Karat Packaging Inc. — Call Transcript 2026

Thank you for standing by. My name is Perla, and I will be your conference operator today. At this time, I would like to Welcome everyone to the Karat Packaging First Quarter 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Thank you. I would now like to hand the conference over to Roger Pondel. Please go ahead. Thank you operator. Good afternoon, everyone, and welcome to Karat Packaging's 2026 first quarter conference call. I'm Roger Pondel with PondelWilkinson, Karat Packaging's investor relations firm. It will be my pleasure momentarily to introduce the company's Chief Executive Officer, Alan Yu, and its Chief Financial Officer, Jian Guo. Before I turn the call over to Alan, I want to remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factors section of the company's most recent Form 10-K, as filed with the Securities and Exchange Commission, and copies of which are available on the SEC's website at www.sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Karat Packaging undertakes no obligation to update any forward-looking statements except as required by law. Please also note that during today's call, we'll be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, all of which are non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today's press release, which is now posted on the company's website. With that, I will turn the call over to CEO, Alan Yu. Alan? Thank you Roger. Good afternoon everyone. We began 2026 with a robust first quarter. Year-over-year sales increased almost 13%, with momentum building throughout the quarter. Our performance during the quarter accelerated significantly, starting with modest weather-impacted growth in January to growth exceeding 20% in March, which included some pull-forward of orders. The acceleration reflected improving demand, strong execution across the organization, and continued gain in the market share. Notably, our online sales, which are typically at a higher contribution margin, returned to robust growth this quarter after we pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms. Compared to the prior year quarter, online sales increased almost 10% to $19.5 million in the first quarter of 2026 from $17.8 million in the prior year quarter. With momentum building steadily throughout the first quarter, achieving 19% year-over-year growth in March 2026. Gross margin remained resilient at 35.5% despite the continued impact of higher tariffs. This performance demonstrate the effectiveness of our diversified sourcing strategy and was further supported by a favorable product mix and pricing. As we look ahead, we are closely managing a dynamic cost environment. Given the sharp increase in oil prices and the resulting impact on product costs, we are implementing price increases on select plastic items beginning in the middle of this month. While certain source product costs are rising, we expect tariff saving under current trade policy to begin reducing cost of goods sold this month. These savings should partially offset inflationary pressure, and together with our pricing action, we expect to support gross margin stability. Importantly, we are well-positioned to continue gaining market share amid ongoing resin supply challenges. Our strong inventory position and disciplined supply chain execution give us confidence in our ability to consistently serve customers and meet demand. Turning to innovation and sustainability, our paper bag product category continues to expand steadily, driving a year-over-year increase in eco-friendly product sales of 16.9% in the first quarter. We also successfully closed another national chain account for paper bag during this quarter, further strengthening our leadership position and reinforcing our long-term strategy in sustainable packaging solutions. Our sourcing diversification initiative continues to deliver tangible benefits. We have proactively rebalanced import volumes across geographies in response to evolving tariff structures, strengthening our cost competitiveness and consistent product availability. In this quarter, we increased domestic purchase to 18% compared to 14% in the prior year quarter, an increased sourcing from Malaysia and Vietnam to an aggregate of 17% from 12% in the prior year quarter. At the same time, we reduced purchase from Taiwan in the current quarter to 46% compared to 54% in the prior year quarter. Reduced sourcing from China to 11% compared to 18% in the prior year quarter. Additionally, we expanded our sourcing footprint by adding a new supplier in South America, which further reduces geographic risk and enhance supply chain flexibility. We remain focused on providing responsive customer service and disciplined execution, which are a hallmark of Karat Packaging while advancing Karat's operational efficiencies. These efforts are reflected in better operating cost leverage, which decreased to 28.3% in the first quarter of 2026 from 31.8% in the prior year quarter. In summary, we deliver a strong start to the year, maintain margin resilience in a challenging environment, and continue to invest in growth areas that align with our customer demand and long-term industry trend. I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company financial result in greater detail. Jian? Thank you Alan. I'll begin with a summary of our Q1 performance, followed by an update on our guidance. Net sales for the 2026 first quarter increased to $116.9 million, up 12.9% from $103.6 million in the prior year quarter. The increase primarily reflected $12.1 million in volume and mix, and a $2.0 million favorable impact from pricing. Sales to channel accounts and distributors, our biggest sales channel, were up by 15.1% in the 2026 first quarter. Online sales, as Alan discussed earlier, rose almost 10% over the prior year quarter. Sales to the retail channel declined 12% from the 2025 first quarter. Cost of goods sold for the 2026 first quarter increased 20% to $75.4 million from $62.9 million in the prior year quarter. The increase was driven primarily by sales growth and higher import costs of $7.3 million, primarily as a result of higher import duty and tariffs, which increased from $3.4 million for the three months ended March 31, 2025 to $10.5 million for the three months ended March 31, 2026. Gross profit for the 2026 first quarter increased to $41.5 million from $40.8 million in the prior year quarter. Gross margin for the 2026 first quarter was 35.5% compared with 39.3% a year ago. The year-over-year decline in gross margin reflects the expected impact from higher import costs, which increased to 13.8% of net sales from 8.6% in the prior year quarter, as well as elevated inventory adjustments as a percentage of net sales. These impacts were partially offset by lower product costs as a percentage of net sales. Operating expenses in the 2026 first quarter increased to $33.1 million from $32.9 million last year. The increase was primarily driven by higher rent expense of $0.6 million associated with the opening of the company's new Chino distribution center in March 2025, along with a $0.6 million increase in salaries and benefits. These increases were partially offset by a $0.7 million reduction in online platform fees resulting from a shift away from third-party fulfillment of online orders, as well as a $0.4 million decrease in shipping and transportation costs due to lower online shipping rates. Operating income in the 2026 first quarter increased 8.2% to $8.5 million from $7.8 million in the prior year quarter. Total other income net decreased to $0.9 million for the 2026 first quarter from $1.1 million in the prior year quarter. Net income for the 2026 first quarter increased 4.8% to $7.1 million from $6.8 million for the prior year quarter. Net income margin was 6.1% in the 2026 first quarter, compared with 6.6% last year. Net income attributable to Karat for the 2026 first quarter increased 5.2% to $6.7 million or $0.34 per diluted share from $6.4 million or $0.32 per diluted share in the prior year quarter. Adjusted EBITDA for the 2026 first quarter rose to $12.5 million from $11.9 million for the prior year quarter. Adjusted EBITDA margin was 10.7% compared with 11.5% for the 2025 first quarter. Adjusted diluted earnings per common share increased to $0.34 for the 2026 first quarter from $0.33 per share in the comparable prior year period. We executed strong working capital management during the first quarter, generating operating cash flow of $7.2 million and free cash flow of $6.3 million, despite continued heavy duty and tariff payments, as discussed earlier. We paid out a regular quarterly dividend of $0.45 per share to shareholders on February 27, 2026. As of March 31, 2026, we had $90.7 million in working capital and $36.4 million in financial liquidity with another $5.7 million in short-term investments. On May 5, 2026, our board of directors approved a regular quarterly dividend of $0.45 per share, payable May 28, 2026, to shareholders of record as of May 21, 2026. Looking ahead to the 2026 second quarter, we expect net sales to increase by approximately 8%-10% from the prior year quarter. As Alan noted earlier, some timing shift of orders in March contributed to a softer start in April. Since then, we have replenished inventory, and we're confident in our ability to achieve our sales target. We expect gross margin for the 2026 second quarter to be within 35%-37% and adjusted EBITDA margin to be within 11%-13%, excluding potential tariff refund impact under the current trade policy. For the full year 2026, we expect net sales to grow in a low double-digit range over the prior year. We expect gross margin for the full year 2026 to be within 34%-36% and adjusted EBITDA margin to be within 11%-13%, excluding potential tariff refund impact under the current trade policy. As Alan mentioned earlier, we are seeing accelerated growth in our pipeline, reflecting our strong market positioning and initiative to continue gaining market share in a dynamic trade and supply chain environment. We expect to continue to drive top line growth, sustain our gross margin, and continue to deliver strong profitability with enhanced operational efficiency and disciplined cost management. Alan and I will now be happy to answer your questions and now turn the call back to the operator. Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star one again. With that, your first question comes from the line of George Staphos with Bank of America. Please go ahead. Hi, this is Kyle Benvenuto on for George. Thank you for taking my question. You noted the sharp increase in oil prices is pressuring costs across sourced products and plastics. Within both your 2Q and 2026 margin guidance ranges, what oil price assumptions are embedded, and at what point would the mid-May plastic price increases no longer be sufficient to protect the 34% margin floor for the year? Here's what we see on the oil prices. Yes, you're correct. Oil prices has gone up and raw material has gone up so sharply. The issue is we were able to negotiate with our vendor to support our less increase versus the full increase impact of the oil prices. Majority of our partner vendors overseas have absorbed majority of the increases. That's and also that's where we're seeing that we're giving minimum increase in the May 15 to June area. That's how I see it. Is it gonna be escalating? Is this tension gonna escalate more? Right now we see that the resin price has stabilized in Asia. It has come down a little bit also. We do not see at this point that the raw material price will go up even higher from this point. Thank you, Alan. One more question for you, and I'll turn it over. Your guidance points to 8%-10% sales growth for 2Q. How much of this is driven by the expansion of new national accounts versus organic volume growth from your existing customer base? Thank you. We're seeing a sharp increase in our online sale portion of our business. For example, last month, April, we topped our record over double-digit in terms of online sales. We do foresee that this quarter we will have a record sales online as well. Last year, we did about $72 million-$73 million online revenue, and this year we are on track for $100+ million on online revenues. Majority of the growth, actually a big chunk of the growth is from online sales revenue. From our national chain accounts, yes, we do see some of the national chain pipeline converting to revenues. That is also a segment that we do see a growth in the national chain account. Especially it's summer season, most of these chains are gonna increase their order for their drink cups and carriers as well as the deli part of our food segment of our business is we was expecting an increase in that segment as well. These are all organic growth, by the way. Thank you. Congrats on the quarter. Thank you. The next question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead. Hey, guys. Thanks for taking my questions. First one for me. I just wanna make sure I understand this dynamic correctly. Alan, you had called out the 20% growth that you saw in the month of March, and then obviously the second quarter guidance is only 8%-10% revenue growth. It sounds like you guys saw some pull forward in order demand that drove the strength in March, and then things kinda stabilized a little bit in the second quarter. That's where that, you know, delta is between that 20% and that 8%-10% growth is. It's not necessarily the business is slowing. No, it's not. Also, we wanna be conservative in terms of our growth numbers. We do expect our full year guidance to be in range with what we have guided earlier this year. Second quarter, we're seeing some softening in April because of the pull forwarding from March. In this month so far, we're seeing a very positive revenue growth in terms of May. We wanna be conservative, you know, cautious in terms of making sure that we meet the guidance, yeah, or exceed the guidance. Yep, fair enough. Nope, that makes sense. Then just thinking in terms of pricing, you know, you called out in the prepared remarks and talked a little bit about that, but, you know, how much price do you feel like needs to be taken for you guys to preserve your gross margins? Then thinking about that industry-wide, you know, what does your price increases look like compared to competitors? Are you still feeling like you're, you know, priced below where the market is, and that's allowing for some of those share gains? Yes. We're hearing that our price announcement was 5%-15%, depends on category-wise. Our peer group are seeing, seem to have a price increase of 8%-12%. We are in the lower range of the price increase amongst our peer group, because we understand that this is a difficult environment, that foodservice is having a challenging year and all the beef prices going up. We do wanna be support our partners in this, in this turn. Basically we're actually announcing a lower price increase. Because of some help with the tariff, that in the past 6 or 9 months we were paying 20% tariff, now we're down to 10% tariff. There may be changes in July and August, but at least for now, we're seeing a 10% tariff reduction. It's helping our gross margin a lot. That's where we see that. We do see a stronger gross margin for this quarter versus the prior quarters. That's why we're seeing that, our net sales should be, we should be on track with our net sales. Okay. Got it. Thank you for taking my questions. Thank you, Ryan. The next question comes from the line at Ryan Merkel with William Blair. Please go ahead. Hey, good afternoon. Thanks for the questions. This is Ben Schmid on for Ryan. First question here, just to put a finer point on March and April. Is there any way to size the pull-forward impact in March? It sounds like April might have been down, so just a finer point there would be great. I would think that about $2 million were pulled forward from April to March. Okay. Got it. Thank you. Last one for me. I know you guys mentioned a win this quarter, but any other updates on the pipeline of potential wins you guys discussed last quarter? We are working with a very large chains, actually a few large chains that might be converting in this quarter or at least next quarter. This quarter we are converting some of the existing customers, adding additional SKU to the existing customers, such as the eco-friendly product line and paper bag. That's what we're seeing right now. All right. Got it. That's all for me. Thanks, guys. Thank you. We have no further questions at this time. I would like to turn it back to Alan Yu for closing remarks. Thank you everybody for joining our conference call, first quarter Karat Packaging earnings. We look forward to seeing you next time. Thank you very much. Have a wonderful day. Bye-bye. Thank you. Ladies and gentlemen, this now concludes today's conference call. You may now disconnect.

Speaker 5: Thank you for standing by. My name is Perla, and I will be your conference operator today. At this time, I would like to Welcome everyone to the Karat Packaging First Quarter 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Thank you. I would now like to hand the conference over to Roger Pondel. Please go ahead. Thank you for standing by. thank you for standing by My name is Perla, and I will be your conference operator today. my name is perla and i will be your conference operator today At this time, I would like to Welcome everyone to the Karat Packaging First Quarter 2026 Financial Results Conference Call. at this time i would like to welcome everyone to the karat packaging first quarter 2026 financial results conference call All lines have been placed on mute to prevent any background noise. all lines have been placed on mute to prevent any background noise After the speaker's remarks, there will be a question and answer session. after the speaker's remarks there will be a question and answer session If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. if you would like to ask a question during this time simply press star followed by the number 1 on your telephone keypad If you would like to withdraw your question, please press star 1 again. if you would like to withdraw your question please press star 1 again Thank you. thank you I would now like to hand the conference over to Roger Pondel. i would now like to hand the conference over to roger pondel Please go ahead. please go ahead

Speaker 6: Thank you operator. Good afternoon, everyone, and welcome to Karat Packaging's 2026 first quarter conference call. I'm Roger Pondel with PondelWilkinson, Karat Packaging's investor relations firm. It will be my pleasure momentarily to introduce the company's Chief Executive Officer, Alan Yu, and its Chief Financial Officer, Jian Guo. Before I turn the call over to Alan, I want to remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Thank you operator. thank you operator Good afternoon, everyone, and welcome to Karat Packaging's 2026 first quarter conference call. good afternoon everyone and welcome to karat packaging's 2026 first quarter conference call I'm Roger Pondel with PondelWilkinson , Karat Packaging's investor relations firm. i'm roger pondel with pondelwilkinson karat packaging's investor relations firm It will be my pleasure momentarily to introduce the company's Chief Executive Officer, Alan Yu, and its Chief Financial Officer, Jian Guo. it will be my pleasure momentarily to introduce the company's chief executive officer alan yu and its chief financial officer jian guo Before I turn the call over to Alan, I want to remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. before i turn the call over to alan i want to remind our listeners that today's call may include forward-looking statements within the meaning of the private securities litigation reform act of 1995 Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factors section of the company's most recent Form 10-K, as filed with the Securities and Exchange Commission, and copies of which are available on the SEC's website at www.sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Karat Packaging undertakes no obligation to update any forward-looking statements except as required by law. Please also note that during today's call, we'll be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, all of which are non-GAAP financial measures as defined by SEC Regulation G. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the Risk Factors section of the company's most recent Form 10-K, as filed with the Securities and Exchange Commission, and copies of which are available on the SEC's website at www.sec.gov, along with other company filings made with the SEC from time to time. such forward-looking statements are subject to numerous conditions many of which are beyond the company's control including those set forth in the risk factors section of the company's most recent form 10-k as filed with the securities and exchange commission and copies of which are available on the sec's website at www.sec.gov along with other company filings made with the sec from time to time Actual results could differ materially from these forward-looking statements, and Karat Packaging undertakes no obligation to update any forward-looking statements except as required by law. actual results could differ materially from these forward-looking statements and karat packaging undertakes no obligation to update any forward-looking statements except as required by law Please also note that during today's call, we'll be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, all of which are non-GAAP financial measures as defined by SEC Regulation G. please also note that during today's call we'll be discussing adjusted ebitda adjusted ebitda margin adjusted diluted earnings per share and free cash flow all of which are non-gaap financial measures as defined by sec regulation g A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today's press release, which is now posted on the company's website. With that, I will turn the call over to CEO, Alan Yu. Alan? A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today's press release, which is now posted on the company's website. a reconciliation of the most directly comparable gaap measures to the non-gaap financial measures is included in today's press release which is now posted on the company's website With that, I will turn the call over to CEO, Alan Yu. with that i will turn the call over to ceo alan yu Alan? alan

Speaker 1: Thank you Roger. Good afternoon everyone. We began 2026 with a robust first quarter. Year-over-year sales increased almost 13%, with momentum building throughout the quarter. Our performance during the quarter accelerated significantly, starting with modest weather-impacted growth in January to growth exceeding 20% in March, which included some pull-forward of orders. The acceleration reflected improving demand, strong execution across the organization, and continued gain in the market share. Notably, our online sales, which are typically at a higher contribution margin, returned to robust growth this quarter after we pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms. Compared to the prior year quarter, online sales increased almost 10% to $19.5 million in the first quarter of 2026 from $17.8 million in the prior year quarter. Thank you Roger. thank you roger Good afternoon everyone. good afternoon everyone We began 2026 with a robust first quarter. we began 2026 with a robust first quarter Year-over-year sales increased almost 13%, with momentum building throughout the quarter. year-over-year sales increased almost 13% with momentum building throughout the quarter Our performance during the quarter accelerated significantly, starting with modest weather-impacted growth in January to growth exceeding 20% in March, which included some pull-forward of orders. our performance during the quarter accelerated significantly starting with modest weather-impacted growth in january to growth exceeding 20% in march which included some pull-forward of orders The acceleration reflected improving demand, strong execution across the organization, and continued gain in the market share. the acceleration reflected improving demand strong execution across the organization and continued gain in the market share Notably, our online sales, which are typically at a higher contribution margin, returned to robust growth this quarter after we pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms. notably our online sales which are typically at a higher contribution margin returned to robust growth this quarter after we pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms Compared to the prior year quarter, online sales increased almost 10% to $19.5 million in the first quarter of 2026 from $17.8 million in the prior year quarter. compared to the prior year quarter online sales increased almost 10% to $19.5 million in the first quarter of 2026 from $17.8 million in the prior year quarter With momentum building steadily throughout the first quarter, achieving 19% year-over-year growth in March 2026. Gross margin remained resilient at 35.5% despite the continued impact of higher tariffs. This performance demonstrate the effectiveness of our diversified sourcing strategy and was further supported by a favorable product mix and pricing. As we look ahead, we are closely managing a dynamic cost environment. Given the sharp increase in oil prices and the resulting impact on product costs, we are implementing price increases on select plastic items beginning in the middle of this month. While certain source product costs are rising, we expect tariff saving under current trade policy to begin reducing cost of goods sold this month. These savings should partially offset inflationary pressure, and together with our pricing action, we expect to support gross margin stability. With momentum building steadily throughout the first quarter, achieving 19% year-over-year growth in March 2026. with momentum building steadily throughout the first quarter achieving 19% year-over-year growth in march 2026 Gross margin remained resilient at 35.5% despite the continued impact of higher tariffs. gross margin remained resilient at 35.5% despite the continued impact of higher tariffs This performance demonstrate the effectiveness of our diversified sourcing strategy and was further supported by a favorable product mix and pricing. this performance demonstrate the effectiveness of our diversified sourcing strategy and was further supported by a favorable product mix and pricing As we look ahead, we are closely managing a dynamic cost environment. as we look ahead we are closely managing a dynamic cost environment Given the sharp increase in oil prices and the resulting impact on product costs, we are implementing price increases on select plastic items beginning in the middle of this month. given the sharp increase in oil prices and the resulting impact on product costs we are implementing price increases on select plastic items beginning in the middle of this month While certain source product costs are rising, we expect tariff saving under current trade policy to begin reducing cost of goods sold this month. while certain source product costs are rising we expect tariff saving under current trade policy to begin reducing cost of goods sold this month These savings should partially offset inflationary pressure, and together with our pricing action, we expect to support gross margin stability. these savings should partially offset inflationary pressure and together with our pricing action we expect to support gross margin stability Importantly, we are well-positioned to continue gaining market share amid ongoing resin supply challenges. Our strong inventory position and disciplined supply chain execution give us confidence in our ability to consistently serve customers and meet demand. Turning to innovation and sustainability, our paper bag product category continues to expand steadily, driving a year-over-year increase in eco-friendly product sales of 16.9% in the first quarter. We also successfully closed another national chain account for paper bag during this quarter, further strengthening our leadership position and reinforcing our long-term strategy in sustainable packaging solutions. Our sourcing diversification initiative continues to deliver tangible benefits. We have proactively rebalanced import volumes across geographies in response to evolving tariff structures, strengthening our cost competitiveness and consistent product availability. Importantly, we are well-positioned to continue gaining market share amid ongoing resin supply challenges. importantly we are well-positioned to continue gaining market share amid ongoing resin supply challenges Our strong inventory position and disciplined supply chain execution give us confidence in our ability to consistently serve customers and meet demand. our strong inventory position and disciplined supply chain execution give us confidence in our ability to consistently serve customers and meet demand Turning to innovation and sustainability, our paper bag product category continues to expand steadily, driving a year-over-year increase in eco-friendly product sales of 16.9% in the first quarter. turning to innovation and sustainability our paper bag product category continues to expand steadily driving a year-over-year increase in eco-friendly product sales of 16.9% in the first quarter We also successfully closed another national chain account for paper bag during this quarter, further strengthening our leadership position and reinforcing our long-term strategy in sustainable packaging solutions. we also successfully closed another national chain account for paper bag during this quarter further strengthening our leadership position and reinforcing our long-term strategy in sustainable packaging solutions Our sourcing diversification initiative continues to deliver tangible benefits. our sourcing diversification initiative continues to deliver tangible benefits We have proactively rebalanced import volumes across geographies in response to evolving tariff structures, strengthening our cost competitiveness and consistent product availability. we have proactively rebalanced import volumes across geographies in response to evolving tariff structures strengthening our cost competitiveness and consistent product availability In this quarter, we increased domestic purchase to 18% compared to 14% in the prior year quarter, an increased sourcing from Malaysia and Vietnam to an aggregate of 17% from 12% in the prior year quarter. At the same time, we reduced purchase from Taiwan in the current quarter to 46% compared to 54% in the prior year quarter. Reduced sourcing from China to 11% compared to 18% in the prior year quarter. Additionally, we expanded our sourcing footprint by adding a new supplier in South America, which further reduces geographic risk and enhance supply chain flexibility. We remain focused on providing responsive customer service and disciplined execution, which are a hallmark of Karat Packaging while advancing Karat's operational efficiencies. In this quarter, we increased domestic purchase to 18% compared to 14% in the prior year quarter, an increased sourcing from Malaysia and Vietnam to an aggregate of 17% from 12% in the prior year quarter. At the same time, we reduced purchase from Taiwan in the current quarter to 46% compared to 54% in the prior year quarter. in this quarter we increased domestic purchase to 18% compared to 14% in the prior year quarter an increased sourcing from malaysia and vietnam to an aggregate of 17% from 12% in the prior year quarter. at the same time we reduced purchase from taiwan in the current quarter to 46% compared to 54% in the prior year quarter Reduced sourcing from China to 11% compared to 18% in the prior year quarter. reduced sourcing from china to 11% compared to 18% in the prior year quarter Additionally, we expanded our sourcing footprint by adding a new supplier in South America, which further reduces geographic risk and enhance supply chain flexibility. additionally we expanded our sourcing footprint by adding a new supplier in south america which further reduces geographic risk and enhance supply chain flexibility We remain focused on providing responsive customer service and disciplined execution, which are a hallmark of Karat Packaging while advancing Karat's operational efficiencies. we remain focused on providing responsive customer service and disciplined execution which are a hallmark of karat packaging while advancing karat's operational efficiencies These efforts are reflected in better operating cost leverage, which decreased to 28.3% in the first quarter of 2026 from 31.8% in the prior year quarter. In summary, we deliver a strong start to the year, maintain margin resilience in a challenging environment, and continue to invest in growth areas that align with our customer demand and long-term industry trend. I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company financial result in greater detail. Jian? These efforts are reflected in better operating cost leverage, which decreased to 28.3% in the first quarter of 2026 from 31.8% in the prior year quarter. these efforts are reflected in better operating cost leverage which decreased to 28.3% in the first quarter of 2026 from 31.8% in the prior year quarter In summary, we deliver a strong start to the year, maintain margin resilience in a challenging environment, and continue to invest in growth areas that align with our customer demand and long-term industry trend. in summary we deliver a strong start to the year maintain margin resilience in a challenging environment and continue to invest in growth areas that align with our customer demand and long-term industry trend I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company financial result in greater detail. i will now turn the call over to jian guo our chief financial officer to discuss the company financial result in greater detail Jian? jian

Speaker 3: Thank you Alan. I'll begin with a summary of our Q1 performance, followed by an update on our guidance. Net sales for the 2026 first quarter increased to $116.9 million, up 12.9% from $103.6 million in the prior year quarter. The increase primarily reflected $12.1 million in volume and mix, and a $2.0 million favorable impact from pricing. Sales to channel accounts and distributors, our biggest sales channel, were up by 15.1% in the 2026 first quarter. Online sales, as Alan discussed earlier, rose almost 10% over the prior year quarter. Sales to the retail channel declined 12% from the 2025 first quarter. Thank you Alan. thank you alan I'll begin with a summary of our Q1 performance, followed by an update on our guidance. i'll begin with a summary of our q1 performance followed by an update on our guidance Net sales for the 2026 first quarter increased to $116.9 million, up 12.9% from $103.6 million in the prior year quarter. net sales for the 2026 first quarter increased to $116.9 million up 12.9% from $103.6 million in the prior year quarter The increase primarily reflected $12.1 million in volume and mix, and a $2.0 million favorable impact from pricing. the increase primarily reflected $12.1 million in volume and mix and a $2.0 million favorable impact from pricing Sales to channel accounts and distributors, our biggest sales channel, were up by 15.1% in the 2026 first quarter. sales to channel accounts and distributors our biggest sales channel were up by 15.1% in the 2026 first quarter Online sales, as Alan discussed earlier, rose almost 10% over the prior year quarter. online sales as alan discussed earlier rose almost 10% over the prior year quarter Sales to the retail channel declined 12% from the 2025 first quarter. sales to the retail channel declined 12% from the 2025 first quarter Cost of goods sold for the 2026 first quarter increased 20% to $75.4 million from $62.9 million in the prior year quarter. The increase was driven primarily by sales growth and higher import costs of $7.3 million, primarily as a result of higher import duty and tariffs, which increased from $3.4 million for the three months ended March 31, 2025 to $10.5 million for the three months ended March 31, 2026. Gross profit for the 2026 first quarter increased to $41.5 million from $40.8 million in the prior year quarter. Gross margin for the 2026 first quarter was 35.5% compared with 39.3% a year ago. Cost of goods sold for the 2026 first quarter increased 20% to $75.4 million from $62.9 million in the prior year quarter. cost of goods sold for the 2026 first quarter increased 20% to $75.4 million from $62.9 million in the prior year quarter The increase was driven primarily by sales growth and higher import costs of $7.3 million, primarily as a result of higher import duty and tariffs, which increased from $3.4 million for the three months ended March 31, 2025 to $10.5 million for the three months ended March 31, 2026. the increase was driven primarily by sales growth and higher import costs of $7.3 million primarily as a result of higher import duty and tariffs which increased from $3.4 million for the three months ended march 31 2025 to $10.5 million for the three months ended march 31 2026 Gross profit for the 2026 first quarter increased to $41.5 million from $40.8 million in the prior year quarter. gross profit for the 2026 first quarter increased to $41.5 million from $40.8 million in the prior year quarter Gross margin for the 2026 first quarter was 35.5% compared with 39.3% a year ago. gross margin for the 2026 first quarter was 35.5% compared with 39.3% a year ago The year-over-year decline in gross margin reflects the expected impact from higher import costs, which increased to 13.8% of net sales from 8.6% in the prior year quarter, as well as elevated inventory adjustments as a percentage of net sales. These impacts were partially offset by lower product costs as a percentage of net sales. Operating expenses in the 2026 first quarter increased to $33.1 million from $32.9 million last year. The increase was primarily driven by higher rent expense of $0.6 million associated with the opening of the company's new Chino distribution center in March 2025, along with a $0.6 million increase in salaries and benefits. The year-over-year decline in gross margin reflects the expected impact from higher import costs, which increased to 13.8% of net sales from 8.6% in the prior year quarter, as well as elevated inventory adjustments as a percentage of net sales. the year-over-year decline in gross margin reflects the expected impact from higher import costs which increased to 13.8% of net sales from 8.6% in the prior year quarter as well as elevated inventory adjustments as a percentage of net sales These impacts were partially offset by lower product costs as a percentage of net sales. these impacts were partially offset by lower product costs as a percentage of net sales Operating expenses in the 2026 first quarter increased to $33.1 million from $32.9 million last year. operating expenses in the 2026 first quarter increased to $33.1 million from $32.9 million last year The increase was primarily driven by higher rent expense of $0.6 million associated with the opening of the company's new Chino distribution center in March 2025, along with a $0.6 million increase in salaries and benefits. the increase was primarily driven by higher rent expense of $0.6 million associated with the opening of the company's new chino distribution center in march 2025 along with a $0.6 million increase in salaries and benefits These increases were partially offset by a $0.7 million reduction in online platform fees resulting from a shift away from third-party fulfillment of online orders, as well as a $0.4 million decrease in shipping and transportation costs due to lower online shipping rates. Operating income in the 2026 first quarter increased 8.2% to $8.5 million from $7.8 million in the prior year quarter. Total other income net decreased to $0.9 million for the 2026 first quarter from $1.1 million in the prior year quarter. Net income for the 2026 first quarter increased 4.8% to $7.1 million from $6.8 million for the prior year quarter. These increases were partially offset by a $0.7 million reduction in online platform fees resulting from a shift away from third-party fulfillment of online orders, as well as a $0.4 million decrease in shipping and transportation costs due to lower online shipping rates. these increases were partially offset by a $0.7 million reduction in online platform fees resulting from a shift away from third-party fulfillment of online orders as well as a $0.4 million decrease in shipping and transportation costs due to lower online shipping rates Operating income in the 2026 first quarter increased 8.2% to $8.5 million from $7.8 million in the prior year quarter. operating income in the 2026 first quarter increased 8.2% to $8.5 million from $7.8 million in the prior year quarter Total other income net decreased to $0.9 million for the 2026 first quarter from $1.1 million in the prior year quarter. total other income net decreased to $0.9 million for the 2026 first quarter from $1.1 million in the prior year quarter Net income for the 2026 first quarter increased 4.8% to $7.1 million from $6.8 million for the prior year quarter. net income for the 2026 first quarter increased 4.8% to $7.1 million from $6.8 million for the prior year quarter Net income margin was 6.1% in the 2026 first quarter, compared with 6.6% last year. Net income attributable to Karat for the 2026 first quarter increased 5.2% to $6.7 million or $0.34 per diluted share from $6.4 million or $0.32 per diluted share in the prior year quarter. Adjusted EBITDA for the 2026 first quarter rose to $12.5 million from $11.9 million for the prior year quarter. Adjusted EBITDA margin was 10.7% compared with 11.5% for the 2025 first quarter. Adjusted diluted earnings per common share increased to $0.34 for the 2026 first quarter from $0.33 per share in the comparable prior year period. Net income margin was 6.1% in the 2026 first quarter, compared with 6.6% last year. net income margin was 6.1% in the 2026 first quarter compared with 6.6% last year Net income attributable to Karat for the 2026 first quarter increased 5.2% to $6.7 million or $0.34 per diluted share from $6.4 million or $0.32 per diluted share in the prior year quarter. net income attributable to karat for the 2026 first quarter increased 5.2% to $6.7 million or $0.34 per diluted share from $6.4 million or $0.32 per diluted share in the prior year quarter Adjusted EBITDA for the 2026 first quarter rose to $12.5 million from $11.9 million for the prior year quarter. adjusted ebitda for the 2026 first quarter rose to $12.5 million from $11.9 million for the prior year quarter Adjusted EBITDA margin was 10.7% compared with 11.5% for the 2025 first quarter. Adjusted diluted earnings per common share increased to $0.34 for the 2026 first quarter from $0.33 per share in the comparable prior year period. adjusted ebitda margin was 10.7% compared with 11.5% for the 2025 first quarter. adjusted diluted earnings per common share increased to $0.34 for the 2026 first quarter from $0.33 per share in the comparable prior year period We executed strong working capital management during the first quarter, generating operating cash flow of $7.2 million and free cash flow of $6.3 million, despite continued heavy duty and tariff payments, as discussed earlier. We paid out a regular quarterly dividend of $0.45 per share to shareholders on February 27, 2026. As of March 31, 2026, we had $90.7 million in working capital and $36.4 million in financial liquidity with another $5.7 million in short-term investments. On May 5, 2026, our board of directors approved a regular quarterly dividend of $0.45 per share, payable May 28, 2026, to shareholders of record as of May 21, 2026. We executed strong working capital management during the first quarter, generating operating cash flow of $7.2 million and free cash flow of $6.3 million, despite continued heavy duty and tariff payments, as discussed earlier. we executed strong working capital management during the first quarter generating operating cash flow of $7.2 million and free cash flow of $6.3 million despite continued heavy duty and tariff payments as discussed earlier We paid out a regular quarterly dividend of $0.45 per share to shareholders on February 27, 2026. we paid out a regular quarterly dividend of $0.45 per share to shareholders on february 27 2026 As of March 31, 2026, we had $90.7 million in working capital and $36.4 million in financial liquidity with another $5.7 million in short-term investments. as of march 31 2026 we had $90.7 million in working capital and $36.4 million in financial liquidity with another $5.7 million in short-term investments On May 5, 2026, our board of directors approved a regular quarterly dividend of $0.45 per share, payable May 28, 2026, to shareholders of record as of May 21, 2026. on may 5 2026 our board of directors approved a regular quarterly dividend of $0.45 per share payable may 28 2026 to shareholders of record as of may 21 2026 Looking ahead to the 2026 second quarter, we expect net sales to increase by approximately 8%-10% from the prior year quarter. As Alan noted earlier, some timing shift of orders in March contributed to a softer start in April. Since then, we have replenished inventory, and we're confident in our ability to achieve our sales target. We expect gross margin for the 2026 second quarter to be within 35%-37% and adjusted EBITDA margin to be within 11%-13%, excluding potential tariff refund impact under the current trade policy. For the full year 2026, we expect net sales to grow in a low double-digit range over the prior year. Looking ahead to the 2026 second quarter, we expect net sales to increase by approximately 8%-10% from the prior year quarter. looking ahead to the 2026 second quarter we expect net sales to increase by approximately 8%-10% from the prior year quarter As Alan noted earlier, some timing shift of orders in March contributed to a softer start in April. as alan noted earlier some timing shift of orders in march contributed to a softer start in april Since then, we have replenished inventory, and we're confident in our ability to achieve our sales target. since then we have replenished inventory and we're confident in our ability to achieve our sales target We expect gross margin for the 2026 second quarter to be within 35%-37% and adjusted EBITDA margin to be within 11%-13%, excluding potential tariff refund impact under the current trade policy. we expect gross margin for the 2026 second quarter to be within 35%-37% and adjusted ebitda margin to be within 11%-13% excluding potential tariff refund impact under the current trade policy For the full year 2026, we expect net sales to grow in a low double-digit range over the prior year. for the full year 2026 we expect net sales to grow in a low double-digit range over the prior year We expect gross margin for the full year 2026 to be within 34%-36% and adjusted EBITDA margin to be within 11%-13%, excluding potential tariff refund impact under the current trade policy. As Alan mentioned earlier, we are seeing accelerated growth in our pipeline, reflecting our strong market positioning and initiative to continue gaining market share in a dynamic trade and supply chain environment. We expect to continue to drive top line growth, sustain our gross margin, and continue to deliver strong profitability with enhanced operational efficiency and disciplined cost management. Alan and I will now be happy to answer your questions and now turn the call back to the operator. We expect gross margin for the full year 2026 to be within 34%-36% and adjusted EBITDA margin to be within 11%-13%, excluding potential tariff refund impact under the current trade policy. we expect gross margin for the full year 2026 to be within 34%-36% and adjusted ebitda margin to be within 11%-13% excluding potential tariff refund impact under the current trade policy As Alan mentioned earlier, we are seeing accelerated growth in our pipeline, reflecting our strong market positioning and initiative to continue gaining market share in a dynamic trade and supply chain environment. as alan mentioned earlier we are seeing accelerated growth in our pipeline reflecting our strong market positioning and initiative to continue gaining market share in a dynamic trade and supply chain environment We expect to continue to drive top line growth, sustain our gross margin, and continue to deliver strong profitability with enhanced operational efficiency and disciplined cost management. we expect to continue to drive top line growth sustain our gross margin and continue to deliver strong profitability with enhanced operational efficiency and disciplined cost management Alan and I will now be happy to answer your questions and now turn the call back to the operator. alan and i will now be happy to answer your questions and now turn the call back to the operator

Speaker 5: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star one again. With that, your first question comes from the line of George Staphos with Bank of America. Please go ahead. Thank you. thank you We will now begin the question-and-answer session. we will now begin the question-and-answer session If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. if you have dialed in and would like to ask a question please press star one on your telephone keypad to raise your hand and join the queue If you would like to withdraw your question, please press star one again. if you would like to withdraw your question please press star one again With that, your first question comes from the line of George Staphos with Bank of America. with that your first question comes from the line of george staphos with bank of america Please go ahead. please go ahead

Speaker 4: Hi, this is Kyle Benvenuto on for George. Thank you for taking my question. You noted the sharp increase in oil prices is pressuring costs across sourced products and plastics. Within both your 2Q and 2026 margin guidance ranges, what oil price assumptions are embedded, and at what point would the mid-May plastic price increases no longer be sufficient to protect the 34% margin floor for the year? Hi, this is Kyle Benvenuto on for George. hi this is kyle benvenuto on for george Thank you for taking my question. thank you for taking my question You noted the sharp increase in oil prices is pressuring costs across sourced products and plastics. you noted the sharp increase in oil prices is pressuring costs across sourced products and plastics Within both your 2Q and 2026 margin guidance ranges, what oil price assumptions are embedded, and at what point would the mid-May plastic price increases no longer be sufficient to protect the 34% margin floor for the year? within both your 2q and 2026 margin guidance ranges what oil price assumptions are embedded and at what point would the mid-may plastic price increases no longer be sufficient to protect the 34% margin floor for the year

Speaker 1: Here's what we see on the oil prices. Yes, you're correct. Oil prices has gone up and raw material has gone up so sharply. The issue is we were able to negotiate with our vendor to support our less increase versus the full increase impact of the oil prices. Majority of our partner vendors overseas have absorbed majority of the increases. That's and also that's where we're seeing that we're giving minimum increase in the May 15 to June area. That's how I see it. Is it gonna be escalating? Is this tension gonna escalate more? Right now we see that the resin price has stabilized in Asia. It has come down a little bit also. Here's what we see on the oil prices. here's what we see on the oil prices Yes, you're correct. yes you're correct Oil prices has gone up and raw material has gone up so sharply. oil prices has gone up and raw material has gone up so sharply The issue is we were able to negotiate with our vendor to support our less increase versus the full increase impact of the oil prices. the issue is we were able to negotiate with our vendor to support our less increase versus the full increase impact of the oil prices Majority of our partner vendors overseas have absorbed majority of the increases. majority of our partner vendors overseas have absorbed majority of the increases That's and also that's where we're seeing that we're giving minimum increase in the May 15 to June area. that's and also that's where we're seeing that we're giving minimum increase in the may 15 to june area That's how I see it. that's how i see it Is it gonna be escalating? is it gonna be escalating Is this tension gonna escalate more? is this tension gonna escalate more Right now we see that the resin price has stabilized in Asia. right now we see that the resin price has stabilized in asia It has come down a little bit also. it has come down a little bit also We do not see at this point that the raw material price will go up even higher from this point. We do not see at this point that the raw material price will go up even higher from this point. we do not see at this point that the raw material price will go up even higher from this point

Speaker 4: Thank you, Alan. One more question for you, and I'll turn it over. Your guidance points to 8%-10% sales growth for 2Q. How much of this is driven by the expansion of new national accounts versus organic volume growth from your existing customer base? Thank you. Thank you, Alan. thank you alan One more question for you, and I'll turn it over. one more question for you and i'll turn it over Your guidance points to 8%-10% sales growth for 2Q. your guidance points to 8%-10% sales growth for 2q How much of this is driven by the expansion of new national accounts versus organic volume growth from your existing customer base? how much of this is driven by the expansion of new national accounts versus organic volume growth from your existing customer base Thank you. thank you

Speaker 1: We're seeing a sharp increase in our online sale portion of our business. For example, last month, April, we topped our record over double-digit in terms of online sales. We do foresee that this quarter we will have a record sales online as well. Last year, we did about $72 million-$73 million online revenue, and this year we are on track for $100+ million on online revenues. Majority of the growth, actually a big chunk of the growth is from online sales revenue. From our national chain accounts, yes, we do see some of the national chain pipeline converting to revenues. That is also a segment that we do see a growth in the national chain account. We're seeing a sharp increase in our online sale portion of our business. we're seeing a sharp increase in our online sale portion of our business For example, last month, April, we topped our record over double-digit in terms of online sales. for example last month april we topped our record over double-digit in terms of online sales We do foresee that this quarter we will have a record sales online as well. we do foresee that this quarter we will have a record sales online as well Last year, we did about $72 million-$73 million online revenue, and this year we are on track for $100+ million on online revenues. last year we did about $72 million-$73 million online revenue and this year we are on track for $100+ million on online revenues Majority of the growth, actually a big chunk of the growth is from online sales revenue. majority of the growth actually a big chunk of the growth is from online sales revenue From our national chain accounts, yes, we do see some of the national chain pipeline converting to revenues. from our national chain accounts yes we do see some of the national chain pipeline converting to revenues That is also a segment that we do see a growth in the national chain account. that is also a segment that we do see a growth in the national chain account Especially it's summer season, most of these chains are gonna increase their order for their drink cups and carriers as well as the deli part of our food segment of our business is we was expecting an increase in that segment as well. These are all organic growth, by the way. Especially it's summer season, most of these chains are gonna increase their order for their drink cups and carriers as well as the deli part of our food segment of our business is we was expecting an increase in that segment as well. especially it's summer season most of these chains are gonna increase their order for their drink cups and carriers as well as the deli part of our food segment of our business is we was expecting an increase in that segment as well These are all organic growth, by the way. these are all organic growth by the way

Speaker 4: Thank you. Congrats on the quarter. Thank you. thank you Congrats on the quarter. congrats on the quarter

Speaker 1: Thank you. Thank you. thank you

Speaker 5: The next question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead. The next question comes from the line of Ryan Meyers with Lake Street Capital Markets. the next question comes from the line of ryan meyers with lake street capital markets Please go ahead. please go ahead

Speaker 7: Hey, guys. Thanks for taking my questions. First one for me. I just wanna make sure I understand this dynamic correctly. Alan, you had called out the 20% growth that you saw in the month of March, and then obviously the second quarter guidance is only 8%-10% revenue growth. It sounds like you guys saw some pull forward in order demand that drove the strength in March, and then things kinda stabilized a little bit in the second quarter. That's where that, you know, delta is between that 20% and that 8%-10% growth is. It's not necessarily the business is slowing. Hey, guys. hey guys Thanks for taking my questions. thanks for taking my questions First one for me. first one for me I just wanna make sure I understand this dynamic correctly. i just wanna make sure i understand this dynamic correctly Alan, you had called out the 20% growth that you saw in the month of March, and then obviously the second quarter guidance is only 8%-10% revenue growth. alan you had called out the 20% growth that you saw in the month of march and then obviously the second quarter guidance is only 8%-10% revenue growth It sounds like you guys saw some pull forward in order demand that drove the strength in March, and then things kinda stabilized a little bit in the second quarter. it sounds like you guys saw some pull forward in order demand that drove the strength in march and then things kinda stabilized a little bit in the second quarter That's where that, you know, delta is between that 20% and that 8%-10% growth is. that's where that you know delta is between that 20% and that 8%-10% growth is It's not necessarily the business is slowing. it's not necessarily the business is slowing

Speaker 1: No, it's not. Also, we wanna be conservative in terms of our growth numbers. We do expect our full year guidance to be in range with what we have guided earlier this year. Second quarter, we're seeing some softening in April because of the pull forwarding from March. In this month so far, we're seeing a very positive revenue growth in terms of May. We wanna be conservative, you know, cautious in terms of making sure that we meet the guidance, yeah, or exceed the guidance. No, it's not. no it's not Also, we wanna be conservative in terms of our growth numbers. also we wanna be conservative in terms of our growth numbers We do expect our full year guidance to be in range with what we have guided earlier this year. we do expect our full year guidance to be in range with what we have guided earlier this year Second quarter, we're seeing some softening in April because of the pull forwarding from March. second quarter we're seeing some softening in april because of the pull forwarding from march In this month so far, we're seeing a very positive revenue growth in terms of May. in this month so far we're seeing a very positive revenue growth in terms of may We wanna be conservative, you know, cautious in terms of making sure that we meet the guidance, yeah, or exceed the guidance. we wanna be conservative you know cautious in terms of making sure that we meet the guidance yeah or exceed the guidance

Speaker 7: Yep, fair enough. Nope, that makes sense. Then just thinking in terms of pricing, you know, you called out in the prepared remarks and talked a little bit about that, but, you know, how much price do you feel like needs to be taken for you guys to preserve your gross margins? Then thinking about that industry-wide, you know, what does your price increases look like compared to competitors? Are you still feeling like you're, you know, priced below where the market is, and that's allowing for some of those share gains? Yep, fair enough. yep fair enough Nope, that makes sense. nope that makes sense Then just thinking in terms of pricing, you know, you called out in the prepared remarks and talked a little bit about that, but, you know, how much price do you feel like needs to be taken for you guys to preserve your gross margins? then just thinking in terms of pricing you know you called out in the prepared remarks and talked a little bit about that but you know how much price do you feel like needs to be taken for you guys to preserve your gross margins Then thinking about that industry-wide, you know, what does your price increases look like compared to competitors? then thinking about that industry-wide you know what does your price increases look like compared to competitors Are you still feeling like you're, you know, priced below where the market is, and that's allowing for some of those share gains? are you still feeling like you're you know priced below where the market is and that's allowing for some of those share gains

Speaker 1: Yes. We're hearing that our price announcement was 5%-15%, depends on category-wise. Our peer group are seeing, seem to have a price increase of 8%-12%. We are in the lower range of the price increase amongst our peer group, because we understand that this is a difficult environment, that foodservice is having a challenging year and all the beef prices going up. We do wanna be support our partners in this, in this turn. Basically we're actually announcing a lower price increase. Because of some help with the tariff, that in the past 6 or 9 months we were paying 20% tariff, now we're down to 10% tariff. Yes. yes We're hearing that our price announcement was 5%-15%, depends on category-wise. we're hearing that our price announcement was 5%-15% depends on category-wise Our peer group are seeing, seem to have a price increase of 8%-12%. our peer group are seeing seem to have a price increase of 8%-12% We are in the lower range of the price increase amongst our peer group, because we understand that this is a difficult environment, that foodservice is having a challenging year and all the beef prices going up. we are in the lower range of the price increase amongst our peer group because we understand that this is a difficult environment that foodservice is having a challenging year and all the beef prices going up We do wanna be support our partners in this, in this turn. we do wanna be support our partners in this in this turn Basically we're actually announcing a lower price increase. basically we're actually announcing a lower price increase Because of some help with the tariff, that in the past 6 or 9 months we were paying 20% tariff, now we're down to 10% tariff. because of some help with the tariff that in the past 6 or 9 months we were paying 20% tariff now we're down to 10% tariff There may be changes in July and August, but at least for now, we're seeing a 10% tariff reduction. It's helping our gross margin a lot. That's where we see that. We do see a stronger gross margin for this quarter versus the prior quarters. That's why we're seeing that, our net sales should be, we should be on track with our net sales. There may be changes in July and August, but at least for now, we're seeing a 10% tariff reduction. there may be changes in july and august but at least for now we're seeing a 10% tariff reduction It's helping our gross margin a lot. it's helping our gross margin a lot That's where we see that. that's where we see that We do see a stronger gross margin for this quarter versus the prior quarters. we do see a stronger gross margin for this quarter versus the prior quarters That's why we're seeing that, our net sales should be, we should be on track with our net sales. that's why we're seeing that our net sales should be we should be on track with our net sales

Speaker 7: Okay. Got it. Thank you for taking my questions. Okay. okay Got it. got it Thank you for taking my questions. thank you for taking my questions

Speaker 1: Thank you, Ryan. Thank you, Ryan. thank you ryan

Speaker 5: The next question comes from the line at Ryan Merkel with William Blair. Please go ahead. The next question comes from the line at Ryan Merkel with William Blair. the next question comes from the line at ryan merkel with william blair Please go ahead. please go ahead

Speaker 2: Hey, good afternoon. Thanks for the questions. This is Ben Schmid on for Ryan. First question here, just to put a finer point on March and April. Is there any way to size the pull-forward impact in March? It sounds like April might have been down, so just a finer point there would be great. Hey, good afternoon. hey good afternoon Thanks for the questions. thanks for the questions This is Ben Schmid on for Ryan . this is ben schmid on for ryan First question here, just to put a finer point on March and April. first question here just to put a finer point on march and april Is there any way to size the pull-forward impact in March? is there any way to size the pull-forward impact in march It sounds like April might have been down, so just a finer point there would be great. it sounds like april might have been down so just a finer point there would be great

Speaker 1: I would think that about $2 million were pulled forward from April to March. I would think that about $2 million were pulled forward from April to March. i would think that about $2 million were pulled forward from april to march

Speaker 2: Okay. Got it. Thank you. Last one for me. I know you guys mentioned a win this quarter, but any other updates on the pipeline of potential wins you guys discussed last quarter? Okay. okay Got it. got it Thank you. thank you Last one for me. last one for me I know you guys mentioned a win this quarter, but any other updates on the pipeline of potential wins you guys discussed last quarter? i know you guys mentioned a win this quarter but any other updates on the pipeline of potential wins you guys discussed last quarter

Speaker 1: We are working with a very large chains, actually a few large chains that might be converting in this quarter or at least next quarter. This quarter we are converting some of the existing customers, adding additional SKU to the existing customers, such as the eco-friendly product line and paper bag. That's what we're seeing right now. We are working with a very large chains, actually a few large chains that might be converting in this quarter or at least next quarter. we are working with a very large chains actually a few large chains that might be converting in this quarter or at least next quarter This quarter we are converting some of the existing customers, adding additional SKU to the existing customers, such as the eco-friendly product line and paper bag. this quarter we are converting some of the existing customers adding additional sku to the existing customers such as the eco-friendly product line and paper bag That's what we're seeing right now. that's what we're seeing right now

Speaker 2: All right. Got it. That's all for me. Thanks, guys. All right. all right Got it. got it That's all for me. that's all for me Thanks, guys. thanks guys

Speaker 1: Thank you. Thank you. thank you

Speaker 5: We have no further questions at this time. I would like to turn it back to Alan Yu for closing remarks. We have no further questions at this time. we have no further questions at this time I would like to turn it back to Alan Yu for closing remarks. i would like to turn it back to alan yu for closing remarks

Speaker 1: Thank you everybody for joining our conference call, first quarter Karat Packaging earnings. We look forward to seeing you next time. Thank you very much. Have a wonderful day. Bye-bye. Thank you everybody for joining our conference call, first quarter Karat Packaging earnings. thank you everybody for joining our conference call first quarter karat packaging earnings We look forward to seeing you next time. we look forward to seeing you next time Thank you very much. thank you very much Have a wonderful day. have a wonderful day Bye-bye. bye-bye

Speaker 5: Thank you. Ladies and gentlemen, this now concludes today's conference call. You may now disconnect. Thank you. thank you Ladies and gentlemen, this now concludes today's conference call. ladies and gentlemen this now concludes today's conference call You may now disconnect. you may now disconnect