Karat Packaging Inc. (KRT): Results of Operations and Financial Condition
Karat Packaging Inc. (KRT) filed an SEC Form 8-K — Results of Operations and Financial Condition. Karat Packaging Reports Second Quarter 2026 Financial Results — Online Growth Fuels Record Sales and Solid Profitability — CHINO, Calif., August 6, 2026 – Karat Packaging Inc. (Nasdaq: KRT) ("Karat Packaging" or the "Company"), a specialty distributor and manufacturer of environm
How this was made
The 30-second read
Why it matters
The market will likely reprice KRT based on (1) record Q2 sales and profitability, (2) the explicit contribution of IEEPA tariff refunds to gross margin and net income, and (3) management’s guidance that Q3 will include only insignificant IEEPA refunds, setting expectations for normalized margins and EBITDA.
Market read
This is a primary earnings-and-guidance disclosure with quantified margin and profitability drivers, including a large tariff-refund component and explicit expectations for Q3 normalization.
What to watch
Import costs rose as a percentage of net sales (import costs 11.1% vs 9.5%), and operating expenses increased with shipping, online platform fees, and marketing. Traders should watch whether volume growth and online growth can offset these cost pressures without tariff-refund support.
Karat Packaging Reports Second Quarter 2026 Financial Results — Online Growth Fuels Record Sales and Solid Profitability
Record quarterly net sales increased 9.9 percent, while reported gross profit, net income and Adjusted EBITDA rose sharply, led substantially by $25.8 million of IEEPA tariff refunds.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $136.3 million | – | up 9.9 percent |
| Cost of goods soldGAAP | $59.1 million | – | decreased 21.0 percent |
| Gross profitGAAP | $77.2 million | – | up 57.1 percent |
| Gross marginGAAP | 56.6 percent | – | – |
| Operating expensesGAAP | $39.6 million | – | – |
| Other income, netGAAP | $1.4 million | – | – |
| Net incomeGAAP | $29.6 million | – | up 168.3 percent |
| Net income marginGAAP | 21.8 percent | – | – |
| Net income attributable to Karat PackagingGAAP | $29.3 million | – | – |
| Diluted earnings per shareGAAP | $1.46 per diluted share | – | – |
| Adjusted EBITDAnon-GAAP | $41.6 million | – | – |
| Adjusted EBITDA marginnon-GAAP | 30.5 percent of net sales | – | – |
| Adjusted diluted earnings per common sharenon-GAAP | $1.48 per share | – | – |
| Net sales, first half of 2026GAAP | $253.2 million | – | increased 11.3 percent |
| Cost of goods sold, first half of 2026GAAP | $134.6 million | – | decreased 2.3 percent |
| Gross profit, first half of 2026GAAP | $118.7 million | – | increased 32.1 percent |
| Gross margin, first half of 2026GAAP | 46.9 percent | – | – |
| Operating expenses, first half of 2026GAAP | $72.6 million | – | – |
| Other income, net, first half of 2026GAAP | $2.3 million | – | – |
| Net income, first half of 2026GAAP | $36.8 million | – | increased 105.9 percent |
| Net income margin, first half of 2026GAAP | 14.5 percent | – | – |
| Net income attributable to Karat Packaging, first half of 2026GAAP | $36.1 million | – | – |
| Diluted earnings per share, first half of 2026GAAP | $1.80 per diluted share | – | – |
| Adjusted EBITDA, first half of 2026non-GAAP | $54.1 million | – | – |
2026 third quarter and full-year 2026 outlook
- RevenueNet sales for the 2026 third quarter expected to increase by low double-digits from the prior-year quarter; Net sales for full-year 2026 expected to increase by low double-digits from the prior year.
- Gross marginGross margin for the 2026 third quarter expected to be within 35 to 37 percent, including insignificant IEEPA tariff refunds anticipated during the quarter; Gross margin for full-year 2026 expected to be in the low 40 percents, including IEEPA tariff refunds recorded during the first half of 2026.
- NoteAdjusted EBITDA margin for the 2026 third quarter expected to be within 9 to 11 percent, including insignificant IEEPA tariff refunds anticipated during the quarter.
- NoteAdjusted EBITDA margin for full-year 2026 expected to be approximately mid-teens, including IEEPA tariff refunds recorded during the first half of 2026.
What drove it
- $13.1 million in volume growth and product mix.
- A $0.4 million favorable year-over-year pricing comparison.
- Online business grew 23.6 percent over the prior-year quarter.
- The Company added four new chain accounts during the quarter.
- IEEPA tariff refunds of $25.8 million reduced cost of goods sold and increased gross profit.
- Other income, net benefited from $0.9 million interest income related to IEEPA tariff refunds recognized in the 2026 second quarter.
Concerns
- Reported second-quarter gross profit included contribution of $25.8 million from IEEPA tariff refunds.
- Reported second-quarter net income included contribution of $20.2 million from IEEPA tariff refunds.
- Product costs as a percentage of net sales increased to 49.2 percent from 48.5 percent.
- Import costs as a percentage of net sales increased to 11.1 percent from 9.5 percent.
- Operating expenses increased to $39.6 million from $32.6 million, including higher shipping and transportation costs, online platform fees, marketing expense, salaries and benefits, bad debt expense and warehouse expense.
- Third-quarter guidance anticipates insignificant IEEPA tariff refunds.
What to watch
- Net sales growth expected to increase by low double-digits from the prior-year quarter in the 2026 third quarter.
- Gross margin expected to be within 35 to 37 percent in the 2026 third quarter.
- Adjusted EBITDA margin expected to be within 9 to 11 percent in the 2026 third quarter.
- The planned 47,000-square-foot warehouse for a new distribution center in Orlando, Florida, which the Company expects to be operational by the third quarter of this year.
- Full-year 2026 gross margin expected to be in the low 40 percents and Adjusted EBITDA margin expected to be approximately mid-teens.
Analysis
Karat Packaging reported record quarterly net sales of $136.3 million, up 9.9 percent from $124.0 million in the prior-year quarter. Growth was primarily driven by $13.1 million in volume growth and product mix and a $0.4 million favorable year-over-year pricing comparison, partly offset by a $1.1 million decrease in shipping and logistics revenue. Management also reported 23.6 percent online sales growth and four new chain accounts during the quarter.
Reported profitability was materially enhanced by $25.8 million of IEEPA tariff refunds. Gross profit increased to $77.2 million from $49.1 million and gross margin reached 56.6 percent versus 39.6 percent, with the refunds contributing 1,890 basis points to gross margin. Net income rose to $29.6 million from $11.1 million, including a $20.2 million contribution from the refunds, while Adjusted EBITDA was $41.6 million compared with $17.7 million.
Underlying cost pressures remained visible despite the refund benefit. Product costs as a percentage of net sales increased to 49.2 percent from 48.5 percent, and import costs as a percentage of net sales rose to 11.1 percent from 9.5 percent. Operating expenses increased to $39.6 million from $32.6 million, led by higher shipping and transportation costs, online platform fees, marketing expense, salaries and benefits, bad debt expense, and warehouse expense.
For the first half of 2026, net sales increased 11.3 percent to $253.2 million and gross margin was 46.9 percent, including 1,020 basis points from IEEPA tariff refunds. The outlook calls for low-double-digit net sales growth in both the third quarter and full year, but third-quarter gross margin of 35 to 37 percent and Adjusted EBITDA margin of 9 to 11 percent, with insignificant IEEPA tariff refunds anticipated. This places attention on sales momentum, import and product-cost pressure, and profitability after the first-half refund benefit.
The Company is finalizing a lease for a 47,000-square-foot warehouse for a new distribution center in Orlando, Florida, expected to be operational by the third quarter of this year. Management said the facility is expected to improve service throughout the Southeast, enhance e-commerce fulfillment capabilities, reduce delivery times, and provide infrastructure for future growth.
Management, verbatim
We delivered record quarterly net sales of $136.3 million, driven by solid customer demand and accelerated momentum in our online business growth. Our financial performance included a benefit from the IEEPA tariff refunds, which further contributed to strong reported profitability.
Alan Yu, Chief Executive Officer
Not in the filing
stated, not guessed- Operating income for the second quarter of 2026 and prior-year quarter was not provided in the supplied filing text.
- Operating margin for the second quarter of 2026 and prior-year quarter was not provided in the supplied filing text.
- Income tax expense and effective tax rate were not provided in the supplied filing text.
- Cash, debt and other balance-sheet figures were not provided in the supplied filing text.
- Operating cash flow and free cash flow were not provided in the supplied filing text.
- Share repurchases, dividends and other capital-return figures were not provided in the supplied filing text.
- Formal reportable segment revenue was not provided in the supplied filing text.
- Prior-quarter comparisons were not provided in the supplied filing text.
- Prior outlook was not provided.
- First-half 2026 Adjusted EBITDA margin comparison and adjusted diluted earnings per common share were truncated from the supplied filing text.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Karat Packaging filed an SEC Form 8-K (Item 2.02) with an attached press release reporting Q2 2026 financial results and providing Q3 and full-year 2026 guidance.
Ticker impact
Karat Packaging reported Q2 2026 record net sales and profitability, with guidance that Q3 gross margin and EBITDA will exclude “insignificant” IEEPA refunds.
Likely near-term positive bias if traders focus on record sales and margins, but increased volatility risk if investors discount the IEEPA refund contribution versus the guided “insignificant” refunds in Q3.
This is a primary SEC 8-K with quantified Q2 results and explicit Q3 and full-year guidance ranges, including a stated expectation that IEEPA refunds will be insignificant in Q3. The magnitude of the refund contribution (basis points and dollars) is large enough to drive debate on normalized margins.
Market effects
Highlights how tariff-related refund mechanics can swing distributor/manufacturer margins, potentially affecting how investors model normalized gross margin for similar packaging/foodservice supply names.
Warehouse expansion in Orlando, Florida signals continued investment in fulfillment capacity for Southeast demand and e-commerce growth.
IEEPA refund and import cost dynamics underscore ongoing sensitivity to trade policy and ocean freight/container rate changes.
Counterpoint
Treat the IEEPA tariff refunds as non-recurring and focus on the guided Q3 gross margin (35% to 37%) and adjusted EBITDA margin (9% to 11%) excluding meaningful refunds, implying a normalization step-down from Q2’s elevated margins.
Key entities
- companyKarat Packaging Inc.
Specialty distributor and manufacturer of environmentally friendly disposable foodservice products; subject of the 8-K earnings and guidance release.
- executiveAlan Yu
CEO quoted in the release discussing online growth momentum, new chain accounts, and the planned Orlando distribution center.
- policy_mechanismIEEPA tariff refunds
Tariff refund mechanism that management quantifies as a major contributor to Q2 gross profit, net income, and adjusted EBITDA.
