Karat Packaging Inc.

Good day, and welcome to the Care Packaging, Inc. Second Quarter 2023 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 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 with Pondell Wilkinson, Investor Relations for Care Packaging. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Care Packaging's 2023 Second Quarter Earnings Call. I'm Roger Pondell with Pondell Wilkinson, Care 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 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 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, and carrot 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 posted on the company's website. And with that, I will turn the call over to CEO Alan Liu.

Alan? Thank you, Roger. Good afternoon, everyone. Despite revenue being impacted by anticipated price reductions and lower revenue from logistics services and shipping charges, we achieved excellent second quarter results. Sales for our core disposable food service product grew during the quarter. With volume increasing 5% over the prior year period, demand for our eco-friendly product remained strong. Sales for the category grew 22% in the second quarter over the prior year period. Our 2023 objective for the eco-friendly product category is to be at about 35% of total sales. We were able to sustain record levels for the gross margin despite the industry-wide deflationary environment and multiple price reduction that were implemented, as well as write-off of raw materials associated with the disposal of certain machinery and equipment. We continue to implement our asset-light growth initiatives to focus more on import and distribution, drive margin expansion, and improve inventory management and fill rates. we are working through some operational challenges in the opening of our Chicago and Houston warehouse, and we currently expect both warehouses to be fully operational before the end of September 2023. We are also looking for additional warehouse space in strategic locations such as Arizona and Florida. Together, with the scaling back of manufacturing footprints in certain US locations substantially completed, combined with the expansion of import items we were able to achieve and maintain greater margin. I also want to mention that we completed the transaction of selling our portion of a joint venture project in Taiwan and have received payment of our full investment of $6 million plus interest. Our current operating model and strategic initiative are producing strong operating cash flow. Accordingly, as we announced earlier today, our broader director declared a special dividend of 40 cents per share The Board also approved the initiation of a regular quarterly cash dividend policy, and it could declare a dividend of $0.10 per share. These distributions demonstrate the Board's confidence in Carat's future and commitment to returning value to our shareholders. I will now turn the call over to Jan Gao, our Chief Financial Officer, to discuss the company financial results in greater detail. Jan?