Karat Packaging Inc.

Hello and thank you for standing by. At this time, I'd like to welcome everyone to the Carat Packaging Inc. 3rd Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to redraw your question, press star 1 again. Thank you. As a reminder, this call is being recorded. I will now turn the conference over to Roger Pondell. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and welcome to Carrot Packaging's 2024 Third Quarter 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 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, and 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 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 are encouraged by our third quarter performance, with net sales up nearly 7% and volume up approximately 10%. Despite some pricing pressure, we experienced growth in most of our sales channels. Our online business, which benefited from the inclusion of $3 million online platform fees in the current quarter, achieved a 33% increase over the prior year period. Carrot's recent expansion into the supermarket chain category is starting to generate positive results. After successful product sampling and trial orders, we began shipping customized bakery packaging containers for a major grocery chain customer in late September, followed by the initiation of shipments on utensils to another major grocery chain in mid-October. We are now developing additional product offering and intensifying our sales effort in this sector. Sales of our eco-friendly products increased 9% year-over-year and now represented 33.4% of total sales in the third quarter. We believe demand for eco-friendly and compostable single-use disposable product will continue to increase and will contribute positively in the long term. We are focusing on new eco-friendly product development to further enhance our competitive edge. By the end of fourth quarter, we expect to launch a new line of RPT cup and lids to meet the rising demand that we're seeing in the marketplace. This new line of our PET product is made with more than 25% recycled PET material. Geographically, we continue to experience strong growth in the Midwest, Northwest, and East Coast compared with last year. Additionally, we see sales stabilizing in California, which is our biggest market, following a sharp decline in the past few quarters. At the gross margin level, We achieved gross margin of 38.6% in the third quarter versus 36.9% in the prior year period, despite the impact from high ocean freight rate in the first half of the quarter. Heading into the fourth quarter, we are encouraged by the positive momentum and our focus on optimizing inventory sourcing and management, controlling expenses, and enhancing warehouse capabilities. From an inventory perspective, we implemented procedures to optimize sourcing and inventory management. Even with reduced domestic production and increased sales, we expect to be able to reduce inventory import volume in the fourth quarter of 2024 compared to the prior year. Additionally, with decreased ocean freight rate and reduced vendor pricing in certain categories, we expect fourth quarter margin to remain at a higher level. Additionally, we recently implemented measures to further reduce labor and certain other operating costs, and we expect such measures to yield benefit in the fourth quarter. We are also actively looking for a new distribution center in the Southeast region to support anticipated business growth. We carried strong operating cash flow, as well as the company liquidity, solid balance sheet, and positive long-term outlook our Board of Directors again approved an increase in the quarterly cash dividend payment to $0.40 per share on November 5th from $0.35 per share in the preceding quarter. I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company's financial results in greater detail. Jian?