Karat Packaging | 8-K: FY2026 Q2 Revenue Beats Estimate at USD 136.3 M

Revenue: As of FY2026 Q2, the actual value is USD 136.3 M, beating the estimate of USD 135.46 M.

EPS: As of FY2026 Q2, the actual value is USD 1.46, beating the estimate of USD 0.47.

EBIT: As of FY2026 Q2, the actual value is USD 38.29 M.

Second Quarter 2026 Financial Highlights (Three Months Ended June 30, 2026 vs. 2025)

Operational Metrics

• Net Sales: Karat Packaging Inc. reported record quarterly net sales of $136.3 million, an increase of 9.9% from $124.0 million in the prior-year quarter. This increase was primarily driven by $13.1 million in volume growth and product mix, and a $0.4 million favorable year-over-year pricing comparison, partially offset by a $1.1 million decrease in shipping and logistics revenue.
• Cost of Goods Sold: Cost of goods sold decreased by 21.0% to $59.1 million from $74.9 million in the prior-year quarter, primarily due to $25.8 million in IEEPA tariff refunds.
• Gross Profit: Gross profit increased to $77.2 million, including $25.8 million from IEEPA tariff refunds, up 57.1% from $49.1 million in the prior-year quarter.
• Gross Margin: Gross margin was 56.6%, including a 1,890 basis points contribution from IEEPA tariff refunds, compared with 39.6% in the prior-year quarter.
• Operating Expenses: Operating expenses increased to $39.6 million from $32.6 million in the prior-year quarter, mainly due to higher shipping and transportation costs ($3.1 million), online platform fees ($0.6 million), marketing expense ($0.5 million), salaries and benefits ($1.1 million), bad debt expense ($0.6 million), and warehouse expense ($0.4 million).
• Operating Income: Operating income was $37.6 million, compared to $16.6 million in the prior-year quarter.
• Other Income, Net: Other income, net was $1.4 million, compared with other expenses, net, of -$2.0 million in the prior-year quarter.
• Net Income: Net income increased by 168.3% to $29.6 million, including $20.2 million from IEEPA tariff refunds, from $11.1 million in the prior-year quarter.
• Net Income Margin: Net income margin was 21.8%, including a 1,480 basis points contribution from IEEPA tariff refunds, versus 8.9% in the prior-year quarter.
• Adjusted EBITDA: Adjusted EBITDA was $41.6 million, including $25.8 million from IEEPA tariff refunds, compared with $17.7 million for the prior-year quarter.
• Adjusted EBITDA Margin: Adjusted EBITDA margin was 30.5% of net sales, including a 1,890 basis points contribution from IEEPA tariff refunds, compared with 14.3% for the prior-year quarter.

Segment Revenue

• Chains and distributors: $105.9 million in 2026 compared to $97.2 million in 2025.
• Online: $25.8 million in 2026 compared to $20.9 million in 2025, representing 23.6% growth over the prior-year quarter.
• Retail: $4.5 million in 2026 compared to $5.9 million in 2025.

Six-Month 2026 Financial Highlights (Six Months Ended June 30, 2026 vs. 2025)

Operational Metrics

• Net Sales: Net sales increased by 11.3% to $253.2 million from $227.6 million in the same period last year.
• Cost of Goods Sold: Cost of goods sold decreased by 2.3% to $134.6 million from $137.7 million, primarily due to $25.8 million in IEEPA tariff refunds.
• Gross Profit: Gross profit increased by 32.1% to $118.7 million, including $25.8 million from IEEPA tariff refunds, from $89.9 million in the same period last year.
• Gross Margin: Gross margin was 46.9%, including a 1,020 basis points contribution from IEEPA tariff refunds, compared with 39.5% in the same period last year.
• Operating Expenses: Operating expenses were $72.6 million, compared with $65.5 million in the same period last year, driven by higher shipping and transportation costs, salaries and benefits, bad debt expense, warehouse expense, and marketing expenses.
• Other Income, Net: Other income, net was $2.3 million, compared with other expenses, net, of -$0.9 million in the same period last year.
• Net Income: Net income increased by 105.9% to $36.8 million, including $20.2 million from IEEPA tariff refunds, from $17.9 million in the same period last year.
• Net Income Margin: Net income margin was 14.5%, including an 800 basis points contribution from IEEPA tariff refunds, compared with 7.8% in the same period of 2025.
• Adjusted EBITDA: Adjusted EBITDA was $54.1 million, including $25.8 million from IEEPA tariff refunds, compared with $29.6 million in the same period last year.
• Adjusted EBITDA Margin: Adjusted EBITDA margin was 21.4%, including a 1,020 basis points contribution from IEEPA tariff refunds, compared with 13.0% in the same period of 2025.

Segment Revenue

• Chains and distributors: $198.8 million in 2026 compared to $177.8 million in 2025.
• Online: $45.3 million in 2026 compared to $38.7 million in 2025.
• Retail: $9.1 million in 2026 compared to $11.1 million in 2025.

Cash Flow

• Net Cash Provided by Operating Activities: $40.3 million, including $25.2 million from IEEPA tariff refunds, compared to $17.5 million in the prior-year period.
• Net Cash Used in Investing Activities: -$18.3 million compared to $1.2 million provided by investing activities in the prior-year period.
• Net Cash Used in Financing Activities: -$21.6 million compared to -$19.7 million in the prior-year period.
• Free Cash Flow: $38.1 million compared to $16.2 million in the prior-year period.

Unique Metrics

• Dividend: Karat Packaging Inc.’s Board of Directors approved an increase in its regular quarterly dividend to $0.47 per share.
• Share Repurchase Program: During Q2 2026, Karat Packaging Inc. repurchased 73,510 shares for approximately $2.0 million, with $10.0 million remaining available under the program as of June 30, 2026.

Outlook / Guidance

Karat Packaging Inc. expects net sales for the third quarter and full-year 2026 to increase by low double-digits from the prior-year periods. The company projects a gross margin of 35% to 37% for Q3 2026 and in the low 40 percents for full-year 2026, and an Adjusted EBITDA margin of 9% to 11% for Q3 2026 and approximately mid-teens for full-year 2026. These projections include the impact of IEEPA tariff refunds recorded in the first half of 2026 where applicable.