Karat Packaging Inc.

Good day and welcome to the Carrot Packaging, Inc. first quarter 2022 earnings 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 your telephone keypad. 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. Please go ahead.

Good afternoon, everyone, and welcome to Carrot Packaging's 2022 first quarter earnings call. I'm Roger Pondell with Pondell Wilkinson, Carrot 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, Jan Goh. Before I turn the call over to Alan, I want to remind all 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 most recently formed 10 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 carrot packaging undertakes no obligation to update any forward-looking statements except as required by law. Please also note that during today's 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, 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 first quarter 2022 result, again, demonstrated excellent operational execution, achieving record sales and strong margin expansion. Our positive sales performance was broad-based across all categories, including national and regional chain accounts. distributors, onlines, and retail channels. Sales were boosted to some extent by Carrot's T-Zone branded products, particularly bubble tea supplies, and our newly expanded logistics services. We continued to gain wallet share with our existing customers, and we added many new customers through wholesale distribution and through e-commerce, direct to consumer channels. Our online presence continued to be an important initiative. In addition to selling carrot product, we plan to expand the selling platform on our site, enable other food service purveyors to showcase and sell their product, and creating a convenient one-stop shopping option for our customers. The company achieved gross margin of 32.5% in the year 2022 first quarters, increasing 390 basis points over the same quarter last year. Despite continued supply chain challenges, and higher freight costs, this demonstrated our ability to improve operational efficiencies and cost leverage. Gross margin also benefited from freight and duty capitalization. Demand for compostable and biodegradable products is on the rise, as more cities and states are beginning to enact regulations to ban single-use plastic and styrofoam products. CARE's long-standing commitment to providing environmentally friendly disposable products has empowered us to grow into a leader in the industry. As we continue to provide new and innovative offerings, just subsequent to the close of the quarter, we enter into a joint venture agreement to build a 180,000 square feet state-of-the-art automated factory in Taiwan to manufacture 100% compostable food service products from Bacoste. which is a derivative of sugarcane pulp. The new plant, which will feature state-of-the-art robotics, is expected to produce approximately 7,600 tons or 650 containers of takeout boxes, plates, bowls, tableware, and other Bacost products in the year 2023. About half of the product produced at this plant will be earmarked for Carrot customers. This will further enhance Carrot's vertical integration in its supply chain and minimize dependence on imported goods from China, which is where most Bogaz products in the United States are currently imported from. Longer term, it is our objective to build a similar plant in the United States and become a dominant domestic manufacturer in the near future. I am also happy to mention that as of this month, we've expanded our warehouse capacity, adding a total of 90,000 square feet of new lease warehouse space in California and Hawaii. We also expanded our South Carolina warehouse space by 50,000 square feet to meet continuing increasing demand. This much-needed additional warehouse space will give us more growing room and allow us to further increase our fulfillment rates and support additional sales growth. As we proceed into 2022, we believe we will see continued business growth further accelerated by the expansion of our warehouse base and continue operating efficiencies. We are currently targeting net sales for the 2022 second quarters to be in the range of $116 million to $118 million, up about 24% at the midpoint of the range over the same period last year. Accordingly, for the full 2022 year, we are increasing our guidance with net sales expected to be in the range of $445 million to $449 million versus $360 million in the year 2021. And up from last quarter, forecast a full year growth guidance of 17 to 19%, or $426 million to $433 million. Our gross margin goal for the year 2022 full year remains 31% to 32% on average. The ocean freight costs are challenging to predict. We currently expect the freight rate to remain elevated for the remainder of 2022. While some of our higher first quarter ocean freight costs will be absorbed in the second and possibly the third quarter of 2022, we reiterate the full year average gross margin goal of 31 to 32%. We currently expect some tailwind from foreign currency gains and continued operating efficiencies to offset most of our expected unfavorable impact on freight and duty capitalization in the second quarters. I want to leave adequate time for questions, so with that said, I will turn over the call to Jian Gao, our Chief Financial Officer, to discuss our financial results in greater detail. Jian?