--- title: "Karat Packaging | 10-Q: FY2026 Q1 Revenue Beats Estimate at USD 116.95 M" type: "News" locale: "en" url: "https://longbridge.com/en/news/285771308.md" datetime: "2026-05-08T20:19:42.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/285771308.md) - [en](https://longbridge.com/en/news/285771308.md) - [zh-HK](https://longbridge.com/zh-HK/news/285771308.md) --- # Karat Packaging | 10-Q: FY2026 Q1 Revenue Beats Estimate at USD 116.95 M Revenue: As of FY2026 Q1, the actual value is USD 116.95 M, beating the estimate of USD 114.32 M. EPS: As of FY2026 Q1, the actual value is USD 0.34, beating the estimate of USD 0.31. EBIT: As of FY2026 Q1, the actual value is USD 8.587 M. Karat Packaging Inc. manages and evaluates its operations as a single reportable segment. #### Segment Revenue Net sales for the three months ended March 31, 2026, were $116.9 million, an increase of $13.3 million, or 12.9%, compared to $103.6 million for the same period in 2025. This growth was primarily driven by a $12.1 million increase in volume and product mix and a $2.0 million favorable year-over-year pricing comparison, partially offset by a $0.8 million decrease in shipping and logistics revenue. #### Operational Metrics - **Cost of Goods Sold**: Increased by $12.6 million, or 20.0%, to $75.4 million for the three months ended March 31, 2026, from $62.9 million in the prior year. This was due to a $5.2 million increase in product costs from sales volume growth and a $7.3 million increase in import costs, including duty and tariffs, which rose from $3.4 million in Q1 2025 to $10.5 million in Q1 2026. - **Gross Profit**: Was $41.5 million for the three months ended March 31, 2026, an increase of $0.8 million, or 1.9%, from $40.8 million in the prior year. - **Gross Margin**: Decreased by 380 basis points to 35.5% for the three months ended March 31, 2026, from 39.3% in the prior year. This decline was attributed to rising import costs, which increased to 13.8% of net sales in Q1 2026 from 8.6% in Q1 2025, partially offset by a decrease in product costs as a percentage of net sales to 48.4% in Q1 2026 from 49.5% in Q1 2025. Inventory write-offs were 0.3% of inventory in Q1 2026, compared to a 0.1% inventory recovery in Q1 2025. - **Operating Expenses**: Increased by $0.1 million, or 0.4%, to $33.1 million for the three months ended March 31, 2026, from $32.9 million in the prior year. This included a $0.6 million increase in rent expense due to a new distribution center and a $0.6 million increase in salaries and benefits, offset by a $0.7 million decrease in online platform fees and a $0.4 million decrease in shipping and transportation costs. - **Operating Income**: Increased by $0.6 million, or 8.2%, to $8.5 million for the three months ended March 31, 2026, from $7.8 million in the prior year. - **Other Income, Net**: Decreased by - $0.2 million, or -17.7%, to $0.9 million for the three months ended March 31, 2026, from $1.1 million in the prior year, mainly due to a - $0.3 million decrease in interest income. - **Provision for Income Taxes**: Increased by $0.1 million, or 5.7%, to $2.2 million for the three months ended March 31, 2026, from $2.1 million in the prior year, with effective tax rates of 23.9% and 23.7% respectively. - **Net Income**: Increased by $0.3 million, or 4.8%, to $7.1 million for the three months ended March 31, 2026, from $6.8 million in the prior year. The net income margin was 6.1% in Q1 2026, a decrease of 50 basis points from 6.6% in Q1 2025. - **Adjusted EBITDA (Non-GAAP)**: Increased by 4.8% to $12.5 million for the three months ended March 31, 2026, from $11.9 million in the prior year. The Adjusted EBITDA margin was 10.7% in Q1 2026, a decrease of 80 basis points from 11.5% in Q1 2025. #### Cash Flow - **Net Cash Provided by Operating Activities**: Was $7.2 million for the three months ended March 31, 2026, compared to $7.7 million in the prior year, a decrease of 6.9%. The decrease was mainly due to a - $6.2 million increase in accounts receivable and a - $2.9 million reduction in operating lease liabilities, partially offset by a $1.3 million reduction in inventory purchases and a $1.3 million increase in income tax payable. - **Net Cash Used in Investing Activities**: Was - $6.9 million for the three months ended March 31, 2026, primarily due to - $5.7 million in purchases of short-term investments and - $0.6 million in purchases of property and equipment. This compares to $3.5 million provided by investing activities in the prior year, which included $12.7 million in redemptions of short-term investments, offset by - $8.1 million in purchases of short-term investments and - $1.0 million in deposits for property and equipment. - **Net Cash Used in Financing Activities**: Was - $9.5 million for the three months ended March 31, 2026, primarily consisting of - $9.0 million in cash dividends paid to shareholders and - $0.4 million in long-term debt payments. This compares to - $10.4 million in the prior year, which included - $9.0 million in cash dividends, - $0.9 million in Global Wells membership interest redemption gain tax withholding, and - $0.3 million in long-term debt payments. - **Free Cash Flow (Non-GAAP)**: Was $6.3 million for the three months ended March 31, 2026, compared to $6.6 million in the prior year. #### Unique Metrics - **Domestic Purchases**: Increased to 18.3% for Q1 2026 from 13.8% for Q1 2025. - **Sourcing Diversification**: Sourcing from Taiwan decreased from 53.7% to 46.3%, and from China decreased from 18.4% to 11.3% for Q1 2026 compared to Q1 2025. Purchases from Malaysia and Vietnam increased from an aggregate of 12.2% to 17.2% during the same periods. - **Import Duty and Tariffs**: Increased from $3.4 million in Q1 2025 to $10.5 million in Q1 2026. - **Thermal Paper Investigation Liability**: Karat Packaging Inc. maintains a liability reserve of $1.5 million as of March 31, 2026, related to an investigation by U.S. Customs and Border Protection regarding certain imported thermal paper products. - **IEEPA Tariffs**: Karat Packaging Inc. has paid $26.0 million in IEEPA tariffs during 2025 and the first two months of 2026 and has submitted refund claims totaling $25.8 million through the CAPE system. #### Future Outlook and Strategy Karat Packaging Inc. aims to enhance supply chain resilience, efficiency, and margin expansion by realigning its global supply chain, increasing domestic purchases, and diversifying sourcing to countries with more favorable trade conditions. The company anticipates continued positive impact from the growing preference for food delivery and take-out, which increases demand for packaging, and expects increased demand for eco-friendly products due to environmental concerns. Karat Packaging Inc.’s liquidity position, consisting of $28.7 million in cash and cash equivalents, $5.7 million in short-term investments, and $7.7 million in available Line of Credit, is deemed adequate to meet working capital needs and fund capital expenditures for at least the next 12 months, while also exploring options for further business growth and shareholder value beyond this period. ### Related Stocks - [KRT.US](https://longbridge.com/en/quote/KRT.US.md) ## Related News & Research - [AMKR: Record Q2 2026 revenue and robust growth across all segments, with strong outlook for Q3](https://longbridge.com/en/news/293969389.md) - [QUAD: Q2 2026 net sales up 1% year-over-year, with strong EPS growth and guidance reaffirmed](https://longbridge.com/en/news/294114976.md) - [KLAC: Record revenue, accelerating growth, and strong market share gains driven by AI and packaging](https://longbridge.com/en/news/294122556.md) - [Solventum’s Q2 2026 Earnings: What to Expect](https://longbridge.com/en/news/293459582.md) - [Thermo Fisher Scientific (NYSE:TMO) Updates FY 2026 Earnings Guidance](https://longbridge.com/en/news/293626208.md)