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Dec 31, 2022
Karat Packaging Q4 2022 Earnings Report
Karat Packaging's financial performance for Q4 2022 and full year 2022 was reported, highlighting a slight increase in net sales and improved gross margin despite challenges from inventory write-offs and increased operating expenses.
Key Takeaways
Karat Packaging reported a 1.5% increase in net sales for Q4 2022, reaching $92.7 million. The gross margin improved by 100 basis points to 32.0%, although net income decreased to $4.5 million due to higher operating expenses and an inventory write-off. The company is focused on growth strategies, including expanding warehouses and increasing its sales team.
Net sales increased by 1.5% to $92.7 million compared to the prior-year quarter.
Gross margin improved by 100 basis points to 32.0% due to lower ocean freight costs.
Net income decreased to $4.5 million from $6.0 million in the prior-year quarter.
The company is implementing growth strategies such as expanding warehouses and increasing the sales team.
Karat Packaging
Karat Packaging
Karat Packaging Revenue by Segment
Revenue by Segment
Chains and distributors Revenue
CapyFin.comOnline Revenue
CapyFin.comRetail Revenue
CapyFin.com Forward Guidance
Karat Packaging anticipates net sales to increase by a high single-digit percentage for the full year 2023 and aims for a gross margin between 32% and 33%. Sales for the first half of 2023 are expected to be lower due to price reductions and destocking of certain inventories.
Positive Outlook
- Net sales for the full year 2023 expected to increase high single digit.
- Gross margin goal for the 2023 full year: 32 percent to 33 percent.
- Gross margin continued to improve during the 2022 fourth quarter, with a significant reduction of ocean freight costs versus the same quarter last year.
- Ocean freight costs have essentially now stabilized, which is expected to enable further margin expansion for 2023.
- New contracts with chain accounts and expanded product offerings to existing customers are expected to add to the top line in the second half of 2023.
Challenges Ahead
- Sales for the first half of 2023 anticipated to be lower due, in part, to price reductions and destocking for certain inventories, compared with the prior year period.
- Gross profit was negatively impacted by an out-of-period inventory write-off of $1.7 million.
- Adjusted EBITDA was negatively impacted by a deposit write-off of $0.5 million related to a pre-pandemic capital investment project.
- Operating expenses increased in the 2022 fourth quarter due to higher labor costs, production costs, and rental expense.
- Net income for the 2022 fourth quarter decreased due to the factors mentioned above.
Revenue & Expenses
Visualization of income flow from segment revenue to net income