Karat Packaging Inc.

Good afternoon and welcome to the Carrot Packaging fourth quarter and full year 2023 earnings conference call. All participants will be in 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, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to Carrot Packaging's 2023 fourth quarter and full year conference 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 of 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 care packaging undertakes no obligation to to update any forward-looking statements except as required by law. Please also note that during the 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?

Thank you, Roger. Good afternoon, everyone. Sales volume for our 2023 fourth quarter grew 7% over the prior year period. Although revenue was again impacted by unfavorable year-over-year pricing comparison, and by startup delays from several new national and regional chain accounts, we estimated approximately $2 to $3 million in revenue from new accounts was pushed into 2024. We are starting to work on orders from these new accounts now. As part of our strategic initiatives, we continue to scale back U.S. manufacturing during the fourth quarter, which further enhanced gross margin to a near record height of 35.7%. Sales from manufactured product in the fourth quarter were 16% of total net sales, compared with approximately 27% last year. We expect our gross margin to remain at higher levels because of our initiative and the continued strong US dollar. Sales of our eco-friendly product grew 11% in the fourth quarter over the prior year period. This category represented approximately 33% of total sales, which exceeded our expectation, versus 31% last year. We are continuing to develop new and innovative eco-friendly products to meet increasing customer demand and expand our customer base. In 2023, we opened a new distribution center in Chicago and Houston and doubled the size of our Washington State Distribution Center. with the move into a new 100,000 square feet facilities. These new distribution centers are fully operational and contributing nicely to geographic and market penetration. As part of our growth plan for 2024, we recently signed a new lease for a distribution center in Arizona. We're taking possession of the warehouse now and are expecting it to be fully operational early in the second quarter. We are planning on opening another distribution center in the Southeast region this year. Together with a Salesforce expansion, we are further penetrating key U.S. markets in the South, Midwest, and Pacific Northwest region and expect the growth in these markets to more than offset the decline in the California market with weaker conditions in the restaurant sector throughout the states. Our operating leverage in Q4 2023 was impacted by a write-off vendor prepayment of $1.1 million to purchase certain PPE product in 2020 during a period of extreme inventory supply shortage caused by the pandemic. We are focusing on implementing automation and AI technology at all of our facilities in 2024 to further enhance efficiencies and productivities. Additionally, We are actively evaluating strategic acquisition opportunities this year, as market valuations are showing signs of reality and normalization. What carries strong operating cash flow, as well as the company's liquidity, strong balance sheet, and positive long-term outlook, our Board of Directors in February again authorized an increase in the quarterly cash dividend payment to $0.30 per share from $0.20 per share last quarter, and from $0.10 per share since the regular quarterly dividend policies was initiated in August 2023. I will now turn the call over to Jan Guo, our Chief Financial Officer, to discuss the company financial result in greater detail. Jan?