krt-20250930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number 001-40336

Karat Packaging Inc.

(Exact name of registrant as specified in its charter)


Delaware						83-2237832
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6185 Kimball Avenue Chino, CA						91708
(Address of principal executive offices)						(Zip Code)


			(626) 965-8882
			(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

KRT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Common Stock, $0.001 par value, outstanding on November 5, 2025 was 20,099,505 shares.

Table of Contents


		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	34

Item 4.	Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	36

SIGNATURES		38

KARAT PACKAGING INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

PART I - FINANCIAL INFORMATION


	September 30, 2025		December 31, 2024
Assets
Current assets
Cash and cash equivalents (including $1,437 and $1,703 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	$	24,022	$	31,584
Short-term investments (including $7,935 and $11,128 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	19,946		28,343
Accounts receivable, net of allowance for bad debt of $559 and $758 at September 30, 2025 and December 31, 2024, respectively	37,868		26,736
Inventories	84,134		70,722
Prepaid expenses and other current assets (including $159 and $27 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	4,709		3,612
Total current assets	170,679		160,997
Property and equipment, net (including $42,061 and $42,972 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	84,168		87,982
Deposits	2		36
Goodwill	3,510		3,510
Intangible assets, net	280		300
Operating right-of-use assets	42,969		40,628
Deferred tax asset	196		—
Other non-current assets (including $54 and $34 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	1,033		1,069
Total assets	$	302,837	$	294,522


	September 30, 2025		December 31, 2024
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable (including $97 and $16 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	$	25,272	$	17,831
Accrued expenses (including $400 and $489 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	16,210		13,555
Related party payable	3,120		3,130
Income taxes payable (including $0 and $3 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	—		65
Deferred revenue	1,116		742
Long-term debt, current portion (including $21,100 and $1,179 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	21,100		1,179
Operating lease liabilities, current portion	11,647		8,977
Line of credit	1,000		—
Other current liabilities (including $48 and $916 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	139		968
Total current liabilities	79,604		46,447
Deferred tax liability	622		426
Long-term debt, net of current portion and debt discount of $70 and $141 at September 30, 2025 and December 31, 2024, respectively (including $23,031 and $47,279 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively, and debt discount of $70 and $141 associated with variable interest entity at September 30, 2025 and December 31, 2024, respectively)	23,031		47,279
Operating lease liabilities, net of current portion	35,252		35,435
Other non-current liabilities (including $1,233 and $1,198 associated with variable interest entity at September 30, 2025 and December 31, 2024 respectively)	2,742		2,736
Total liabilities	141,251		132,323
Commitments and Contingencies (Note 14)
Karat Packaging Inc. stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding, as of both September 30, 2025 and December 31, 2024	—		—
Common stock, $0.001 par value, 100,000,000 shares authorized, 20,120,505 and 20,097,505 shares issued and outstanding, respectively, as of September 30, 2025 and 20,059,505 and 20,036,505 shares issued and outstanding, respectively, as of December 31, 2024	20		20
Additional paid in capital	90,800		89,457
Treasury stock, $0.001 par value, 23,000 shares as of both September 30, 2025 and December 31, 2024	(248)		(248)
Retained earnings	63,909		66,340
Total Karat Packaging Inc. stockholders’ equity	154,481		155,569
Noncontrolling interest	7,105		6,630
Total stockholders’ equity	161,586		162,199
Total liabilities and stockholders’ equity	$	302,837	$	294,522

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

KARAT PACKAGING INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Net sales	$	124,516	$	112,771	$	352,126	$	320,984
Cost of goods sold	81,598		69,274		219,339		196,478
Gross profit	42,918		43,497		132,787		124,506
Operating expenses
Selling expenses	13,798		13,746		41,925		38,377
General and administrative expenses (including $724 and $643 associated with variable interest entity for the three months ended September 30, 2025 and 2024, respectively; $2,186 and $1,888 associated with variable interest entity for the nine months ended September 30, 2025 and 2024, respectively)	20,950		18,508		58,622		53,170
Impairment expense and (gain) loss, net, on disposal of property and equipment	(403)		(27)		(703)		2,498
Total operating expenses	34,345		32,227		99,844		94,045
Operating income	8,573		11,270		32,943		30,461
Other income (expenses)
Rental income (including $370 and $263 associated with variable interest entity for the three months ended September 30, 2025 and 2024, respectively; $1,177 and $776 associated with variable interest entity for the nine months ended September 30, 2025 and 2024, respectively)	710		593		2,241		1,484
Other income, net	67		48		29		154
Gain (loss) on foreign currency transactions	681		(287)		(1,947)		152
Interest income (including $120 and $123 associated with variable interest entity for the three months ended September 30, 2025 and 2024, respectively; $431 and $469 associated with variable interest entity for the nine months ended September 30, 2025 and 2024, respectively)	415		770		1,657		1,734
Interest expense (including $505 and $517 associated with variable interest entity for the three months ended September 30, 2025 and 2024, respectively; $1,514 and $1,553 associated with variable interest entity for the nine months ended September 30, 2025 and 2024, respectively)	(539)		(535)		(1,569)		(1,607)
Total other income, net	1,334		589		411		1,917
Income before provision for income taxes	9,907		11,859		33,354		32,378
Provision for income taxes	2,304		2,597		7,884		7,413
Net income	7,603		9,262		25,470		24,965
Net income attributable to noncontrolling interest	278		168		802		605
Net income attributable to Karat Packaging Inc.	$	7,325	$	9,094	$	24,668	$	24,360
Basic and diluted earnings per share:
Basic	$	0.36	$	0.45	$	1.23	$	1.22
Diluted	$	0.36	$	0.45	$	1.22	$	1.21
Weighted average common shares outstanding, basic	20,091,476		20,017,774		20,062,277		19,993,964
Weighted average common shares outstanding, diluted	20,201,285		20,133,813		20,197,218		20,107,801

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

KARAT PACKAGING INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands, except share and per share data)


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity Attributable to Karat Packaging Inc.		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance, January 1, 2024	19,988,482	$	20	(23,000)	$	(248)	$	86,667	$	67,679	$	154,118	$	8,572	$	162,690
Cash dividends declared ($0.30 per share)	—	—		—	—		—		(5,992)		(5,992)		—		(5,992)
Issuance of common stock upon vesting of restricted stock units	3,750	—		—	—		—		—		—		—		—
Stock-based compensation	—	—		—	—		375		—		375		—		375
Exercise of stock options	2,800	—		—	—		52		—		52		—		52
Global Wells noncontrolling membership interest redemption	—	—		—	—		—		(316)		(316)		(2,893)		(3,209)
Net income	—	—		—	—		—		6,166		6,166		310		6,476
Balance, March 31, 2024	19,995,032	$	20	(23,000)	$	(248)	$	87,094

SEC Form 10-Q filed by Karat Packaging Inc.