Karat Packaging (KRT) Q1 2026 earnings summary

Executive summary

• Net sales for Q1 2026 rose 12.9% year-over-year to $116.9 million, driven by strong demand, volume growth, favorable product mix and pricing, and online sales growth, partially offset by lower logistics revenue.

• Online sales increased nearly 10% to $19.5 million, with a pivot to company storefront and third-party platforms.

• Eco-friendly product sales grew 16.9% year-over-year, supported by expansion in the paper bag category and new national chain wins.

• Gross profit increased 1.9% to $41.5 million, but gross margin declined to 35.5% from 39.3% due to higher import costs and tariffs.

• Net income rose 4.8% to $7.1 million, with a net income margin of 6.1%, down from 6.6% last year.

Financial highlights

• Adjusted EBITDA increased to $12.5 million, with adjusted EBITDA margin at 10.7%, up 4.8% year-over-year.

• Operating income grew 8.2% to $8.5 million.

• Free cash flow was $6.3 million, down from $6.6 million in Q1 2025.

• Cash and cash equivalents at quarter-end were $28.7 million, with $5.7 million in short-term investments.

• Working capital stood at $90.7 million; financial liquidity was $36.4 million.

Outlook and guidance

• Q2 2026 net sales expected to grow 8%-10% year-over-year, with gross margin guidance of 35%-37% and adjusted EBITDA margin of 11%-13%.

• Full year 2026 net sales projected to grow in the low double digits, with gross margin of 34%-36% and adjusted EBITDA margin of 11%-13%.

• Guidance reflects conservative assumptions due to order pull-forward in March, dynamic cost environment, and excludes potential tariff refunds.

• Management expects continued positive impact from food delivery and eco-friendly product demand.

• Price increases on select plastic items to be implemented in mid-May to offset rising oil and product costs.