# EDGAR Filing Document

**Accession Number:** 0001758021
**File Stem:** 0001628280-25-038881
**Filing Date:** 2025-8
**Character Count:** 37586
**Document Hash:** e42b04b5786a61923176b2696216a89a
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001628280-25-038881.hdr.sgml**: 20250807

**ACCESSION NUMBER**: 0001628280-25-038881

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20250807

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20250807

**DATE AS OF CHANGE**: 20250807

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Karat Packaging Inc.
- **CENTRAL INDEX KEY:** 0001758021
- **STANDARD INDUSTRIAL CLASSIFICATION:** PLASTICS PRODUCTS, NEC [3089]
- **ORGANIZATION NAME:** 08 Industrial Applications and Services
- **EIN:** 832237832
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40336
- **FILM NUMBER:** 251194116

**BUSINESS ADDRESS:**
- **STREET 1:** 6185 KIMBALL AVENUE
- **CITY:** CHINO
- **STATE:** CA
- **ZIP:** 91708
- **BUSINESS PHONE:** 6269658882

**MAIL ADDRESS:**
- **STREET 1:** 6185 KIMBALL AVENUE
- **CITY:** CHINO
- **STATE:** CA
- **ZIP:** 91708

?xml version='1.0' encoding='ASCII'? krt-20250807

a..

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K**

**CURRENT REPORT**

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2025

**<u>Karat Packaging Inc.</u>**

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **<u>Delaware</u>** | **<u>001-40336</u>** | **<u>83-2237832</u>** |
| (State or other jurisdiction of incorporation | (Commission File Number | (IRS Employer Identification No.) |

---

**<u>6185 Kimball Avenue, Chino, CA 91708</u>**

(Address of principal executive offices) (Zip Code)

**<u>(626) 965-8882</u>**

Registrant's telephone number, including area code:

**<u>N/A</u>**

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

□ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

□ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

□ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

□ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **<u>Title of each class</u>** | **<u>Trading Symbol</u>** | **<u>Name of each exchange on which registered</u>** |
| Common Stock, $0.001 par value per share | KRT | The Nasdaq Stock Market LLC |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b -2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.□

.

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a..

**Item 2.02 Results of Operations and Financial Condition.**

 **&nbsp;&nbsp;&nbsp;&nbsp;**On August 7, 2025, Karat Packaging Inc. (the "Company") issued a press release reporting its financial results for the quarter ended June 30, 2025. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

&nbsp;&nbsp;&nbsp;&nbsp;The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

**Item 9.01 Financial Statements and Exhibits.**

*(d) Exhibits* 

---

| | |
|:---|:---|
| Exhibit<br>Number | Description |
| 99.1 | <u>[Press release, dated August 7, 2025](krt-20250807xpressrelease.htm)</u> |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

.

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a..

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
| DATE: August 7, 2025 | KARAT PACKAGING INC. | KARAT PACKAGING INC. |
|  | By: | /s/ Jian Guo |
|  |  | Jian Guo |
|  |  | Chief Financial Officer |

---

.

## Exhibit 99.1

![capture.jpg](capture.jpg)

**Karat Packaging Reports 2025 Second Quarter Financial Results** 

***-- Record Quarterly Net Sales and Net Income --***

***-- Successful Alternative Sourcing to Navigate Tariff Uncertainty --***

**CHINO, Calif, August 7, 2025 –** Karat Packaging Inc. (Nasdaq: KRT) ("Karat" or the "Company"), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its 2025 second quarter ended June 30, 2025.

**Second Quarter 2025 Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Record quarterly net sales of $124.0 million, up 10.1 percent, from $112.6 million in the prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross profit of $49.1 million, up 13.1 percent, from $43.4 million in prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross margin increased to 39.6 percent, from 38.5 percent in prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Record quarterly net income of $11.1 million, up 19.8 percent, from $9.2 million in the prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net income margin of 8.9 percent versus 8.2 percent in the prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA of $17.7 million, up 12.8 percent, from $15.7 million in the prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA margin of 14.3 percent versus 13.9 percent in the prior-year quarter.

**Guidance**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net sales for the 2025 third quarter expected to increase by high single-digit to low double-digits from the prior-year quarter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gross margin for the 2025 third quarter expected to be in the low to mid 30s.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA margin for the 2025 third quarter expected to be within 10 to 12 percent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Full year guidance: Maintaining the 2025 full year guidance on net sales, gross margin and adjusted EBITDA margin, pending potential impact related to additional tariff changes.

"Our record quarterly performance is a testimony to our nimble business model and resilient global supply chain, which allowed us to achieve early success in navigating the supply chain disruptions and trade uncertainty. We are swiftly diversifying our sourcing footprint, reducing sourcing from China to just 10 percent in the second quarter, while implementing plans to further expand across other Asian countries and Latin America to enhance supply chain resilience and flexibility," said Alan Yu, Chief Executive Officer. "In addition, our ability to quickly ramp up existing domestic manufacturing operations enabled us to respond rapidly to customer needs and win new business. These actions have enhanced our agility and competitiveness in a challenging environment and position us well for the future."

"Despite a significant foreign currency headwind due to a sudden substantial weakening in the United States Dollar against the New Taiwan Dollar, we delivered record quarterly net sales and net income. With the currency pressure beginning to ease at the start of the third quarter, we believe Karat has a strong foundation for continued profitable growth."

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"Business trends remain strong heading into the third quarter and the remainder of 2025, supported by sustained double-digit sales growth across all major markets, including California. Recent new business wins from large national chains are scheduled to begin shipping in the third and fourth quarter."

"Additionally, our new Chino warehouse is now fully operational, further enhancing our logistics capabilities and enabling faster delivery times. It also allowed us to build inventory during the quarter in preparation for planned expansion in the second half of the year," Yu added.

**Second Quarter 2025 Financial Results**

Net sales for the 2025 second quarter increased 10.1 percent to $124.0 million, from $112.6 million in the prior-year quarter. The increase was primarily driven by an increase of $14.2 million in volume and change in product mix, partially offset by a $3.3 million unfavorable year-over-year pricing comparison.

Cost of goods sold for the 2025 second quarter increased 8.2 percent to $74.9 million, from $69.2 million in the prior-year quarter. The increase was the result of product costs increasing $4.0 million due to sales growth partially offset by more favorable vendor pricing and product mix. Import costs, including ocean freight and duty, also increased $2.1 million as a result of higher import duty and tariff, coupled with a 37.0 percent increase in import volume, as we increased inventory purchases ahead of expected business expansion during the second half of 2025. This was partially offset by a 4.0 percent decrease in average freight container rates during the 2025 second quarter.

Gross profit for the 2025 second quarter increased 13.1 percent to $49.1 million, from $43.4 million in the prior-year quarter. Gross margin for the 2025 second quarter was 39.6 percent, compared with 38.5 percent in the prior-year quarter. Gross margin benefited from lower product costs as a percentage of net sales due to more favorable vendor pricing and product mix as well as a reduction in depreciation expense as a percentage of net sales. These improvements in margin were partially offset by an increase in ocean freight and duty costs as a percentage of net sales from higher import duty and tariff, coupled with increase in import volume, as we increased inventory purchases ahead of expected business expansion during the second half of 2025.

Operating expenses in the 2025 second quarter were $32.6 million, compared with $32.3 million in the prior-year quarter, an increase of 0.8 percent. The increase was mainly driven by $1.7 million of higher shipping costs related to offline orders due to higher sales volume, $1.2 million of higher rent expense due to a higher rate on our Chino, California facility lease extension plus the opening of a new Chino distribution center, and $0.4 million of higher salaries and benefits expenses. These increases were partially offset by a $0.3 million reduction in shipping costs related to online orders despite an increase in the number of packages shipped as we realized a shipping rate reduction, $0.8 million of lower online platform fees, $0.7 million reduction in marketing expense, and a $0.5 million decrease in stock-based compensation. Additionally, the 2025 second quarter included a $0.3 million gain on disposal of machinery in the normal course of business, compared with a $0.5 million loss on disposal of machinery in the normal course of business during the prior-year quarter.

Other expenses, net, was $2.0 million for the 2025 second quarter, compared with other income, net, of $1.0 million in the prior-year quarter. This unfavorable variance was primarily due to a loss on foreign currency transactions of $2.9 million during the 2025 second quarter driven by the weakening of United States Dollar against New Taiwan Dollar, compared with a gain of $0.3 million during the prior-year quarter.

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Net income for the 2025 second quarter increased 19.8 percent to $11.1 million, from $9.2 million for the prior-year quarter. Net income margin was 8.9 percent in the 2025 second quarter, compared with 8.2 percent in the prior-year quarter.

Net income attributable to Karat for the 2025 second quarter was $10.9 million, or $0.54 per diluted share, compared with $9.1 million, or $0.45 per diluted share, in the prior-year quarter.

Adjusted EBITDA, a non-GAAP measure defined below, totaled $17.7 million for the 2025 second quarter, compared with $15.7 million for the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 14.3 percent, compared with 13.9 percent for the prior-year quarter.

Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $0.57 per share for the 2025 second quarter, compared with $0.49 per share in the prior-year quarter.

**Six-Month 2025 Financial Results**

Net sales for the first half of 2025 increased 9.3 percent to $227.6 million, from $208.2 million in the same period last year. Net sales for the first half of 2024 were understated by $0.7 million, which represented products shipped and recognized as revenue in 2023, but not delivered until 2024. The increase in net sales was primarily driven by an increase of $26.1 million in volume and change in product mix, partially offset by a $7.4 million unfavorable year-over-year pricing comparison.

Cost of goods sold for the first half of 2025 increased 8.3 percent to $137.7 million, from $127.2 million in the same period last year. Cost of goods sold for the first half of 2024 were understated by $0.4 million, which represented products shipped and recognized as cost of goods sold in 2023, but not delivered until 2024, as discussed above. The increase in cost of goods sold was the result of product costs increasing $7.0 million due to sales growth partially offset by more favorable vendor pricing and product mix. Import costs, including ocean freight and duty, also increased $4.1 million as a result of higher import duty and tariff, coupled with a 25.9 percent increase in import volume, as we increased inventory purchases ahead of expected business expansion during the second half of 2025, and a 0.1 percent increase in average freight container rates during the first half of 2025.

Gross profit for the first half of 2025 increased 10.9 percent to $89.9 million, from $81.0 million in the same period last year. Gross margin was 39.5 percent for the first half of 2025, compared with 38.9 percent in the same period last year. Gross margin benefited from lower product costs as a percentage of net sales due to more favorable vendor pricing and product mix as well as a reduction in depreciation expense as a percentage of net sales. These improvements in margin were offset by an increase in ocean freight and duty costs as a percentage of net sales from higher import duty and tariff, coupled with an increase in import volume, as we increased inventory purchases ahead of expected business expansion during the second half of 2025.

Operating expenses for the first half of 2025 were $65.5 million, compared with $61.8 million in the same period last year, an increase of 6.0 percent. The increase was mainly driven by $3.3 million of higher shipping costs related to offline orders due to higher sales volume, $1.3 million of higher shipping costs related to online orders due to an increase in the number of packages shipped partially offset by a shipping rate reduction, $2.1 million of higher rent expense due to a higher rate on our Chino, California facility lease extension plus the opening of a new Chino distribution center, $0.6 million of higher salaries and benefit expenses, and $0.5 million of higher professional expenses primarily due to transaction costs in connection with the secondary offering by certain executive officers and stockholders of the Company.

------

These increases were partially offset by $0.8 million of lower online platform fees, $0.5 million decrease in stock-based compensation, and $0.3 million reduction in marketing expense. Additionally, the first half of 2025 included a $0.3 million gain on disposal of machinery in the normal course of business, compared with a $2.5 million loss during the same period last year, which included a $2.0 million non-cash impairment charge of an operating right-of-use asset resulting from the sublease of the City of Industry warehouse in California and a $0.5 million loss on disposal of machinery in the normal course of business.

Other expenses, net, was $0.9 million in the first half of 2025, compared with other income, net, of $1.3 million in the same period last year. This unfavorable variance was primarily due to a loss on foreign currency transactions of $2.6 million during the first half of 2025 driven by the weakening of United States Dollar against New Taiwan Dollar, compared with a gain of $0.4 million during the same period last year.

Net income increased 13.8 percent to $17.9 million for the first half of 2025, from $15.7 million in the same period last year. Net income margin was 7.8 percent in the first half of 2025, compared with 7.5 percent in the same period last year.

Net income attributable to Karat was $17.3 million, or $0.86 per diluted share, for the first half of 2025, compared with $15.3 million, or $0.76 per diluted share, in the same period last year.

Adjusted EBITDA, a non-GAAP measure defined below, increased to $29.6 million in the first half of 2025, from $29.2 million in the same period last year. Adjusted EBITDA margin, a non-GAAP measure defined below, was 13.0 percent in the first half of 2025, compared with 14.0 percent in the same period last year.

Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $0.90 per share in the first half of 2025, compared with $0.88 per share in the same period last year.

**Dividend**

On August 5, 2025, Karat's board of directors approved another regular quarterly dividend of 0.45 per share on the Company's common stock, payable on or about August 27, 2025, to stockholders of record as of August 20, 2025.

**Investor Conference Call**

The Company will host an investor conference call today, August 7, 2025, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2025 second quarter results.

**Phone:** 877-418-4045 (domestic); 412-317-6745 (international)

**Conference ID:** Karat Packaging Inc.

**Webcast:** Accessible at https://irkarat.com/events-presentations/; archive available for approximately one year

**About Karat Packaging Inc.**

Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of 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

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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 our 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 and 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 Securities and Exchange Commission. 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 or Roger Pondel

310-279-5980

ir@karatpackaging.com

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**KARAT PACKAGING INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

**(In thousands, except share and per share data)**

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| Net sales | $123986 | $112600 | $227610 | $208213 |
| Cost of goods sold | 74879 | 69193 | 137741 | 127204 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 49107 | 43407 | 89869 | 81009 |
| **Operating expenses** |  |  |  |  |
| Selling expenses | 13716 | 13868 | 28127 | 24631 |
| General and administrative expenses (including $785 and $689 associated with variable interest entity for the three months ended June 30, 2025 and 2024, respectively; $1,462 and $1,245 associated with variable interest entity for the six months ended June 30, 2025 and 2024, respectively)  | 19124 | 17893 | 37672 | 34662 |
| Impairment expense and (gain) loss, net, on disposal of property and equipment | (283) | 531 | (300) | 2525 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 32557 | 32292 | 65499 | 61818 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income | 16550 | 11115 | 24370 | 19191 |
| **Other income (expenses)** |  |  |  |  |
| Rental income (including $361 and $258 associated with variable interest entity for the three months ended June 30, 2025 and 2024, respectively; $807 and $513 associated with variable interest entity for the six months ended June 30, 2025 and 2024, respectively)  | 755 | 600 | 1531 | 891 |
| Other (expenses) income, net | (82) | 51 | (38) | 106 |
| (Loss) gain on foreign currency transactions | (2867) | 317 | (2628) | 439 |
| Interest income (including $85 and $133 associated with variable interest entity for the three months ended June 30, 2025 and 2024, respectively; $311 and 346 associated with variable interest entity for the six months ended June 30, 2025 and 2024, respectively)  | 676 | 533 | 1242 | 964 |
| Interest expense (including $509 and $519 associated with variable interest entity for the three months ended June 30, 2025 and 2024, respectively; $1,009 and $1,036 associated with variable interest entity for the six months ended June 30, 2025 and 2024, respectively)  | (521) | (548) | (1030) | (1072) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other (expenses) income, net | (2039) | 953 | (923) | 1328 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before provision for income taxes | 14511 | 12068 | 23447 | 20519 |
| Provision for income taxes | 3459 | 2841 | 5580 | 4816 |
| **Net income** | **11052** | **9227** | **17867** | **15703** |
| **Net income attributable to noncontrolling interest** | **118** | **127** | **524** | **437** |
| **Net income attributable to Karat Packaging Inc.** | $**10934** | $**9100** | $**17343** | $**15266** |
| **Basic and diluted earnings per share:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $0.55 | $0.46 | $0.87 | $0.76 |
| &nbsp;&nbsp;&nbsp;Diluted | $0.54 | $0.45 | $0.86 | $0.76 |
| Weighted average common shares outstanding, basic | 20058247 | 19994250 | 20047436 | 19981928 |
| Weighted average common shares outstanding, diluted | 20191111 | 20113842 | 20194942 | 20094664 |

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**KARAT PACKAGING INC. AND SUBSIDIARIES**

**NET SALES BY CATEGORY (UNAUDITED)**

 **(In thousands)**

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| Chains and distributors \* | $97165 | $87228 | $177835 | $162596 |
| Online | 20884 | 19546 | 38675 | 34425 |
| Retail \* | 5937 | 5826 | 11100 | 11192 |
|  | $**123986** | $**112600** | $**227610** | $**208213** |

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\* During the three months ended June 30, 2025, the Company reclassified one customer from the retail to the chains and distributors channel, and recast the corresponding net sales amounts of $1,071,000 and $2,150,000 for the three and six months ended June 30, 2024, respectively, to conform to the current period presentation. The recast had no effect on previously reported consolidated net sales for the three and six months ended June 30, 2024.

**KARAT PACKAGING INC. AND SUBSIDIARIES**

**SELECTED BALANCE SHEET AND CASH FLOW INFORMATION**

**(In thousands)**

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| | | |
|:---|:---|:---|
| **Selected Balance Sheet Information:** | **June 30, 2025** | **December 31, 2024** |
| | **(Unaudited)** | |
| Cash and cash equivalents | $30549 | $31584 |
| Short-term investments  | $26443 | $28343 |
| Accounts receivable, net of allowance for bad debt | $36385 | $26736 |
| Inventories | $88779 | $70722 |
| Total assets | $320963 | $294522 |
| Accounts payable | $33160 | $17831 |
| Total current liabilities | $69498 | $46447 |
| Total liabilities | $158257 | $132323 |
| Total stockholders' equity | $162706 | $162199 |

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| | | |
|:---|:---|:---|
| **Selected Cash Flow Information:** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
|  | **(Unaudited)** | **(Unaudited)** |
| Net cash provided by operating activities | $17476 | $20254 |
| Net cash provided by (used in) investing activities | $1164 | $(8467) |
| Dividends paid to shareholders | $(18048) | $(12996) |
| Net cash used in financing activities | $(19675) | $(15552) |

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**KARAT PACKAGING INC. AND SUBSIDIARIES**

**RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)**

**(In thousands, except percentages and per share amounts)**<br>

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin:** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** |
|  | **2025** | **2025** | **2024** | **2024** |
|  | **Amounts** | **% of Net Sales** | **Amounts** | **% of Net Sales** |
| Net income: | $11052 | 8.9% | $9227 | 8.2% |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;Interest income | (676) | (0.5) | (533) | (0.5) |
| &nbsp;&nbsp;Interest expense | 521 | 0.4 | 548 | 0.5 |
| &nbsp;&nbsp;Provision for income taxes | 3459 | 2.8 | 2841 | 2.5 |
| &nbsp;&nbsp;Depreciation and amortization | 2678 | 2.1 | 2660 | 2.4 |
| &nbsp;&nbsp;Stock-based compensation expense | 445 | 0.4 | 940 | 0.8 |
| &nbsp;&nbsp;&nbsp;Secondary offering transaction costs (1) | 214 | 0.2 |  |  |
| **Adjusted EBITDA** | $**17693** | **14.3%** | $**15683** | **13.9%** |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin:** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2025** | **2024** | **2024** |
|  | **Amounts** | **% of Net Sales** | **Amounts** | **% of Net Sales** |
| Net income: | $17867 | 7.8% | $15703 | 7.5% |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;Interest income | (1242) | (0.5) | (964) | (0.5) |
| &nbsp;&nbsp;Interest expense | 1030 | 0.4 | 1072 | 0.5 |
| &nbsp;&nbsp;Provision for income taxes | 5580 | 2.5 | 4816 | 2.3 |
| &nbsp;&nbsp;Depreciation and amortization | 5366 | 2.4 | 5289 | 2.6 |
| &nbsp;&nbsp;Stock-based compensation expense | 791 | 0.3 | 1315 | 0.6 |
| &nbsp;&nbsp;&nbsp;Secondary offering transaction costs (1) | 214 | 0.1 |  |  |
| &nbsp;&nbsp;Operating right-of-use asset impairment |  |  | 1993 | 1.0 |
| **Adjusted EBITDA** | $**29606** | **13.0%** | $**29224** | **14.0%** |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted EBITDA by Entity:** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** |
| | **Karat Packaging** | **Global Wells** | **Eliminations** | **Consolidated** |
| Net income (loss) | $10932 | $139 | $(19) | $11052 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;Interest income | (592) | (84) |  | (676) |
| &nbsp;&nbsp;Interest expense | 13 | 508 |  | 521 |
| &nbsp;&nbsp;Provision for income taxes | 3459 |  |  | 3459 |
| &nbsp;&nbsp;Depreciation and amortization | 2374 | 304 |  | 2678 |
| &nbsp;&nbsp;Stock-based compensation expense | 445 |  |  | 445 |
| &nbsp;&nbsp;Secondary offering transaction costs (1) | 214 |  |  | 214 |
| **Adjusted EBITDA** | $**16845** | $**867** | $**(19)** | $**17693** |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted EBITDA by Entity:** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** |
| | **Karat Packaging** | **Global Wells** | **Eliminations** | **Consolidated** |
| Net income (loss) | $9100 | $150 | $(23) | $9227 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;Interest income | (400) | (133) |  | (533) |
| &nbsp;&nbsp;Interest expense | 29 | 519 |  | 548 |
| &nbsp;&nbsp;Provision for income taxes | 2841 |  |  | 2841 |
| &nbsp;&nbsp;Depreciation and amortization | 2356 | 304 |  | 2660 |
| &nbsp;&nbsp;Stock-based compensation expense | 940 |  |  | 940 |
| **Adjusted EBITDA** | $**14866** | $**840** | $**(23)** | $**15683** |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted EBITDA by Entity:** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** |
| | **Karat Packaging** | **Global Wells** | **Eliminations** | **Consolidated** |
| Net income (loss) | $17341 | $617 | $(91) | $17867 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;Interest income | (931) | (311) |  | (1242) |
| &nbsp;&nbsp;Interest expense | 22 | 1008 |  | 1030 |
| &nbsp;&nbsp;Provision for income taxes | 5580 |  |  | 5580 |
| &nbsp;&nbsp;Depreciation and amortization | 4759 | 607 |  | 5366 |
| &nbsp;&nbsp;Stock-based compensation expense | 791 |  |  | 791 |
| &nbsp;&nbsp;Secondary offering transaction costs (1) | 214 |  |  | 214 |
| **Adjusted EBITDA** | $**27776** | $**1921** | $**(91)** | $**29606** |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted EBITDA by Entity:** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** |
| | **Karat Packaging** | **Global Wells** | **Eliminations** | **Consolidated** |
| Net income | $14950 | $510 | $243 | $15703 |
| Add (deduct): |  |  |  |  |
| &nbsp;&nbsp;Interest income | (618) | (346) |  | (964) |
| &nbsp;&nbsp;Interest expense | 36 | 1036 |  | 1072 |
| &nbsp;&nbsp;Provision for income taxes | 4816 |  |  | 4816 |
| &nbsp;&nbsp;Depreciation and amortization | 4682 | 607 |  | 5289 |
| &nbsp;&nbsp;Stock-based compensation expense | 1315 |  |  | 1315 |
| &nbsp;&nbsp;Operating right-of-use asset impairment | 1993 |  |  | 1993 |
| **Adjusted EBITDA** | $**27174** | $**1807** | $**243** | $**29224** |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Reconciliation of Adjusted Diluted Earnings Per Common Share:** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Diluted earnings per common share: | $0.54 | $0.45 | $0.86 | $0.76 |
| Add (deduct): |  |  |  |  |
| Stock-based compensation expense | 0.02 | 0.05 | 0.04 | 0.06 |
| Operating right-of-use asset impairment |  |  |  | 0.10 |
| Secondary offering transaction costs (1) | 0.01 |  | 0.01 |  |
| Tax impact |  | (0.01) | (0.01) | (0.04) |
| **Adjusted diluted earnings per common shares** | $**0.57** | $**0.49** | $**0.90** | $**0.88** |

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(1) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses.

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| | | |
|:---|:---|:---|
| **Reconciliation of Free Cash Flow:** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| Cash from operating activities | $17476 | $20254 |
| Deduct: |  |  |
| &nbsp;&nbsp;Purchase of property and equipment | (274) | (415) |
| &nbsp;&nbsp;Deposits paid for property and equipment | (989) | (2041) |
| **Free Cash Flow** | $**16213** | $**17798** |

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**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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA is a financial measure calculated as net income excluding (i) interest income, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation

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expense, (vi) operating right-of-use asset impairment, and (vii) costs related to the secondary offering by certain executive officers and stockholders of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation, operating right-of-use asset impairment, and adjusted for the related tax effects of these adjustments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Free Cash Flow is calculated as cash from operating activities less cash used in (i) purchases of property and equipment, and (ii) deposits paid for property and equipment.

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 financial performance 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.

With respect to our financial targets for the 2025 third quarter and 2025 full year adjusted EBITDA margin, a reconciliation of these non-GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non-GAAP target measures. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statements of income and cash flows prepared in accordance with GAAP, that would be required to produce such a reconciliation.