Karat Packaging Inc.

Good day and welcome to the Carrot Packaging 2021 fourth quarter and year-end conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Roger Pondell, Pondell Wilkinson, Carrot Packaging Investor Relations Firm. Please go ahead, sir.

Good afternoon, everyone, and welcome to Carrot Packaging's 2021 fourth quarter and year-end conference call. I'm Roger Pondell with Pondell Wilkinson, Carrot Packaging's Investor Relations Firm. It will be my pleasure momentarily to to introduce the company's Chief Executive Officer, Alan Yu, and Carrot's new Chief Financial Officer, Jan Goh. 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 factor section of the company's IPO registration statement and its most recent Form 10-Q 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, and CARAT packaging undertakes no obligation to update any forward-looking statements except as required by law. Please also note that 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 gap measures to the non-gap financial measures is included in today's press release, which is now posted on the company's website. And with that, it is my pleasure to turn the call over to CEO Alan Yu. Alan? Thank you, Roger.

Good afternoon, everyone. We're pleased to be here with all of you today. Our business continued to grow at a robust pace. as we gain wallet share with our existing customers and expand our customer base. Earlier today, we reported record fourth quarter net sales and continued margin expansion. Despite ongoing global supply chain challenges and tight labor conditions, fourth quarter 2021 results reflect exceptionally strong demand for our product, and market trend remains favorable. As we continue to provide new, innovative offerings, Our sales were somewhat constrained by the delay of certain shipments to customers from December to January due to inventory shortages resulting from port congestion and labor challenges. We continue to manage the labor environment through increasing recruiting efforts and shifting distribution to other facilities in our supply chain. Online sales again posted the highest percentage increase, 56% year over year in the fourth quarters. as we are placing greater emphasis on this category of our business, which commands higher margins. In addition to sales from our own online channels, we experience excellent growth through eBay, Walmart, and Amazon. Our distributor channel and national and regional chains also post a very strong result. During the year, we added more than 50 new regional restaurant chain accounts, as well as national chain accounts. As noted in the press release, we've achieved our gross margin goal in the 2021 fourth quarters, increasing 360 basis points to 31% over the same quarter last year, despite higher inventory and ocean freight expenses. This demonstrated our ability to improve productivity and operational efficiency, as well as successfully passing through inflation-related cost increases. Gross margin also benefited somewhat from higher lender costs capitalized in the fourth quarters compared to the third quarters, mainly freight duty and custom brokerage fees. Our positive business momentum is progressing in 2022. The food service sector is continuing to experience steady increase in consumer spending. Moreover, demand for environmentally friendly products continue to grow, which boasts wealth of carrot as a leading industry providers. As a result of favorable outlook, we are currently targeting net sales for the 2022 first quarter to be in the range of $101 million to $103 million, up about 35% at the midpoint of the range over the same period last year. For the full 2022 year, we expect sales to grow 17% to 19% over 2021. Lastly, as part of our plan to expand our third-party logistics services, We have just leased 14 trucks and trailers. This is in addition to the previously announced orders of 10 Tesla semi-trucks that we expect to arrive in 2023. We want to leave adequate time for questions, so I will stop here and turn the call over to Jen Gao, our new Chief Financial Officer, who joined Carrot in February to discuss our financial results in greater detail. Jen?