Karat Packaging Inc (KRT) 2024 Q2 法說會逐字稿

Thank you for standing by. My name is Celine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Karat Packaging second-quarter 2024 conference call. (Operator Instructions) I would now like to turn the call over to Roger Pondel, Investor Relations. Please go ahead.

謝謝你的支持。我叫席琳，今天我將擔任你們的會議操作員。此刻，我歡迎大家參加Karat Packaging 2024年第二季電話會議。（操作員說明）我現在想將電話轉給投資者關係部的 Roger Pondel。請繼續。

Thank you, operator and good afternoon, everyone and welcome to Karat Packaging's 2024 second-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.

謝謝業者，大家下午好，歡迎參加 Karat Packaging 2024 年第二季電話會議。我是 Karat Packaging 投資者關係公司 PondelWilkinson 的 Roger Pondel。我很高興立即向您介紹該公司的執行長 Alan Yu；及其財務長郭建。

Before I turn this 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, 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. The Karat Packaging undertakes no obligation to update any forward-looking statements, except as required by law.

在我將這次電話會議轉交給艾倫之前，我想提醒我們的聽眾，今天的電話會議可能包含 1995 年《私人證券訴訟改革法案》含義內的前瞻性陳述。此類前瞻性陳述受到許多條件的影響，其中許多條件超出了公司的控制範圍，包括公司向美國證券交易委員會提交的最新 10-K 表格的風險因素部分中列出的條件，該表格的副本可以在SEC 網站www.sec.gov 上取得這些資訊以及不時向SEC 提交的其他公司文件。實際結果可能與這些前瞻性陳述有重大差異。Karat Packaging 不承擔更新任何前瞻性聲明的義務，法律要求的除外。

Please also note that this during this call, we will be discussing adjusted EBITDA, adjusted EBITDA margin and adjusted diluted earnings per share 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. And with that, I will turn the call over to CEO, Alan Yu, Alan?

另請注意，在本次電話會議中，我們將討論調整後的 EBITDA、調整後的 EBITDA 利潤率和調整後的稀釋每股收益，這些都是 SEC 法規 G 定義的非 GAAP 財務指標。準則財務指標包含在今天的新聞稿中，該新聞稿現已發佈在公司網站上。接下來，我會將電話轉給執行長 Alan Yu，Alan？

Thank you, Roger. Good afternoon, everyone. Net sales for our 2024 second quarter grew 3.5% over the prior year period and sales volume grew 3.2%. Our business pipeline continues to expand with the signing of new national and regional chain accounts. However initiation of some new orders is taking longer than anticipated during the quarter, mainly due to administrative setup procedures at the larger chain account and software demand in certain categories, which we do not expect to recur in the back end of the year.

謝謝你，羅傑。大家下午好。2024 年第二季淨銷售額較上年同期成長 3.5%，銷量成長 3.2%。隨著新的國家和地區連鎖帳戶的簽署，我們的業務管道不斷擴大。然而，本季一些新訂單的啟動時間比預期要長，這主要是由於較大連鎖帳戶的管理設定程序和某些類別的軟體需求，我們預計這種情況不會在今年年底再次出現。

We are pleased to see that gross margin held steady in the second quarter at 38.5%, despite pressure from significantly higher ocean freight costs that started in mid-May. Ocean freight rates spiked at that time when increased tariffs for certain imports goods were announced initially to take effect August 1, resulting in part to higher demand and lower capacity.

我們很高興看到，儘管自 5 月中旬開始海運費大幅上漲帶來壓力，但第二季毛利率仍穩定在 38.5%。當某些進口商品的關稅上調最初宣佈於 8 月 1 日生效時，海運費飆升，部分原因是需求增加和運能下降。

Freight rates moderated somewhat in late July, which enabled us to ship more product with contracted ocean freight rates that were locked in earlier this year. We expect freight rates to start to normalize after demand, softened subsequent to the tariff effective dates.

七月下旬運費有所回落，這使我們能夠以今年稍早鎖定的合約海運費運送更多產品。我們預計，在關稅生效日期後需求疲軟後，運費將開始正常化。

With better visibility into ocean freight rates, reduced vendor pricing, and continued strength of the US dollar, we expect to be able to meet our full-year goal for gross margin. Our strategic initiative from last year to establish warehouses in new geographic markets and in large existing warehouses is yielding positive results and is contributing to business growth across most of our sales channels, especially for our online sales.

隨著對海運費率的更好了解、供應商定價的降低以及美元的持續走強，我們預計能夠實現全年毛利率目標。從去年開始，我們在新的地理市場和大型現有倉庫中建立倉庫的策略性舉措正在產生積極的成果，並有助於我們大多數銷售管道的業務成長，尤其是我們的線上銷售。

Sales for this category which typically carries the highest margin and included a positive impact from the inclusion of online platform fees of $2.7 million in the second quarter of 2024, grew 26% in the second quarter. Sales of our eco-friendly products represented approximately 32.3% of total sales in the second quarter, essentially the same percentage as last year.

該類別的銷售額通常利潤率最高，並且受到 2024 年第二季 270 萬美元線上平台費用的正面影響，第二季銷售額成長了 26%。第二季度，我們的環保產品銷售約佔總銷售額的32.3%，與去年基本持平。

Eco-friendly product remains a priority for Karat. We believe that there will be an increased demand for eco-friendly and compostable single-use disposable products, and this should have a positive long-lasting impact on our results. We saw that the growth in eco-friendly products significantly outpaced the overall growth in July.

環保產品仍是 Karat 的首要任務。我們相信，對環保和可堆肥的一次性產品的需求將會增加，這應該會對我們的業績產生正面的長期影響。我們看到7月份環保產品的成長明顯超過了整體的成長。

Sales for manufactured products in the second quarter were 11% of total net sales compared with approximately 20% last year. In keeping with our asset-light strategy in the US and emphasis on imported items. From the inventory pipeline perspective, we are positioned to support an even stronger second half of the year in 2024 compared to 2023.

第二季製成品銷售額佔總淨銷售額的 11%，而去年約為 20%。符合我們在美國的輕資產策略和對進口產品的重視。從庫存管道的角度來看，與 2023 年相比，我們將在 2024 年下半年支援更強勁的庫存。

Our preliminary sales in July were up by more than 10% year over year, and we expect the robust year-over-year performance to continue into the end of this year. Further, we are continuing to be exploring strategic acquisition opportunities to further penetrate the marketplace.

我們 7 月的初步銷售額年增超過 10%，我們預計強勁的同比表現將持續到今年年底。此外，我們正在繼續探索策略性收購機會，以進一步滲透市場。

Lastly, on August 6, our Board of Directors authorized a regular quarterly cash dividend payment of $0.35 per share and a special dividend of $0.15 per share. I will now turn this call over to Jian Guo, our Chief Financial Officer, to discuss the company's financial results in greater detail. Jian.

最後，8 月 6 日，我們的董事會批准定期支付每股 0.35 美元的季度現金股息和每股 0.15 美元的特別股息。我現在將把這通電話轉給我們的財務長郭建，更詳細地討論公司的財務表現。健。

Thank you, Alan. Net sales for the 2024 second quarter were $112.6 million, up 3.5% from $108.7 million for the same quarter last year. As Alan mentioned earlier, our sales volume grew 3.2% compared to the 2023 second quarter. Net sales also included the favorable impact of the inclusion of online platform fees of $2.7 million and the unfavorable year-over-year pricing comparison.

謝謝你，艾倫。2024 年第二季淨銷售額為 1.126 億美元，比去年同期的 1.087 億美元成長 3.5%。正如 Alan 之前提到的，與 2023 年第二季相比，我們的銷售量成長了 3.2%。淨銷售額還包括 270 萬美元線上平台費用的有利影響以及不利的同比定價比較。

By channel, compared with a year ago, online sales for the 2024 second quarter were up 26.2%, benefiting in part from the inclusion of online platform fees discussed earlier. Sales to national and regional chains were up about 0.9%. Sales to the retail channel increased 1.1%, and sales to distributors was slightly lower. The distributor channel remains challenging with the pricing environment still very competitive.

按通路來看，與去年同期相比，2024年第二季線上銷售額成長了26.2%，部分受惠於先前討論的納入線上平台費用。全國和地區連鎖店的銷售額增長了約 0.9%。零售通路銷售額成長 1.1%，分銷商銷售額略有下降。經銷商通路仍充滿挑戰，定價環境仍然非常有競爭力。

Cost of goods sold for the 2024 second quarter was $69.2 million compared with $66.9 million in the prior-year quarter. The increase was primarily due to increased freight and duty costs and inventory reserve adjustments and the inclusion of certain production costs in cost of goods sold. These increases were partially offset as the prior year quarter included write-off of certain expired product and raw materials related to the disposal of certain machinery and equipment in executing the plan to scale back production in certain locations.

2024 年第二季的銷售成本為 6,920 萬美元，而去年同期為 6,690 萬美元。這一增長主要是由於運費和關稅成本增加以及庫存儲備調整以及將某些生產成本計入銷售成本中。這些成長被部分抵消，因為去年同期包括沖銷某些過期產品和原材料，這些產品和原材料與執行某些地點縮減生產計劃時處置某些機械和設備有關。

Gross profit for the 2024 second quarter was $43.4 million versus $41.9 million in last year. Gross margin was 38.5%, same as the prior-year quarter. Gross margin for the 2024 second quarter was impacted by higher inventory reserve adjustments and an increase in freight and duty costs, which as a percentage of net sales increased to 8.6% from 6.2% in the prior year quarter.

2024 年第二季的毛利為 4,340 萬美元，去年同期為 4,190 萬美元。毛利率為 38.5%，與去年同期相同。2024 年第二季的毛利率受到庫存儲備調整增加以及運費和關稅成本增加的影響，運費佔淨銷售額的百分比從去年同期的 6.2% 增至 8.6%。

At the same time, gross margin for the 2024 second quarter benefited from the adjustments to net sales related to online platform fees and cost of goods sold related to production expenses as discussed earlier. And lower vendor pricing and increased import as a percentage of total product mix, resulting in a decrease in product costs as a percentage of net sales. Gross margin in the 2023 second quarter included a negative impact of 160 basis points from the write-off of certain raw materials as we executed the plan to scale back production in certain locations, which we discussed earlier.

同時，2024 年第二季的毛利率受益於與線上平台費用相關的淨銷售額以及與前面討論的生產費用相關的銷售商品成本的調整。供應商定價降低以及進口佔總產品組合的百分比增加，導致產品成本佔淨銷售的百分比下降。2023 年第二季的毛利率包括因某些原物料沖銷而產生的 160 個基點的負面影響，因為我們執行了我們之前討論過的縮減某些地點生產的計劃。

Operating expenses in the 2024 second quarter was $32.3 million or 28.7% of net sales compared with $28.5 million or 26.2% of net sales in the prior year quarter. Operating expenses in the current quarter included online sales platform fees, higher rent and warehouse expense, an increase in marketing expense for online sales and higher stock-based compensation expenses. Such increases were partially offset by a decrease in impairment expense and loss on disposal of machinery as the 2023 second quarter included $2.5 million of impairment expense and loss on disposal of machinery, primarily due to executing the plan to scale back production in certain locations.

2024 年第二季的營運費用為 3,230 萬美元，佔淨銷售額的 28.7%，而去年同期的營運費用為 2,850 萬美元，佔淨銷售額的 26.2%。本季的營運費用包括線上銷售平台費用、較高的租金和倉庫費用、線上銷售行銷費用的增加以及基於股票的補償費用的增加。這些成長被減損費用和機械處置損失的減少部分抵消，因為 2023 年第二季包括 250 萬美元的減損費用和機械處置損失，這主要是由於執行了某些地點縮減生產的計劃。

Net income for the 2024 second quarter was $9.2 million compared with $10.7 million in the prior year quarter. Net income margin was 8.2% in the 2024 second quarter compared with 9.8% in the prior year quarter.

2024 年第二季的淨利為 920 萬美元，而去年同期的淨利為 1,070 萬美元。2024 年第二季淨利率為 8.2%，而去年同期為 9.8%。

Net income attributable to Karat for the 2024 second quarter was $9.1 million or $0.45 per diluted share compares with $10.5 million of $0.53 per diluted share last year. Adjusted EBITDA, a non-GAAP measure in the 2024 second quarter was $15.7 million versus $21.1 million in the prior year.

2024 年第二季 Karat 淨利為 910 萬美元，即稀釋後每股 0.45 美元，去年為 1,050 萬美元，即稀釋後每股 0.53 美元。2024 年第二季的調整後 EBITDA（非 GAAP 衡量標準）為 1,570 萬美元，而前一年為 2,110 萬美元。

Adjusted EBITDA margin was 13.9% in the 2024 second quarter versus 19.4% in the prior year quarter. Adjusted diluted earnings per common share was $0.49 per share in the 2024 second quarter compared with $0.69 per share a year ago.

2024 年第二季調整後 EBITDA 利潤率為 13.9%，而去年同期為 19.4%。2024 年第二季調整後稀釋後每股普通股收益為 0.49 美元，去年同期為 0.69 美元。

The second quarter ended with $114.2 million in working capital compared with $110.5 million at the end of 2023. As of June 30, 2024, we have financial liquidity of $55.5 million with another $32.7 million in short-term investments.

第二季末營運資本為 1.142 億美元，而 2023 年底為 1.105 億美元。截至 2024 年 6 月 30 日，我們的財務流動性為 5,550 萬美元，另有 3,270 萬美元的短期投資。

We expect net sales for the 2024 third quarter to increase by mid to high single digits over the prior-year quarter. Our gross margin goal for the 2024 third quarter is approximately 38% to 39%%. For the full 2024 year, we expect net sales to grow mid-single digits and gross margin to be in the range of 38% to 40%. Alan and I will now be happy to answer your questions and I'll turn the call back to the operator.

我們預計 2024 年第三季的淨銷售額將比去年同期成長中高出個位數。我們2024年第三季的毛利率目標約為38%至39%%。2024 年全年，我們預計淨銷售額將實現中個位數成長，毛利率將在 38% 至 40% 之間。艾倫和我現在很樂意回答您的問題，我會將電話轉回給接線生。

(Operator Instructions) Ryan Merkel, William Blair.

（操作員指示）瑞安·默克爾、威廉·布萊爾。

Great. Thanks for taking the questions. First off Alan, why is the change in sales growth lower for '24? Is the big issue the new business taking longer? Or are there also macro pressures, with maybe restaurant traffic also weighing on the change there?

偉大的。感謝您提出問題。首先，Alan，為什麼 24 年的銷售成長變化較低？最大的問題是新業務需要更長的時間嗎？或者是否也存在宏觀壓力，也許餐廳客流量也對那裡的變化造成壓力？

-- what are we referring to because to what my understanding is that our sales for 2024 is actually going to be higher than 2023. And we have been considering -- continuously reiterating overall growth of 7% to 15% total. That is where we are seeing.

-- 我們指的是什麼，因為據我了解，我們 2024 年的銷售額實際上將高於 2023 年。我們一直在考慮——不斷重申整體成長率為 7% 至 15%。這就是我們所看到的。

And if we were having a merger and acquisition, it would be a 15% approximate higher range of the estimate. Without the acquisition, it will be at the lower range of the estimate. So I don't believe that. Jian, can you -- do we change our sales guidance lower?

如果我們進行併購，則預估範圍將高出約 15%。若不進行收購，則將處於預估的下限。所以我不相信這一點。健，你能－我們可以降低我們的銷售指導嗎？

So the sales guidance for the full year of 2024, for right now, we are expecting mid-to-high single digit for the third quarter for 2024. On the full-year basis, we are expecting mid-single digit from the prior year.

因此，就 2024 年全年的銷售指引而言，目前我們預計 2024 年第三季將達到中高個位數。就全年而言，我們預計與上一年相比將達到中個位數。

Yes. And Alan, you cut out when you started answering the question. I thought the prior guide, correct me if I'm wrong, I thought it was up 8% to 15%. I think that included M&A. So you are going from 8% to 15% for the full year '24 to now up mid-single digits. That's kind of a big change. Yeah.

是的。艾倫，當你開始回答問題時你就停了下來。我認為之前的指南，如果我錯了請糾正我，我認為它上漲了 8% 到 15%。我認為這包括併購。因此，24 年全年的成長率將從 8% 上升到 15%，到現在為止將上升到中個位數。這是一個很大的改變。是的。

Correct. Well, I believe that like Jian mentioned earlier, we were expecting some of the chain accounts to hit it earlier versus later. So right now, we are still pushing for the chain to move faster in terms of converting into our product. But right now at this time, I believe Jian is – we are being very conservative in terms of making sure that we can meet our guidance on that part.

正確的。嗯，我相信就像Jian之前提到的那樣，我們預計一些連鎖帳戶會更早而不是更晚達到目標。所以現在，我們仍在推動連鎖店更快轉化為我們的產品。但現在這個時候，我相信Jian是——在確保我們能夠滿足我們在這方面的指導方面，我們非常保守。

Got it. Okay. And then, Alan you mentioned July was stronger and I think you mentioned you thought that would continue. Can you just reiterate those comments? Was that a total business comment? Or is that specific to online or eco-friendly? I'm sorry, I just missed it.

知道了。好的。然後，艾倫，你提到七月更強勁，我想你提到你認為這種情況會持續下去。能重申一下這些評論嗎？這是一個完整的商業評論嗎？還是這是特定於線上或環保的？抱歉，我剛剛錯過了。

Yes. July, I believe we are seeing double-digit growth in revenue-wise. So year-over-year comparison comp. And it's not -- basically, all segments we're seeing chain accounts are hitting at latter part of July. Our bubble tea supply is growing.

是的。七月份，我相信我們的收入將實現兩位數的成長。所以逐年比較比較。基本上，我們看到的連鎖帳戶的所有細分市場都在 7 月下旬受到衝擊。我們的珍珠奶茶供應量正在增加。

Our online is actually going very strong. And online is basically, we are seeing a -- I believe Jian, we mentioned about this quarter was 17% year-over-year growth online. And last quarter, I mentioned that our goal for this year was $70 million online revenue. Right now, I'm actually pushing for $80 million revenue goal.

我們的在線實際上發展得非常強勁。在線基本上，我們看到 - 我相信Jian，我們提到本季度在線同比增長 17％。上個季度，我提到我們今年的目標是 7000 萬美元的線上收入。現在，我實際上正在努力實現 8000 萬美元的收入目標。

So our second part of the 2024, we are seeing a strong push in the online, and how we're about to do that is we added additional staffing into putting more items into Amazon FBA and also changing -- adding a new feature on our Shopify, our LollicupStore.com that customer can buy volume and get volume discount on that part.

因此，2024 年的第二部分，我們看到了線上業務的強勁推動，我們將如何做到這一點，我們增加了額外的人員，將更多的商品放入亞馬遜FBA 中，並進行了改變——在我們的FBA 中新增了一項新功能。

So we foresee that. Basically, our online sale is very likely to be over 20% year-over-year growth. So up from $70 million initially, we projected to almost $80 million. That is our goal for online sales by the end of this year.

所以我們預見了這一點。基本上，我們的線上銷售額年增率很有可能超過20%。因此，我們預計從最初的 7000 萬美元增加到近 8000 萬美元。這是我們今年年底在線上銷售的目標。

Got it. Okay. That's very encouraging. Thank you. I'll pass it on.

知道了。好的。這非常令人鼓舞。謝謝。我會把它傳遞下去。

Jake Bartlett, Truist.

傑克‧巴特利特，真理論者。

Great. Thanks for taking the question. My first was just a follow-up on the last comment. Alan, you mentioned, July being up 10%, but the guidance for the quarter is mid-to-high single digits. So implying a deceleration, is that just being conservative? Or is there something coming down the pike in the next two months that you think would be decreasing the sales growth from the July level?

偉大的。感謝您提出問題。我的第一條評論只是最後一則評論的後續。艾倫，您提到，7 月份增長了 10%，但該季度的指導是中高個位數。那麼暗示減速，這只是保守嗎？或者您認為未來兩個月內是否會發生一些事情，導致銷售額成長較 7 月份的水平下降？

Well, we are trying to be conservative, basically. But like I said, the business is overall is very encouraging. We see the business growing. And we want to make sure that we are able to hit that number, that's one other thing.

嗯，基本上我們試圖保持保守。但正如我所說，整體業務非常令人鼓舞。我們看到業務正在成長。我們希望確保我們能夠達到這個數字，這是另一回事。

Okay. And in the second quarter, you missed your guidance. You mentioned kind of onboarding these new accounts, taking a little longer than expected. But to what extent is the weak pricing or just the pricing environment that was mentioned in the press release, I think on your prepared remarks as well. But how confident are you in the pricing that pricing will sustain? Or is there a risk that the prices will continue to decline given the competitive environment?

好的。在第二季度，您錯過了指導。您提到了加入這些新帳戶的時間比預期要長一些。但新聞稿中提到的定價疲弱程度如何，或者只是定價環境，我也認為您準備好的言論也是如此。但您對維持定價的信心有多大？或者考慮到競爭環境，價格是否有持續下降的風險？

Well, we see the pricing stabilizing and also, we have been very competitive in terms of ensuring that we're continuing to move forward in the market -- taking market shares and ensuring that we don't lose any clients. All of our clients are looking for savings regardless of new clients, old clients -- existing clients. So that's what we've been doing in terms of doing that.

嗯，我們看到價格穩定下來，而且，在確保我們繼續在市場上前進方面，我們一直非常有競爭力——佔領市場份額並確保我們不會失去任何客戶。我們所有的客戶都在尋求節省，無論是新客戶、老客戶或現有客戶。這就是我們一直在做的事情。

And how we'll be able to pass on saving to our client is basically on several items is one of the strong dollars, it is helping that as well as we have been negotiating with our vendors to also get more support from them to lower their cost. But of course, the ocean freight in the second quarter really increased quite a bit in terms of the situation with the ocean freight, the shortage of containers, that's actually raising the prices. But even with that, we are still able to meet our gross margin goal with that high increase in ocean freight.

我們如何能夠將節省的費用傳遞給我們的客戶基本上是在幾個項目上，這是強勢美元之一，它正在幫助我們，我們一直在與我們的供應商談判，以獲得他們的更多支持，以降低他們的成本。當然，從海運情況來看，第二季的海運確實增長了不少，貨櫃短缺，這實際上是在提高價格。但即便如此，我們仍能透過海運費的大幅成長來實現毛利率目標。

Got it. And Alan could you just -- this is -- for those of us who aren't as close to how the ocean freight rates work and all the dynamics there. On the last call, you mentioned that you had contracted -- you had rates locked through April of 2025.

知道了。艾倫，您可以——這是——對於我們這些不太了解海運價格如何運作以及那裡的所有動態的人來說。在上次通話中，您提到您已簽訂合約 - 您的費率鎖定至 2025 年 4 月。

So I'm struggling to understand how the current rate environment impacts you if you are contracted through April of '25. Just help us understand the dynamics there and what makes you go on and off contract? And in the context then, how confident are you in the freight rates for the remainder of the year?

因此，如果您的合約截止到 25 年 4 月，我正在努力了解當前的費率環境對您有何影響。請幫助我們了解那裡的動態以及是什麼讓你續約和解除合約？那麼在這種情況下，您對今年剩餘時間的運費有多大信心？

Well, we signed just like most companies did in the -- back in the end of April, our contracted rate -- a certain contracted rate. And because the situation was a shortage, the ocean freight liner added a peak season surcharge. And that's a rate that can add $500 to $800, and they elected to add $1,000 each container that we ship.

好吧，我們就像大多數公司一樣，在四月底簽署了我們的合約費率——一定的合約費率。並且因為缺貨的情況，遠洋班輪加收了旺季附加費。這個費率可能會增加 500 到 800 美元，而他們選擇為我們運送的每個貨櫃增加 1,000 美元。

At the same time because the ocean freightliner, they knew that there is a higher demand in the containers and they reduced their ship to the US, so they were able to raise the rate in the more [spot rate] market.

同時，由於海運，他們知道貨櫃的需求較高，因此減少了前往美國的船舶，因此他們能夠提高更多[現貨費率]市場的費率。

What they've done is, even though we have a contracted rate, they are not giving us exactly the container numbers that we needed to ship our product. So if we wanted to get additional container, we have to go out of our rates -- contracted rate with freight forwarder like other people, if they didn't sign the contract. And that rate skyrocketed to $8,000 containers and $10,000 containers to New York, which is almost triple the amount of -- like quadruple the amount of money that we had originally signed the contract with.

他們所做的是，即使我們有合約費率，他們也沒有向我們提供運送產品所需的確切貨櫃號碼。因此，如果我們想獲得額外的貨櫃，我們必須像其他人一樣使用我們的費率——與貨運代理商簽訂的合約費率，如果他們沒有簽約的話。這個價格飆升至 8,000 美元貨櫃和 10,000 美元貨櫃運往紐約，幾乎是我們最初簽訂合約金額的三倍——相當於四倍。

Unfortunately, we were able to -- we only needed to use 10% of our containers out of the contract rate versus some of our competitors or other smaller importers that didn't sign -- elect to sign the contract rate would have to ship more product. They have to go out and find containers at the rate of anywhere from $6,500 to $10,000 a container, almost near the price that they were paying during the pandemic.

不幸的是，我們能夠 - 我們只需要使用合約費率以外的 10％ 與我們的一些競爭對手或其他未簽署的小型進口商相比 - 選擇簽署合約費率將不得不運送更多產品。他們必須出去尋找集裝箱，價格從每個集裝箱 6,500 美元到 10,000 美元不等，幾乎接近他們在大流行期間支付的價格。

Okay. And last question, Alan. In an environment or in the eventuality, the possibility that whatever happens with this Presidential election, there is the possibility of a broad kind of tariff being implemented. Can you just speak to that risk for Karat? What mitigating factors there might be? And what kind of maybe contingency measures you are taking for that potentiality?

好的。最後一個問題，艾倫。在某種環境下或萬一發生的情況下，無論這次總統選舉發生什麼，都有可能實施廣泛的關稅。能談談 Karat 面臨的風險嗎？可能存在哪些緩解因素？您正在為這種潛力採取什麼樣的緊急措施？

Sure. We've noticed that US has been implementing tariffs on different items and not just a regular tariff, but additional tariff, anti-dumping tariff on different categories starting July, August, and October, and December. So what we've done is we've been finding different vendors like we had before moving from our purchase from China into Malaysia, Vietnam, and other part of the Asia world.

當然。我們注意到，美國從7月、8月、10月、12月開始對不同的商品加徵關稅，不僅是常規關稅，還有附加關稅、反傾銷關稅等。因此，我們所做的就是尋找不同的供應商，就像我們之前從中國採購轉向馬來西亞、越南和亞洲世界其他地區一樣。

And that's something that we've been doing in the past years. So our purchase reliance on shipment from China has reduced even more. And with the additional tariff on aluminum, that is not going to be just us, it's been everyone in the US, even the manufacturer, not only the importer, manufacturer that need the raw material are getting from China are going to get hit with a really high tariff, as much as 55% to 100% increase in tariffs.

這就是我們過去幾年一直在做的事情。因此，我們對中國出貨的採購依賴度進一步降低。隨著鋁的額外關稅，這不僅僅是我們，而是美國的每個人，甚至是製造商，不僅僅是進口商，需要從中國獲得原材料的製造商都將受到打擊。高達55%到100%。

So everyone have to look for alternatives. And definitely not everyone can bring the factory immediately back to US for production. But even domestic manufacturers have announced increase in prices. So we're also working on that and looking for additional new vendors. We've done so. We're working on testing on the quality and everything to ensure that they will have the same match of the item SKU that we have right now. So that's what we've done right now to mitigate.

所以每個人都必須尋找替代方案。當然不是每個人都能立即將工廠帶回美國生產。但就連國內廠商也宣布漲價。所以我們也在努力解決這個問題並尋找更多的新供應商。我們已經這樣做了。我們正在努力測試品質和一切，以確保它們與我們現在擁有的商品 SKU 相同。這就是我們現在所做的緩解措施。

In the case that a new President comes in and all of a sudden start raising tariffs of every country in Asia and also Europe and Mexico partner country, I think that is going to be an issue that everyone has to deal with. It will be a broad price increase among the categories that basically being increased on tariffs. So it wouldn't just be us, it would be just like everybody. With that said, everyone has to raise their price at that time.

如果新總統上任並突然開始提高亞洲所有國家以及歐洲和墨西哥夥伴國的關稅，我認為這將是每個人都必須處理的問題。這將是基本上透過關稅提高的類別中的廣泛價格上漲。所以這不僅僅是我們，而是像每個人一樣。話雖如此，到時候大家都得漲價了。

Okay. Thank you so much. I appreciate it.

好的。太感謝了。我很感激。

Ryan Meyers, Lake Street Capital Markets.

瑞安·邁耶斯（Ryan Meyers），湖街資本市場。

Hi, guys. Thanks for taking my question. First one for me is, Alan, I was wondering if you could just comment on maybe what you are seeing across some of your food service customers? Are you seeing any softness there? Or is there any kind of issues in overall traffic levels? Just so we get a good understanding of the overall kind of demand at food service environment and what that looks like?

嗨，大家好。感謝您提出我的問題。我的第一個問題是，艾倫，我想知道您是否可以評論一下您在一些食品服務客戶中看到的情況？你看到那裡有柔軟的地方嗎？或者整體流量水準是否有任何問題？只是為了讓我們更了解餐飲服務環境的整體需求以及它是什麼樣的？

Sure. We are getting increasing orders from chain accounts, definitely -- especially chain account that is doing well. Very fortunate for us. And that many of the chain accounts are actually doing well and some chains are not doing as well. Fortunately, we have not -- most of our customers are the better part of it.

當然。我們從連鎖帳戶獲得的訂單肯定在增加——尤其是表現良好的連鎖帳戶。對我們來說非常幸運。許多連鎖帳戶實際上表現良好，而一些連鎖帳戶則表現不佳。幸運的是，我們沒有——我們的大多數客戶都是其中的佼佼者。

In the distribution side, we are seeing softness in distribution side, especially in California. California restaurant environment is really not doing well, especially mom-and-pop shops. They're closing. If not, they are about to close. But that national chain accounts, especially fast-casual chains, surprisingly they are doing better than the fast food chain. That's what we are seeing.

在分銷方面，我們看到分銷方面的疲軟，尤其是在加州。加州的餐廳環境確實不好，尤其是夫妻店。他們要關門了。如果沒有，他們就要關門了。但令人驚訝的是，全國連鎖店，尤其是快餐連鎖店，它們的表現比快餐連鎖店好。這就是我們所看到的。

And then it sounds like the original guidance range that you guys had given, the 8% to 15% at the high end there accounts for an acquisition. So maybe can you just comment on how we should maybe be thinking about that for the rest of this year and what you're seeing in the M&A environment?

然後，聽起來就像你們給出的最初指導範圍一樣，高端的 8% 到 15% 相當於收購。那麼，您能否評論一下我們在今年剩餘時間裡應該如何考慮這個問題以及您在併購環境中看到的情況？

Well, we are still in discussion with different partners and see what we can do in terms of merger and acquisition. And even as we speak right now, we have some potential partners that we're working with right now on that part. Even potentially partnering bring additional manufacturing into Texas, because of like a previous question that brought up about the tariff, there are certain item categories that we are seeing a high tariff.

那我們還在和不同的合作夥伴進行討論，看看在併購方面我們能做些什麼。即使我們現在說話，我們現在也有一些潛在的合作夥伴正在就這方面進行合作。即使潛在的合作夥伴將更多的製造業帶入德州，因為就像之前提出的關稅問題一樣，我們看到某些商品類別的關稅很高。

And actually, I'm looking to discuss with some of the overseas partners to bring their manufacturing capability into US, domestic US, so that we can do a joint venture in terms of producing items that basically it's being hit with the tariff. So basically, we can increase sales and also revenue by bringing the manufacturing back to the US. That's one thing that we are doing right now.

事實上，我正在與一些海外合作夥伴討論，將他們的製造能力引入美國，美國國內，這樣我們就可以建立一家合資企業，生產基本上受到關稅打擊的產品。所以基本上，我們可以透過將製造業帶回美國來增加銷售額和收入。這是我們現在正在做的一件事。

On the revenue side, we are also discussing with -- partnering with a company or buying shares of a company that would enable us to tap into supermarket industry, different segments, adding SKUs. Our goal is basically increase our revenue by adding additional SKU as well as increasing our wallet share of customers.

在收入方面，我們也在討論與一家公司合作或購買一家公司的股票，這將使我們能夠進入超市行業、不同的細分市場，並添加 SKU。我們的目標基本上是透過增加額外的 SKU 以及增加客戶的錢包份額來增加我們的收入。

Okay. Got it. That's helpful. Thanks for taking my questions.

好的。知道了。這很有幫助。感謝您回答我的問題。

Brian Butler, Stifel.

布萊恩巴特勒，斯蒂菲爾。

Good afternoon. Thank you for taking the questions. Just, I guess, back on the inferred guidance for the back half of '24. When you think of the mid-single digit growth for the full year and mid- to high-single digits for third quarter. So does that suggest fourth quarter is going to be -- or you're expecting fourth quarter to be very strong, almost mid-teens for growth? Am I thinking about that progression from quarter to quarter correctly for the back half?

午安.感謝您提出問題。我想，回到 24 年下半年的推論指引。當你想到全年的中個位數成長和第三季的中個位數成長。那麼，這是否表明第四季度將會——或者您預計第四季度的成長將非常強勁，幾乎達到十幾歲左右？我是否正確地考慮了後半段從一個季度到另一個季度的進展？

We're thinking of double-digit growth for the fourth quarter. That is correct. Again, in the past, we have been seeing our company double-digit growth. I think we're happy that we are seeing that we're back to the trajectory that starting the third quarter -- we are having a strong quarter in third quarter and even a stronger quarter in the fourth quarter.

我們預計第四季將實現兩位數成長。這是正確的。過去，我們再次見證了公司兩位數的成長。我認為我們很高興看到我們回到了第三季開始的軌跡——我們在第三季度表現強勁，在第四季度甚至表現強勁。

And is that benefiting from some larger client, the national account signing, finally getting through the administrative process? And how does that roll into -- how should we think about that rolling into '25?

這是受益於一些較大的客戶、國民帳戶簽署、最終完成行政程序嗎？我們該如何考慮進入 25 年？

Yes, that is actually true. Some of the large chain accounts that we were expecting for the third quarter is actually going to roll into the end of the third quarter and into fourth quarter. And that's where we see a segment that we are seeing the growth.

是的，確實如此。我們預計第三季的一些大型連鎖帳戶實際上將進入第三季末和第四季。這就是我們看到成長的細分市場。

It's adding additional national chain accounts. And some of these chain accounts actually switching a different type of product from Styrofoam into plastic, into papers and other things, compostable items. And that's something that we are seeing that right now. And are we going to see a stronger 2025? Definitely, we are going to see a stronger 2025 with an increase in online sales. Additional increase online sales, that's already starting in third quarter and moving to fourth quarter in 2025.

它正在增加更多的全國連鎖帳戶。其中一些連鎖帳戶實際上將不同類型的產品從聚苯乙烯泡沫塑膠轉變為塑膠、紙張和其他可堆肥物品。這就是我們現在所看到的。2025 年我們會看到更強大的嗎？毫無疑問，隨著線上銷售的成長，我們將在 2025 年看到更強勁的表現。線上銷售額的進一步成長已從第三季開始，並將於 2025 年第四季推進。

Okay. And then thinking about the EBITDA and the kind of the margin compression that we saw in the second quarter, we were down about 550 basis points. Do you have a bridge between last year and this year, kind of the puts and takes, what is behind that 550-basis-point compression?

好的。然後考慮 EBITDA 和我們在第二季度看到的利潤率壓縮，我們下降了約 550 個基點。去年和今年之間有橋樑嗎？

That I will ask -- Jian Guo would answer that question.

我會問——郭建會回答這個問題。

Yeah. So if you look at -- Brian, if you're looking at the bridge between last year's adjusted EBITDA margin to this year's adjusted EBITDA margin, the biggest gap there is the operating expense. As we talked about earlier, our growth margin remained consistent between the quarters. So really the biggest gap is the operating expense section.

是的。因此，如果你看一下——布萊恩，如果你看一下去年調整後的 EBITDA 利潤率與今年調整後的 EBITDA 利潤率之間的橋樑，就會發現最大的差距是營運費用。正如我們之前談到的，我們的成長率在兩個季度之間保持一致。所以真正最大的差距是營運費用部分。

Some of the items that we talked about in the prepared remarks in terms of the fixed operating expenses. And then there are also certain categories, certain investments that we're making, for example, the marketing expenses to support our online sales growth, those are the examples -- some of the examples of the increases in operating expense that would account for the majority of the variance year over year.

我們在準備好的評論中談到的一些關於固定營運費用的項目。然後還有某些類別、我們正在進行的某些投資，例如，支持我們在線銷售增長的營銷費用，這些就是例子——運營費用增加的一些例子，這些費用將導致大部分的同比差異。

And is that showing up in the selling expense because selling expense was up like 56% year over year in the second quarter. Is that those things? Is that what you're talking about?

這是否反映在銷售費用中，因為第二季銷售費用年增了 56%。是那些東西嗎？你說的是這個嗎？

The selling expense, I mean, you are right, that's a great comment. Although I do want to highlight, if you are only looking at the selling expense -- if you're looking at the selling expense line item, there is a little bit of an apple-to-orange comparison in the sense that there was an adjustment of the online platform fee which Alan mentioned earlier that this year, it's being included in this quarter.

銷售費用，我的意思是，你是對的，這是一個很好的評論。儘管我確實想強調，如果您只查看銷售費用 - 如果您查看銷售費用行項目，則有一點蘋果與橙子的比較，因為有一個艾倫之前提到今年在線平台費用的調整，它已包含在本季度中。

Well, I should say, starting Q4 2023, we are including in selling expense versus previously it was reported as offset against sales. So that's a fairly significant increase in the selling expense that's sort of from an accounting adjustment that we discussed earlier as well.

嗯，我應該說，從 2023 年第四季開始，我們將銷售費用納入其中，而先前報告中的費用是與銷售額相抵銷的。因此，銷售費用有相當大的增加，這也是我們之前討論過的會計調整的結果。

Okay. And then on the freight costs, so how should we -- how does that freight cost look in the third quarter and the fourth quarter? Can you provide some -- that trend in the back half as a percent maybe of revenues?

好的。然後是貨運成本，那我們應該如何——第三季和第四季的貨運成本如何？您能否提供一些－後半部的趨勢（可能佔收入的百分比）？

Sure. As I mentioned earlier that the second quarter, we are seeing a significant increase in ocean freight due to peak season surcharge as well as if we were to contract out, out of our contract to getting a container from freight forwarder, 10% of that -- that really increased our ocean freight. We have seen the ocean freight prices come down starting July and even more in August.

當然。正如我之前提到的，第二季度，由於旺季附加費，以及如果我們將合約從貨運代理那裡獲得集裝箱，我們看到海運費用顯著增加，其中 10% - - 這確實增加了我們的海運運費。我們看到海運費價格從 7 月開始下降，8 月下降幅度更大。

The non-contract rate was as high as $8,000 to California West Coast and $10,000 to East Coast. Now, it is down below $5,000. And fortunately, we are really not using any containers out of our contract rate starting August.

加州西海岸的非合約費率高達8,000美元，東海岸的非合約費率高達10,000美元。現在，它已跌破5,000美元。幸運的是，從八月份開始，我們確實沒有使用任何超出合約價格的貨櫃。

So in July, we were still taking some containers that we needed to without the contract rate, so that we don't run out of product on our customers. But in August, we have stopped taking any non-contracted containers. So that's a good thing.

因此，在 7 月份，我們仍然在沒有合約費率的情況下採取一些我們需要的貨櫃，這樣我們就不會用完客戶的產品。但到了8月份，我們已經停止接收任何非合約貨櫃。所以這是一件好事。

Even though we are paying for the peak season surcharge, but we are not paying for the extra above the peak season surcharge, the $6,000, $7,000 container rate. And this is due to the fact that containers basically have become more available, less people are shipping products, because there was a tariff that was hitting the US and Europe in August 1, and those companies that needed to ship electric vehicles into Europe, basically they stopped shipping that. So basically there is more containers available for the US customers right now.

儘管我們支付了旺季附加費，但我們並沒有支付旺季附加費之上的額外費用，即 6,000 美元、7,000 美元的貨櫃費率。這是因為貨櫃基本上變得更加可用，運輸產品的人減少了，因為 8 月 1 日美國和歐洲徵收了關稅，而那些需要將電動車運往歐洲的公司基本上他們停止運送了。所以基本上現在有更多的貨櫃可供美國客戶使用。

And the fourth quarter, we are seeing that the ocean freight liners should be removing the peak season surcharge that we can go back to the original contracted rate. So the ocean freight will come down even more during the fourth quarter of this year.

第四季度，我們看到海運班輪應該取消旺季附加費，這樣我們就可以恢復到原來的合約費率。因此，今年第四季海運費將進一步下降。

So, Brian, just a little more color there just to get a line on the model. So overall, in terms of net sales, we’re expecting ocean freight for the second half of the year to range between 8% to 10% of net sales. Everything Alan talked about, right just in terms of the ocean freight the trend, obviously, I think that's a great insight into what we are expecting just in terms of modeling out the second half of the year.

所以，布萊恩，再多一點顏色，只是為了在模型上畫一條線。因此，總體而言，就淨銷售額而言，我們預計下半年的海運費將佔淨銷售額的 8% 至 10%。艾倫談到的一切，就海運趨勢而言，顯然，我認為這對我們在下半年建模方面的預期有很好的洞察力。

I do want to -- just as a reminder, we typically do see about roughly two months lag in terms of the real-time rate and how it is getting recorded on the financials just because of inventory turn. So that said, the spike in the second -- in the late part of the second quarter, we will see primarily that impact getting reflected on the financials in the first half of the third quarter. And as we start, obviously seeing improvements in ocean rate will get that benefit in the second half of the third quarter, as well as the fourth quarter.

我確實想——提醒一下，我們通常確實會看到實時匯率以及由於庫存週轉而在財務報表中記錄的情況存在大約兩個月的滯後。也就是說，第二季末的飆升，我們將主要看到這種影響在第三季上半段的財務數據上得到反映。正如我們開始的那樣，顯然海運費的改善將在第三季下半年和第四季帶來好處。

Right. And to be clear, that is built into your 38% to 40% gross margin kind of forecast for the full year.

正確的。需要明確的是，這已納入您對全年 38% 至 40% 毛利率的預測。

Correct.

正確的。

Right. And if you think about going down to the EBITDA line, are you -- that 38% to 40% would suggest some margin improvement year over year on the gross margin. But on the EBITDA line, it seems like we are going to probably see some compression because of the higher cost on operating in those fixed costs and selling. Is that a fair way to look at EBITDA and gross profit for the full year?

正確的。如果您考慮降低 EBITDA 線，那麼 38% 至 40% 表示毛利率較去年同期有所改善。但在 EBITDA 方面，由於這些固定成本和銷售的營運成本較高，我們似乎可能會看到一些壓縮。這是看待全年 EBITDA 和毛利的公平方法嗎？

On the full-year basis, I think we previously communicated our long-term goal, for our adjusted EBITDA margin is to be the high-mid teen. And I think we're still on track to meet that goal for full-year 2024.

就全年而言，我認為我們之前傳達了我們的長期目標，因為我們調整後的 EBITDA 利潤率是達到中高中水平。我認為我們仍然預計在 2024 年全年實現這一目標。

Mid-teens. Okay. And then one last one on maybe an update. You had talked in the past about expanding some of the distribution product lines kind of beyond the packaging pieces. Do you have an update on that and maybe where you stand and if that strategy is continuing to be pressed forward?

十幾歲左右。好的。然後最後一篇可能是更新。您過去曾談到將一些分銷產品線擴展到包裝件之外。您有這方面的最新情況嗎？

Yes, we are actually looking to the food segment -- frozen food segment. So we are adding refrigerated truck, we are adding refrigerated containers, and we're also looking to build a cold storage containers, warehouse in the state of Texas. So that's what 2025 goal. In terms of what other items we can sell, there might be frozen food, frozen dumpling, and other things that we might be able to distribute and then also possibly manufacturing domestically.

是的，我們實際上正在關注食品領域——冷凍食品領域。所以我們正在增加冷藏卡車，我們正在增加冷藏集裝箱，我們也希望在德克薩斯州建造一個冷藏貨櫃倉庫。這就是 2025 年的目標。就我們可以銷售的其他商品而言，可能有冷凍食品、冷凍餃子和其他我們可能能夠分銷然後也可能在國內生產的東西。

Do you have an estimate on the capital requirements for that?

您對此的資本要求有估計嗎？

Right now, we don't know how much capital requirements going to be. We have not estimated that yet.

目前，我們不知道資本要求是多少。我們還沒有估計到這一點。

Okay. That's all my questions. Thank you very much.

好的。這就是我的所有問題。非常感謝。

That concludes our Q&A session. I will now turn the conference back over to CEO, Alan Yu, for closing remarks.

我們的問答環節到此結束。現在我將把會議轉回執行長 Alan Yu 致閉幕詞。

Thank you, operator and thanks to all of you for joining us today. We appreciate your continuing support. We remain confident about Karat's future, and we look forward to keeping you up appraised of our progress. Have a great evening, everyone. Goodbye.

謝謝運營商，也謝謝大家今天加入我們。我們感謝您持續的支持。我們對 Karat 的未來仍然充滿信心，並期待您隨時評價我們的進展。祝大家有個愉快的夜晚。再見。

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

女士們、先生們，今天的電話會議到此結束。感謝大家的加入。您現在可以斷開連線。