Karat Packaging Inc. is a company dedicated to the manufacturing and distribution of various single-use consumables. These items, crafted from materials such ...
Karat Packaging Inc., founded in 2000 and headquartered in Chino, California, is a leading supplier and manufacturer of single-use disposable products, primarily serving the restaurant and foodservice sectors. The company's extensive product line includes food containers, carry-out packaging, tableware, drinking cups, lids, cutlery, straws, beverage components, and protective gloves, crafted ...Karat Packaging Inc., founded in 2000 and headquartered in Chino, California, is a leading supplier and manufacturer of single-use disposable products, primarily serving the restaurant and foodservice sectors. The company's extensive product line includes food containers, carry-out packaging, tableware, drinking cups, lids, cutlery, straws, beverage components, and protective gloves, crafted from materials such as plastic, paper, and compostable biopolymers. Many of these products are marketed under the 'Karat Earth' label, reflecting the company's commitment to environmentally friendly alternatives. Karat Packaging distributes through national and regional wholesale distributors, large restaurant chains, retail outlets, and direct online sales, and offers value-added services like product innovation, graphic design, custom printing, and logistics solutions. Led by CEO and co-founder Alan Yu, the company has grown from a modest boba shop supplier into a NASDAQ-listed enterprise, reporting a market capitalization of approximately $940 million as of the latest data. Financially, Karat Packaging has demonstrated robust performance with a gross profit margin of 40.5%, an operating margin of 12.8%, and a net profit margin of 10.2% over the trailing twelve months. The company maintains a healthy balance sheet with a current ratio of 2.17 and a debt-to-equity ratio of 0.288, indicating strong liquidity and moderate leverage. With an employee base of around 636, Karat Packaging continues to expand its footprint across the United States, serving customers nationwide from its strategic locations. The company went public in April 2021 and has since paid dividends, with a current dividend yield of approximately 3.8%. Karat Packaging's mission is to be the premier single-source provider for food packaging and disposable product needs, combining operational efficiency, innovative product development, and a strong commitment to sustainability to drive long-term growth and shareholder value.
Operator: Good day, and welcome to the Karat Packaging Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Roger Pondel.
Roger Pondel: Good afternoon, everyone, and welcome to Karat Packaging's 2026 second quarter conference call. I'm Roger Pondel with PondelWilkinson, Karat Packaging's investor relations firm. It will be my pleasure momentarily to introduce the company's Chief Executive Officer, Alan Yu; and its Chief Financial Officer, Jian Guo. Before I turn the call over to Alan, I want to remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the risk factor section of the company's most recent Form 10-K, as filed with the Securities and Exchange Commission, and copies of which are available on the SEC's website at www.sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Karat Packaging undertakes no obligation to update any forward-looking statements except as required by law. Please also note that during this call, we will be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, which are non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today's press release, which is now posted on the company's website. And with that, I will turn the call over to CEO Alan Yu. Alan?
Alan Yu: Thank you, Roger. Good afternoon, everyone. We delivered record quarterly net sales of more than $136 million, reflecting the strength of our customers' demand and accelerated momentum in our online business growth. During the quarter, our sales pipeline expanded, adding four new chain accounts, which further broadened our market reach and created additional opportunities for future revenue growth. We continue to experience encouraging momentum across our business, highlighted by the strong performance of our online channel, where net sales increased 23.6% year over year. Our eco-friendly product portfolio also continued to gain traction, benefiting from the continued expansion of SKUs and growth in the paper bag categories. As a result, eco-friendly products represented 33.8% of total sales during the quarter, compared with 31.8% in the prior-year period. Our results also benefited from IEEPA tariff refunds, which reverses higher tariff costs absorbed in the prior periods, and further contributed to the strong reported profitability. While we were pleased to capture this benefit in the quarter, our focus remains on the fundamental …