– Record Quarterly Revenue of $114.9 Million with Continued Strengthening in Profitability –
– Reiterates Revenue and Gross Margin Outlook for 2022 –
CHINO, Calif., Aug. 11, 2022 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) (“Karat”), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its quarter ended June 30, 2022.
Second Quarter 2022 Highlights
- Record quarterly net sales of $114.9 million, up 21.5 percent from the prior-year quarter.
- Gross profit of $34.0 million, up 20.9 percent from the prior-year quarter.
- Gross margin of 29.6 percent, including expected impact from freight and duty capitalization, versus 29.7 percent in the prior-year quarter.
- Net income of $7.2 million (net income margin of 6.3 percent), versus $9.3 million (net income margin of 9.9 percent), including a gain on forgiveness of debt of $5 million, in the prior-year quarter.
- Adjusted EBITDA of $11.8 million, up 14.6 percent from the prior-year quarter.
- Adjusted EBITDA margin of 10.3 percent versus 10.9 percent in the prior-year quarter.
2022 Outlook
- Net sales for the 2022 third quarter: $117 million to $120 million, up from $102.7 million for the 2021 third quarter.
- Net sales for the 2022 full year: $445 million to $449 million, versus $364.2 million in 2021.
- Gross margin goal for the 2022 full year: 31 percent to 32 percent on average, including expected impact from freight and duty capitalization for the remainder of 2022.
“Results for our second quarter continued to reflect strong demand, including our ability to grow wallet share from existing and new customers,” said Alan Yu, chief executive officer. “The positive sales performance was across all categories, paced by 30 percent growth in the distributors channel and 50 percentage growth in our eco-friendly products.”
“Sales were negatively impacted by fewer order fulfillments of approximately $2 million, caused by shipping delays between our Chino manufacturing plant and other Karat warehouses, including two facilities that we recently leased in May 2022. The quarter’s shipping delay issues were transitional due to inventory overflow received in May and June and I thank the entire Karat team for working diligently to resolve the issues.”
“Our joint venture announced in April, Green Earth Technology in Taiwan, is progressing well. The 180,000-square-foot, state-of-the art automated bagasse factory in Taiwan to produce 100% compostable foodservice products is expected to be completed ahead of schedule, with production and initial shipments to begin before the end of this year.”
“As more cities and states in the U.S. and around the world enact new regulations to ban Styrofoam and single use plastic, we are experiencing increased inquiries from national chain and grocery accounts for compostable products. Karat is committed to its leadership position in the eco-friendly disposable foodservice products arena. We are in discussions with our partner to expand the manufacturing capacity in our Taiwan joint venture, and we plan to accelerate our initiative to build a bagasse factory in the U.S. in 2023, using the proprietary manufacturing processes of the new Taiwan facility,” Mr. Yu added.
Second Quarter 2022 Financial Results
Net sales for the 2022 second quarter increased 21.5 percent to $114.9 million, from $94.5 million in the prior-year quarter.
Gross profit for the 2022 second quarter increased 20.9 percent to $34.0 million, from $28.1 million in the prior-year quarter.
Despite the higher freight and duty costs in the 2022 second quarter, gross margin was 29.6 percent, consistent with 29.7 percent in the prior-year quarter. Gross margin was favorably impacted by a shift to higher margin products, such as environmentally friendly products, price increases implemented to partially offset increased product, ocean freight and labor costs, favorable foreign currency exchange rate impact, along with improved operating efficiencies and leverage.
Operating expenses in the 2022 second quarter were $26.2 million, or 22.8% of net sales, compared with $21.2 million, or 22.5% of net sales, in the prior-year quarter. The increase included higher rent and stock-compensation expense, incremental warehouse transfer costs to manage inventory overflow, higher demurrage fees, and additional temporary labor costs, including COVID-19 related illness.
Operating income in the second quarter of 2022 was $7.8 million, or 6.8 percent of net sales, compared with $6.9 million, or 7.3 percent of net sales, in the prior-year quarter.
Other income totaled $1.1 million in the 2022 second quarter, compared with $4.0 million in the prior-year quarter. The $1.1 million other income for the three months ended June 30, 2022 consisted primarily of a gain on foreign currency transactions of $0.9 million and net interest income of $0.2 million. The decrease primarily reflects a gain of $5.0 million from forgiveness of the Paycheck Protection Program (PPP) loan, partially offset by an interest expense of $1.1 million in the prior-year quarter.
The effective tax rate for the 2022 second quarter was 19.5 percent, compared with 14.2 percent for the prior-year quarter. The lower tax rate last year was primarily attributable to the gain of $5.0 million from forgiveness of the PPP loan.
Net income and net income margin for the 2022 second quarter were $7.2 million and 6.3 percent, respectively, compared with $9.3 million and 9.9 percent, respectively, in the prior-year quarter. 2021 second quarter results included the $5.0 million gain from forgiveness of the PPP loan. Net income attributable to Karat in the 2022 second quarter was $6.3 million, or $0.32 per diluted share, compared with $9.6 million, or $0.50 per diluted share, in the prior-year quarter.
Adjusted EBITDA totaled $11.8 million in the 2022 second quarter, compared with $10.3 million in the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 10.3 percent of net sales, compared with 10.9 percent in the prior-year quarter.
Adjusted diluted earnings per common share, a non-GAAP measure defined below, rose to $0.34 per share, from $0.29 per share in the prior-year quarter.
Six-Month 2022 Financial Results
Net sales for the first six months of 2022 increased 29.4 percent to $220.3 million, from $170.2 million in the same period last year.
Gross profit for the first six months of 2022 increased 37.3 percent to $68.3 million, from $49.7 million in the same period last year.
Despite the higher freight and duty costs in the first six months of 2022, gross margin was 31.0 percent, an increase from 29.2 percent in the same period last year. Gross margin was favorably impacted by a shift to higher margin products, such as environmentally friendly products, price increases implemented to partially offset increased product, ocean freight and labor costs, favorable foreign currency exchange rate impact, along with improved operating efficiencies and leverage.
Operating expenses were $51.0 million in the 2022 year-to-date period, compared with $39.1 million in the same period last year. The increase included higher rent, production and stock-compensation expense, incremental warehouse transfer costs to manage inventory overflow, higher demurrage fees, and additional temporary labor costs, including COVID-19 related illness.
Operating income increased to $17.3 million in the first six months of 2022, or 7.8 percent of net sales, compared with $10.6 million, or 6.3 percent of net sales, in the same period last year.
Other income totaled $2.3 million in the first half of 2022, compared with $4.5 million in the same period last year. Other income in the 2021 year-to-date period primarily reflects the $5.0 million gain on forgiveness of the PPP loan recorded in the second quarter.
Net income increased to $15.1 million for the first six months of 2022, from $12.4 million in the same period last year, including the $5.0 million gain on forgiveness of the PPP loan. Net income margin was 6.9 percent in the first six months of 2022, versus 7.3 percent in the same period last year. Net income attributable to Karat was $13.0 million, or $0.65 per diluted share, in the first six months of 2022, compared with $11.4 million, or $0.66 per diluted share, in the same period last year.
Adjusted EBITDA increased to $24.8 million in the first six months of 2022, compared with $17.2 million in the same period last year. Adjusted EBITDA margin was 11.3 percent in the 2022 year-to-date period, compared with 10.1 percent in the same period last year.
Investor Conference Call
The Company will host an investor conference call today, August 11, 2022, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2022 second quarter results.
Phone: 800-715-9871 (domestic); 646-307-1963 (international)
Conference ID: 6108821
Webcast: Accessible at http://investor.karatpackaging.com/; archive available for approximately one year
About Karat Packaging Inc.
Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of environmentally friendly, disposable foodservice products and related items, primarily used by national and regional restaurants and in foodservice settings throughout the United States. Its products include food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves and other products. The company’s eco-friendly Karat Earth® line offers quality, sustainably focused products that are made from renewable resources. Karat Packaging also offers customized solutions, including new product development and design, printing, and logistics services. To learn more about Karat Packaging, please visit the company’s website at www.karatpackaging.com.
Caution Concerning Forward-Looking Statements
Statements made in this release that are not statements of historical or current facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements, including, but not limited to, achieving continued increases in customer demand, along with achieving third quarter and full year financial guidance, are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including the risks discussed under the heading “Risk Factors” discussed under the caption “Item 1A. Risk Factors” in Part I of our most recent Annual Report on Form 10-K or any updates discussed under the caption “Item 1A. Risk Factors” in Part II of our Quarterly Reports on Form 10-Q and in our other filings with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date, except as required by law.
Investor Relations and Media Contacts:
PondelWilkinson Inc.
Judy Lin Sfetcu/Roger Pondel
310-279-5980
ir@karatpackaging.com
KARAT PACKAGING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per share data)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| Net sales |
$ |
114,881 |
|
|
$ |
94,526 |
|
|
$ |
220,294 |
|
|
$ |
170,199 |
|
| Cost of goods sold |
|
80,917 |
|
|
|
66,428 |
|
|
|
152,041 |
|
|
|
120,475 |
|
| Gross profit |
|
33,964 |
|
|
|
28,098 |
|
|
|
68,253 |
|
|
|
49,724 |
|
| Operating expenses |
|
|
|
|
|
|
|
| Selling expense |
|
9,468 |
|
|
|
7,771 |
|
|
|
18,805 |
|
|
|
14,171 |
|
| General and administrative expense (including $671 and $681 associated with variable interest entity for the three months ended June 30, 2022 and 2021, respectively; $1,234 and $1,300 associated with variable interest entity for the six months ended June 30, 2022 and 2021, respectively) |
|
16,694 |
|
|
|
13,457 |
|
|
|
32,155 |
|
|
|
24,912 |
|
| Total operating expenses |
|
26,162 |
|
|
|
21,228 |
|
|
|
50,960 |
|
|
|
39,083 |
|
| Operating income |
|
7,802 |
|
|
|
6,870 |
|
|
|
17,293 |
|
|
|
10,641 |
|
| Other income (expense) |
|
|
|
|
|
|
|
| Rental income (including $238 and $246 associated with variable interest entity for the three months ended June 30, 2022 and 2021, respectively; and $476 and $492 associated with variable interest entity for the six months ended June 30, 2022 and 2021, respectively) |
|
238 |
|
|
|
246 |
|
|
|
476 |
|
|
|
492 |
|
| Other (expense) income |
|
(181 |
) |
|
|
16 |
|
|
|
(263 |
) |
|
|
122 |
|
| Gain (Loss) on foreign currency transactions |
|
850 |
|
|
|
(119 |
) |
|
|
983 |
|
|
|
(284 |
) |
| Interest income (expense) (including $386 interest income and $821 interest expense associated with variable interest entity for the three months ended June 30, 2022 and 2021, respectively; and $1,251 interest income and $10 interest expense associated with variable interest entity for the six months ended June 30, 2022 and 2021, respectively) |
|
237 |
|
|
|
(1,128 |
) |
|
|
1,077 |
|
|
|
(850 |
) |
| Gain on forgiveness of debt |
|
— |
|
|
|
5,000 |
|
|
|
— |
|
|
|
5,000 |
|
| Total other income |
|
1,144 |
|
|
|
4,015 |
|
|
|
2,273 |
|
|
|
4,480 |
|
| Income before provision for income taxes |
|
8,946 |
|
|
|
10,885 |
|
|
|
19,566 |
|
|
|
15,121 |
|
| Provision for income taxes |
|
1,746 |
|
|
|
1,547 |
|
|
|
4,423 |
|
|
|
2,733 |
|
| Net income |
|
7,200 |
|
|
|
9,338 |
|
|
|
15,143 |
|
|
|
12,388 |
|
| Net income (loss) attributable to noncontrolling interest |
|
856 |
|
|
|
(245 |
) |
|
|
2,132 |
|
|
|
1,025 |
|
| Net income attributable to Karat Packaging Inc. |
$ |
6,344 |
|
|
$ |
9,583 |
|
|
$ |
13,011 |
|
|
$ |
11,363 |
|
| Basic and diluted earnings per share: |
|
|
|
|
|
|
|
| Basic |
$ |
0.32 |
|
|
$ |
0.51 |
|
|
$ |
0.66 |
|
|
$ |
0.67 |
|
| Diluted |
$ |
0.32 |
|
|
$ |
0.50 |
|
|
$ |
0.65 |
|
|
$ |
0.66 |
|
| Weighted average common shares outstanding, basic |
|
19,809,417 |
|
|
|
18,908,648 |
|
|
|
19,808,505 |
|
|
|
17,048,160 |
|
| Weighted average common shares outstanding, diluted |
|
19,926,695 |
|
|
|
19,025,871 |
|
|
|
19,914,044 |
|
|
|
17,165,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KARAT PACKAGING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
|
June 30,
2022 |
|
December 31,
2021 |
| Assets |
|
|
|
| Current assets |
|
|
|
| Cash and cash equivalents (including $932 and $1,163 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
$ |
3,501 |
|
|
$ |
6,483 |
|
| Accounts receivable, net of allowances of $1,734 and $583 at June 30, 2022 and December 31, 2021, respectively (including $6 and $24 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
38,473 |
|
|
|
32,776 |
|
| Inventories |
|
85,475 |
|
|
|
58,472 |
|
| Prepaid expenses and other current assets (including $200 and $63 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
6,691 |
|
|
|
5,141 |
|
| Total current assets |
|
134,140 |
|
|
|
102,872 |
|
| Property and equipment, net (including $46,006 and $46,612 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
95,044 |
|
|
|
93,475 |
|
| Deposits |
|
13,287 |
|
|
|
6,885 |
|
| Goodwill |
|
3,510 |
|
|
|
3,510 |
|
| Intangible assets, net |
|
367 |
|
|
|
380 |
|
| Other assets (including $60 and $65 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
840 |
|
|
|
477 |
|
| Total assets |
$ |
247,188 |
|
|
$ |
207,599 |
|
|
|
|
|
| Liabilities and Stockholders’ Equity |
|
|
|
| Current liabilities |
|
|
|
| Accounts payable (including $4 and $136 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
$ |
23,325 |
|
|
$ |
18,470 |
|
| Accrued expenses (including $281 and $68 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
7,873 |
|
|
|
7,813 |
|
| Related party payable |
|
3,204 |
|
|
|
2,003 |
|
| Income taxes payable (including $0 and $9 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
— |
|
|
|
85 |
|
| Customer deposits (including $81 and $88 associated with variable interest entity as of June 30, 2022 and December 31, 2021, respectively) |
|
1,619 |
|
|
|
1,215 |
|
| Debt, current portion (including $910 and $1,178 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
910 |
|
|
|
1,178 |
|
| Other payables |
|
482 |
|
|
|
— |
|
| Total current liabilities |
|
37,413 |
|
|
|
30,764 |
|
| Deferred tax liability |
|
5,634 |
|
|
|
5,634 |
|
| Line of credit |
|
11,600 |
|
|
|
— |
|
| Long-term debt, net of current portion and debt discount of $239 and $200 as of June 30, 2022 and December 31, 2021, respectively (including $42,016 and $35,339 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively, and debt discount of $239 and $200 associated with variable interest entity as of June 30, 2022 and December 31, 2021, respectively) |
|
42,016 |
|
|
|
35,339 |
|
| Other liabilities (including $1,324 and $2,637 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively) |
|
3,004 |
|
|
|
3,837 |
|
| Total liabilities |
|
99,667 |
|
|
|
75,574 |
|
|
|
|
|
| Karat Packaging Inc. stockholders’ equity |
|
|
|
| Common stock, $0.001 par value, 100,000,000 shares authorized, 19,832,417 and 19,809,417 shares issued and outstanding, respectively, at June 30, 2022; 19,827,417 and 19,804,417 shares issued and outstanding, respectively, at December 31, 2021 |
|
20 |
|
|
|
20 |
|
| Additional paid in capital |
|
84,921 |
|
|
|
83,694 |
|
| Treasury stock, $0.001 par value, 23,000 shares at both June 30, 2022 and December 31, 2021 |
|
(248 |
) |
|
|
(248 |
) |
| Retained earnings |
|
52,445 |
|
|
|
39,434 |
|
| Total Karat Packaging Inc. stockholders’ equity |
|
137,138 |
|
|
|
122,900 |
|
| Noncontrolling interest |
|
10,383 |
|
|
|
9,125 |
|
| Total stockholders’ equity |
|
147,521 |
|
|
|
132,025 |
|
| Total liabilities and stockholders’ equity |
$ |
247,188 |
|
|
$ |
207,599 |
|
KARAT PACKAGING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
|
Six Months Ended
June 30, |
|
|
2022 |
|
|
|
2021 |
|
| Cash flows from operating activities |
|
|
|
| Net income |
$ |
15,143 |
|
|
$ |
12,388 |
|
| Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
| Depreciation and amortization |
|
5,148 |
|
|
|
4,943 |
|
| Adjustments to accounts receivable reserves |
|
1,151 |
|
|
|
— |
|
| Adjustments to inventory reserves |
|
513 |
|
|
|
— |
|
| Gain on sale of asset |
|
(17 |
) |
|
|
— |
|
| Change in fair value of interest rate swap |
|
(2,159 |
) |
|
|
(1,143 |
) |
| Amortization of loan fees |
|
18 |
|
|
|
6 |
|
| Stock-based compensation |
|
1,176 |
|
|
|
240 |
|
| Gain on forgiveness of debt |
|
— |
|
|
|
(5,000 |
) |
| (Increase) decrease in operating assets |
|
|
|
| Accounts receivable |
|
(6,848 |
) |
|
|
(8,760 |
) |
| Inventories |
|
(27,516 |
) |
|
|
(13,134 |
) |
| Prepaid expenses and other current assets |
|
(1,697 |
) |
|
|
3,099 |
|
| Deposits |
|
(163 |
) |
|
|
(144 |
) |
| Other assets |
|
87 |
|
|
|
91 |
|
| Increase (decrease) in operating liabilities |
|
|
|
| Accounts payable |
|
4,855 |
|
|
|
4,285 |
|
| Accrued expenses |
|
552 |
|
|
|
1,625 |
|
| Related party payable |
|
1,201 |
|
|
|
(1,430 |
) |
| Income taxes payable |
|
(85 |
) |
|
|
(41 |
) |
| Customer deposits |
|
404 |
|
|
|
658 |
|
| Other liabilities |
|
9 |
|
|
|
— |
|
| Other payable |
|
482 |
|
|
|
(370 |
) |
| Net cash used in operating activities |
$ |
(7,746 |
) |
|
$ |
(2,687 |
) |
| Cash flows from investing activities |
|
|
|
| Purchases of property and equipment |
|
(1,615 |
) |
|
|
(957 |
) |
| Proceeds from disposal of property and equipment |
|
35 |
|
|
|
— |
|
| Deposits paid for joint venture investment |
|
(4,000 |
) |
|
|
— |
|
| Deposits paid for property and equipment |
|
(7,596 |
) |
|
|
(2,989 |
) |
| Proceeds from settlement of interest rate swap |
|
825 |
|
|
|
— |
|
| Acquisition of Pacific Cup, Inc., net of cash acquired |
|
— |
|
|
|
(893 |
) |
| Net cash used in investing activities |
$ |
(12,351 |
) |
|
$ |
(4,839 |
) |
| Cash flows from financing activities |
|
|
|
| Proceeds from line of credit |
|
20,100 |
|
|
|
1,470 |
|
| Payments on line of credit |
|
(8,500 |
) |
|
|
(31,400 |
) |
| Proceeds from long-term debt |
|
27,477 |
|
|
|
— |
|
| Payments on long-term debt |
|
(21,139 |
) |
|
|
(22,726 |
) |
| Proceeds from exercise of stock options |
|
51 |
|
|
|
67,592 |
|
| Payments on capital lease obligations |
|
— |
|
|
|
(176 |
) |
| Payments of noncontrolling interest tax withholding |
|
(874 |
) |
|
|
— |
|
| Net cash provided by financing activities |
$ |
17,115 |
|
|
$ |
14,760 |
|
| Net (decrease) increase in cash and cash equivalents |
|
(2,982 |
) |
|
|
7,234 |
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
| Beginning of year |
$ |
6,483 |
|
|
|
448 |
|
| End of year |
$ |
3,501 |
|
|
$ |
7,682 |
|
| Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
| Transfers from deposit to property and equipment |
$ |
5,107 |
|
|
$ |
1,338 |
|
| Acquisition price of Pacific Cup, Inc. included within deposits |
$ |
— |
|
|
$ |
100 |
|
| Gain on forgiveness of debt |
$ |
— |
|
|
$ |
5,000 |
|
| Supplemental disclosures of cash flow information: |
|
|
|
| Cash paid for income taxes |
$ |
5,830 |
|
|
$ |
1,574 |
|
| Cash paid for interest |
$ |
1,074 |
|
|
$ |
1,975 |
|
KARAT PACKAGING INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)
| (In thousands, except per share amounts) |
| Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin: |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
|
Amounts |
% of revenue |
Amounts |
% of revenue |
|
Amounts |
% of revenue |
Amounts |
% of revenue |
| Net income: |
$ |
7,200 |
|
6.3 |
% |
$ |
9,338 |
|
9.9 |
% |
|
$ |
15,143 |
|
6.9 |
% |
$ |
12,388 |
|
7.3 |
% |
| Add (deduct): |
|
|
|
|
|
|
|
|
|
| Interest income (expense), net |
|
(237 |
) |
(0.2 |
) |
|
1,128 |
|
1.2 |
|
|
|
(1,077 |
) |
(0.5 |
) |
|
850 |
|
0.5 |
|
| Provision for income taxes |
|
1,746 |
|
1.5 |
|
|
1,547 |
|
1.6 |
|
|
|
4,423 |
|
2.0 |
|
|
2,733 |
|
1.6 |
|
| Depreciation and amortization |
|
2,564 |
|
2.2 |
|
|
2,479 |
|
2.6 |
|
|
|
5,148 |
|
2.4 |
|
|
4,943 |
|
2.9 |
|
| Stock-based compensation expense |
|
565 |
|
0.5 |
|
|
240 |
|
0.3 |
|
|
|
1,176 |
|
0.5 |
|
|
240 |
|
0.1 |
|
| IPO related expenses |
|
— |
|
— |
|
|
601 |
|
0.6 |
|
|
|
— |
|
— |
|
|
997 |
|
0.6 |
|
| Gain on forgiveness of debt |
|
— |
|
— |
|
|
(5,000 |
) |
(5.3 |
) |
|
|
— |
|
— |
|
|
(5,000 |
) |
(2.9 |
) |
| Adjusted EBITDA |
$ |
11,838 |
|
10.3 |
% |
$ |
10,333 |
|
10.9 |
% |
|
$ |
24,813 |
|
11.3 |
% |
$ |
17,151 |
|
10.1 |
% |
| Reconciliation of Adjusted Diluted Earnings Per Common Share |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| Diluted earnings per common share: |
$ |
0.32 |
|
|
$ |
0.50 |
|
|
$ |
0.65 |
|
|
$ |
0.66 |
|
| Add (deduct): |
|
|
|
|
|
|
|
| Stock-based compensation expense |
|
0.03 |
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
0.01 |
|
| IPO related expenses |
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
|
0.06 |
|
| Gain on forgiveness of debt |
|
— |
|
|
|
(0.26 |
) |
|
|
— |
|
|
|
(0.29 |
) |
| Income tax impact of adjustments |
|
(0.01 |
) |
|
|
0.01 |
|
|
|
(0.01 |
) |
|
|
0.01 |
|
| Adjusted diluted earnings per common shares |
$ |
0.34 |
|
|
$ |
0.29 |
|
|
$ |
0.70 |
|
|
$ |
0.45 |
|
| Reconciliation of Adjusted EBITDA by Entity: |
Three Months Ended June 30, 2022 |
|
Six Months Ended June 30, 2022 |
|
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
|
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
| Net income (loss): |
$ |
6,255 |
$ |
990 |
|
$ |
(45 |
) |
$ |
7,200 |
|
|
$ |
13,036 |
$ |
2,465 |
|
$ |
(358 |
) |
$ |
15,143 |
|
| Add: |
|
|
|
|
|
|
|
|
|
| Interest expense (income), net |
|
149 |
|
(386 |
) |
|
— |
|
|
(237 |
) |
|
|
174 |
|
(1,251 |
) |
|
— |
|
|
(1,077 |
) |
| Provision for income taxes |
|
1,746 |
|
— |
|
|
— |
|
|
1,746 |
|
|
|
4,423 |
|
— |
|
|
— |
|
|
4,423 |
|
| Depreciation and amortization |
|
2,261 |
|
303 |
|
|
— |
|
|
2,564 |
|
|
|
4,541 |
|
607 |
|
|
— |
|
|
5,148 |
|
| Stock-based compensation expense |
|
565 |
|
— |
|
|
— |
|
|
565 |
|
|
|
1,176 |
|
— |
|
|
— |
|
|
1,176 |
|
| Adjusted EBITDA |
$ |
10,976 |
$ |
907 |
|
$ |
(45 |
) |
$ |
11,838 |
|
|
$ |
23,350 |
$ |
1,821 |
|
$ |
(358 |
) |
$ |
24,813 |
|
| Reconciliation of Adjusted EBITDA by Entity: |
Three Months Ended June 30, 2021 |
|
Six Months Ended June 30, 2021 |
|
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
|
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
| Net income (loss): |
$ |
9,583 |
|
$ |
(284 |
) |
$ |
39 |
$ |
9,338 |
|
|
$ |
11,363 |
|
$ |
1,185 |
$ |
(160 |
) |
$ |
12,388 |
|
| Add (deduct) |
|
|
|
|
|
|
|
|
|
| Interest expense (income), net |
|
287 |
|
|
841 |
|
|
— |
|
1,128 |
|
|
|
840 |
|
|
10 |
|
— |
|
|
850 |
|
| Provision for income taxes |
|
1,547 |
|
|
— |
|
|
— |
|
1,547 |
|
|
|
2,733 |
|
|
— |
|
— |
|
|
2,733 |
|
| Depreciation and amortization |
|
2,175 |
|
|
304 |
|
|
— |
|
2,479 |
|
|
|
4,336 |
|
|
607 |
|
— |
|
|
4,943 |
|
| Stock-based compensation expense |
|
240 |
|
|
— |
|
|
— |
|
240 |
|
|
|
240 |
|
|
— |
|
— |
|
|
240 |
|
| IPO related expenses |
|
601 |
|
|
— |
|
|
— |
|
601 |
|
|
|
997 |
|
|
— |
|
— |
|
|
997 |
|
| Gain on forgiveness of debt |
|
(5,000 |
) |
|
— |
|
|
— |
|
(5,000 |
) |
|
|
(5,000 |
) |
|
— |
|
— |
|
|
(5,000 |
) |
| Adjusted EBITDA |
$ |
9,433 |
|
$ |
861 |
|
$ |
39 |
$ |
10,333 |
|
|
$ |
15,509 |
|
$ |
1,802 |
$ |
(160 |
) |
$ |
17,151 |
|
Use of Non-GAAP Financial Measures
Karat utilizes certain financial measures and key performance indicators that are not defined by, or calculated in accordance with, GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented. The following non-GAAP measures are presented in this press release:
- Beginning in the fourth quarter of fiscal 2021, Adjusted EBITDA is calculated as net income before interest and income taxes, depreciation and amortization, stock-based compensation expense, IPO related expenses and gain on forgiveness of debt. The prior period Adjusted EBITDA has been revised to conform to this definition.
- Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.
- Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation, IPO related expense and gain on forgiveness of debt, and adjusted for the related tax effects of these adjustments.
We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the core performance of Karat and facilitate a comparison of such performance from period to period. These are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with GAAP for purposes of analyzing our profitability or liquidity. These measures should be considered in addition to, and not as a substitute for, revenue, net income, earnings per share, cash flows or other measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently.
KARAT PACKAGING INC. AND SUBSIDIARIES
NET SALES BY CATEGORY (UNAUDITED)
(In Thousands)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
(in thousands) |
| National and regional chains |
$ |
25,081 |
|
$ |
22,310 |
|
$ |
49,987 |
|
$ |
40,599 |
| Distributors |
|
66,399 |
|
|
50,967 |
|
|
125,523 |
|
|
90,977 |
| Online |
|
15,491 |
|
|
13,703 |
|
|
29,040 |
|
|
25,146 |
| Retail |
|
7,910 |
|
|
7,546 |
|
|
15,744 |
|
|
13,477 |
|
$ |
114,881 |
|
$ |
94,526 |
|
$ |
220,294 |
|
$ |
170,199 |
