Karat Packaging Reports Third Quarter 2026 Financial Results
Karat Packaging Inc. (KRT) filed an SEC Form 8-K — Results of Operations and Financial Condition. Karat Packaging Reports Third Quarter 2026 Financial Results — Continued Strengthening of Pipeline and Solid Topline Growth — CHINO, Calif., November 5, 2026 – Karat Packaging Inc. (Nasdaq: KRT) ("Karat Packaging" or the "Company"), a specialty distributor and manufacturer of env
How this was made
The 30-second read
Why it matters
The earnings release provides fresh guidance and operational details that were not previously public.
Market read
First‑report earnings and guidance for a niche packaging company; relevant for traders tracking small‑cap consumer discretionary earnings.
What to watch
Potential benefit from upcoming tariff refunds and new Florida distribution center could improve future profitability.
Karat Packaging Reports Third Quarter 2026 Financial Results — Continued Strengthening of Pipeline and Solid Topline Growth
Third-quarter net sales increased 8.2 percent to $134.7 million, but gross margin declined to 33.5 percent, net income declined to $4.7 million, and Adjusted EBITDA declined to $8.9 million amid higher product, import, ocean freight, shipping, and online-growth costs.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q3 2026 net salesGAAP | $134.7M | – | 8.2 percent |
| Q3 2026 cost of goods soldGAAP | $89.6M | – | 9.8 percent |
| Q3 2026 gross profitGAAP | $45.1M | – | 5.2 percent |
| Q3 2026 gross marginGAAP | 33.5 percent | – | – |
| Q3 2026 total operating expensesGAAP | $40.3M | – | 17.2 percent |
| Q3 2026 selling expensesGAAP | $18.00M | – | – |
| Q3 2026 general and administrative expensesGAAP | $22.31M | – | – |
| Q3 2026 gain, net, on disposal of property and equipmentGAAP | $52K | – | – |
| Q3 2026 operating incomeGAAP | $4.87M | – | – |
| Q3 2026 total other income, netGAAP | $979K | – | – |
| Q3 2026 income before provision for income taxesGAAP | $5.85M | – | – |
| Q3 2026 provision for income taxesGAAP | $1.13M | – | – |
| Q3 2026 net incomeGAAP | $4.7M | – | – |
| Q3 2026 net income marginGAAP | 3.5 percent | – | – |
| Q3 2026 net income attributable to Karat PackagingGAAP | $4.4M | – | – |
| Q3 2026 diluted earnings per shareGAAP | $0.22 per diluted share | – | – |
| Q3 2026 Adjusted EBITDAnon-GAAP | $8.9M | – | – |
| Q3 2026 Adjusted EBITDA marginnon-GAAP | 6.6 percent | – | – |
| Q3 2026 adjusted diluted earnings per common sharenon-GAAP | $0.24 per share | – | – |
| First nine months of 2026 net salesGAAP | $388M | – | 10.2 percent |
| First nine months of 2026 cost of goods soldGAAP | $224.2M | – | – |
| First nine months of 2026 gross profitGAAP | $163.8M | – | 23.4 percent |
| First nine months of 2026 gross marginGAAP | 42.2 percent | – | – |
| First nine months of 2026 total operating expensesGAAP | $112.9M | – | 13.1 percent |
| First nine months of 2026 operating incomeGAAP | $50.94M | – | – |
| First nine months of 2026 net incomeGAAP | $41.5M | – | – |
| First nine months of 2026 net income marginGAAP | 10.7 percent | – | – |
| First nine months of 2026 net income attributable to Karat PackagingGAAP | $40.5M | – | – |
| First nine months of 2026 diluted earnings per shareGAAP | $2.01 per diluted share | – | – |
| First nine months of 2026 Adjusted EBITDAnon-GAAP | $63M | – | – |
| First nine months of 2026 Adjusted EBITDA marginnon-GAAP | 16.2 percent | – | – |
| First nine months of 2026 adjusted diluted earnings per common sharenon-GAAP | $2.07 per share | – | – |
| First nine months of 2026 net cash provided by operating activitiesGAAP | $50.02M | – | – |
| First nine months of 2026 free cash flownon-GAAP | $47.22M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Chains and distributorsNo category-specific driver was provided. | $103.3M | – | – |
| OnlineOnline sales growth and elevated shipping costs increased online shipping costs by $2.2 million; online platform fees increased $0.9 million and online marketing expenses increased $0.7 million. | $26.90M | – | nearly 38 percent |
| RetailNo category-specific driver was provided. | $4.55M | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
2026 fourth quarter and full-year 2026 outlook
- RevenueNet sales for the 2026 fourth quarter expected to increase by 9 to 11 percent from the prior-year quarter.
- Gross marginGross margin for the 2026 fourth quarter expected to be between 33 to 35 percent.
- NoteAdjusted EBITDA margin for the 2026 fourth quarter expected to be in the high-single digits.
- NoteNet sales for full-year 2026 expected to increase by 9 to 11 percent from the prior year.
- NoteGross margin for full-year 2026 expected to be between 39 and 41 percent, including IEEPA tariff refunds recorded during the first half of 2026.
- NoteAdjusted EBITDA margin for full-year 2026 expected to be approximately mid-teens, including IEEPA tariff refunds recorded during the first half of 2026.
Capital returns
- On November 3, 2026, the Board of Directors approved a regular quarterly dividend of $0.47 per share on the Company’s common stock, payable on or about November 27, 2026, to stockholders of record as of November 19, 2026.
- The Company did not repurchase any common stock during the third quarter of 2026.
- The Company repurchased $2.0 million of common stock during the first nine months of 2026.
- Approximately $10.0 million remained available for future repurchases as of September 30, 2026.
- Dividends paid to shareholders were $27,348 (in thousands) during the nine months ended September 30, 2026, compared with $27,091 (in thousands) during the nine months ended September 30, 2025.
What drove it
- Q3 net-sales growth was primarily driven by $10.7 million in volume growth and product mix and a $0.4 million favorable year-over-year pricing comparison, partially offset by a decrease of $0.8 million in shipping and logistics revenue.
- Q3 ocean freight costs rose $2.4 million, mainly reflecting an 11.7 percent increase in imported containers and a 17.0 percent increase in the average container rate compared with the prior-year quarter.
- Q3 duty and tariff costs decreased $1.1 million compared with the prior-year quarter.
- The first nine months of 2026 included IEEPA tariff refunds of $25.8 million recognized during the period and a $20.2 million contribution to net income.
- The Company began shipping select products to four new chain accounts secured in the second quarter in October. It won additional new business with those customers across multiple product lines, with shipments expected to commence in early 2027.
- The Company gained four additional chain accounts in the third quarter, with shipments expected to commence in the first half of 2027.
- The Company is diversifying sourcing toward Indonesia, Malaysia and South America, and is implementing price increases on select items in November 2026 and January 2027.
- A new Florida distribution center is expected to open in November 2026.
Concerns
- Q3 gross margin declined to 33.5 percent from 34.5 percent as product costs increased to 50.6 percent of net sales from 48.9 percent.
- Q3 operating expenses increased 17.2 percent to $40.3 million, exceeding the 8.2 percent increase in net sales.
- Increased import and domestic shipping costs and elevated resin prices pressured margin, according to the Chief Executive Officer.
- Q3 Adjusted EBITDA margin declined to 6.6 percent from 10.5 percent, and Q3 net income margin declined to 3.5 percent from 6.1 percent.
- First-nine-month profitability and cash flow included IEEPA tariff refunds, including $25.8 million recognized in cost of goods sold and $25.2 million of cash receipts.
What to watch
- Q4 net sales growth against the 9 to 11 percent guidance range.
- Q4 gross margin against the 33 to 35 percent guidance range and adjusted EBITDA margin expected in the high-single digits.
- The effect of elevated oil prices, ocean freight costs, resin prices, sourcing diversification, and announced price increases on margins.
- Ramp timing for the four second-quarter chain-account wins, expanded business with those customers expected in early 2027, and four third-quarter chain-account wins expected in the first half of 2027.
- The opening and operating contribution of the new Florida distribution center expected in November 2026.
- The degree to which full-year gross margin and Adjusted EBITDA margin continue to reflect IEEPA tariff refunds recorded during the first half of 2026.
Balance sheet and cash flow
- Cash and cash equivalents were $33,444 (in thousands) as of September 30, 2026, compared with $37,880 (in thousands) as of December 31, 2025.
- Short-term investments were $10,000 (in thousands) as of September 30, 2026, compared with $— as of December 31, 2025.
- Accounts receivable, net of allowance for bad debt, were $44,910 (in thousands), compared with $36,402 (in thousands).
- Inventories were $96,792 (in thousands), compared with $81,682 (in thousands).
- Total assets were $306,431 (in thousands), compared with $287,686 (in thousands).
- Accounts payable were $45,012 (in thousands), compared with $26,323 (in thousands).
- Total current liabilities were $104,894 (in thousands), compared with $70,220 (in thousands).
- Total liabilities were $135,038 (in thousands), compared with $130,816 (in thousands).
- Total stockholders’ equity was $171,393 (in thousands), compared with $156,870 (in thousands).
- Net cash used in investing activities was $13,045 (in thousands) in the first nine months of 2026, compared with net cash provided by investing activities of $5,447 (in thousands) in the same period of 2025.
- Net cash used in financing activities was $41,416 (in thousands), compared with $31,467 (in thousands).
- Net cash provided by operating activities included cash receipts related to the IEEPA tariff refunds of $25.2 million during the nine months ended September 30, 2026.
Analysis
Karat Packaging delivered third-quarter net sales of $134.7 million, up 8.2 percent from $124.5 million. Management attributed the increase principally to $10.7 million of volume growth and product mix, plus a $0.4 million favorable year-over-year pricing comparison, partly offset by a $0.8 million decrease in shipping and logistics revenue. Online sales grew nearly 38 percent over the prior-year quarter, while chain-account wins and expansion with existing new chain customers provide a stated pipeline for shipments beginning in early 2027 and the first half of 2027.
Profitability weakened materially in the quarter. Gross profit rose 5.2 percent to $45.1 million, slower than sales growth, and gross margin declined to 33.5 percent from 34.5 percent. Product costs increased to 50.6 percent of net sales from 48.9 percent. Ocean freight costs rose $2.4 million, with an 11.7 percent increase in imported containers and a 17.0 percent increase in the average container rate, while higher resin prices and import costs also weighed on results. Operating expenses rose 17.2 percent to $40.3 million, led by shipping and transportation, online platform fees, online marketing, salaries and benefits, warehouse expense, and stock-based compensation.
The resulting earnings pressure was significant. Net income was $4.7 million versus $7.6 million, net income attributable to Karat Packaging was $4.4 million versus $7.3 million, and diluted earnings per share was $0.22 versus $0.36. Adjusted EBITDA was $8.9 million versus $13.1 million, with Adjusted EBITDA margin falling to 6.6 percent from 10.5 percent. The first nine months showed stronger reported growth, including net income of $41.5 million and Adjusted EBITDA of $63.0 million, but both results included material IEEPA tariff-refund contributions of $20.2 million and $25.8 million, respectively.
Cash flow was also supported by tariff-refund receipts. Nine-month operating cash flow was $50,025 (in thousands), including $25.2 million of cash receipts related to IEEPA tariff refunds, and free cash flow was $47,218 (in thousands). Cash and cash equivalents were $33,444 (in thousands), short-term investments were $10,000 (in thousands), and inventories were $96,792 (in thousands) as of September 30, 2026. The company maintained shareholder distributions with a $0.47 per-share quarterly dividend, repurchased $2.0 million of stock during the first nine months, and had approximately $10.0 million remaining under its repurchase program.
For the fourth quarter, Karat expects net sales growth of 9 to 11 percent, gross margin of 33 to 35 percent, and an Adjusted EBITDA margin in the high-single digits. Full-year guidance calls for net sales growth of 9 to 11 percent, gross margin of 39 to 41 percent, and Adjusted EBITDA margin at approximately mid-teens, with the latter two measures explicitly including first-half IEEPA tariff refunds. Execution on announced select-item price increases, sourcing diversification, freight and resin costs, e-commerce economics, and the November opening of the Florida distribution center will be central to the margin trajectory.
Management, verbatim
We delivered solid top-line growth in the third quarter, with sales increasing 8.2 percent, and we saw continued strong momentum in our e-commerce business, where online sales grew nearly 38 percent over the prior-year quarter.
Alan Yu, Chief Executive Officer
While increased import as well as domestic shipping costs and elevated resin prices pressured margin and contributed to results below our expectations, we remain encouraged by the strength of our sales performance, especially the continued momentum in our e-commerce business expansion.
Alan Yu, Chief Executive Officer
Against a backdrop of elevated oil prices and ocean freight costs, we continue to realign Karat’s global supply chain and diversify sourcing toward markets with more favorable trade conditions and freight costs, including Indonesia, Malaysia and South America.
Alan Yu, Chief Executive Officer
Not in the filing
stated, not guessed- Previous-period outlook was not provided, so prior-guidance comparisons are unavailable.
- Quarterly operating cash flow, investing cash flow, financing cash flow, and free cash flow were not reported.
- Debt balances were not reported.
- Q3 2026 category-level year-over-year revenue changes for Chains and distributors and Retail were not reported.
- Sequential quarter comparisons were not reported for the financial metrics.
- Forward operating-expense guidance and tax-rate guidance were not reported.
- A GAAP reconciliation for forward adjusted EBITDA margin targets was not available without unreasonable effort, as stated by the Company.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. 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 is a Nasdaq‑listed specialty distributor of environmentally friendly disposable foodservice products.
Ticker impact
Karat Packaging disclosed Q3 2026 results with 8.2% revenue growth and lowered margins, plus guidance for Q4 and full-year 2026.
likely modest pressure as investors weigh weaker margins against solid top‑line growth and upbeat guidance
Guidance shows continued sales expansion but margin guidance remains below prior year, suggesting earnings may stay subdued.
Market effects
Highlights pressure on foodservice packaging margins from rising resin and freight costs, relevant for peers in disposable packaging.
North American packaging sector may see modest re‑rating as cost pressures persist.
Limited; primarily impacts U.S. specialty packaging niche.
Counterpoint
Investors could view the strong e‑commerce growth and new chain accounts as a catalyst for upside despite margin headwinds.
Key entities
- ExecutiveAlan Yu
Chief Executive Officer of Karat Packaging, provided commentary on results and outlook.
