# Karat Packaging Inc. (KRT)

Informational only - not investment advice.

CIK: 0001758021
SIC: 3089 Plastics Products, NEC
SIC breadcrumb: [Manufacturing](/division/D/) > [SIC Major Group 30](/major-group/30/) > [SIC 3089 Plastics Products, NEC](/industry/3089/)
Latest 10-K filed: 2026-03-13
SEC page: https://www.sec.gov/edgar/browse/?CIK=1758021
Filing source: https://www.sec.gov/Archives/edgar/data/1758021/000175802126000010/krt-20251231.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 467743000 | USD | 2025 | 2026-03-13 |
| Net income | 31478000 | USD | 2025 | 2026-03-13 |
| Assets | 287686000 | USD | 2025 | 2026-03-13 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001758021.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

| Metric | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | 295,518,000 | 364,244,000 | 422,957,000 | 405,651,000 | 422,633,000 | 467,743,000 |
| Net income | 17,517,000 | 20,778,000 | 23,648,000 | 32,470,000 | 29,975,000 | 31,478,000 |
| Operating income | 27,697,000 | 23,145,000 | 30,015,000 | 42,076,000 | 37,761,000 | 41,414,000 |
| Gross profit | 89,125,000 | 107,827,000 | 132,086,000 | 153,043,000 | 164,329,000 | 172,136,000 |
| Diluted EPS | 1.13 | 1.12 | 1.19 | 1.63 | 1.49 | 1.56 |
| Operating cash flow | 14,547,000 | 8,679,000 | 29,474,000 | 53,379,000 | 47,982,000 | 33,815,000 |
| Capital expenditures | 29,536,000 | 4,175,000 | 2,657,000 | 2,835,000 | 934,000 | 756,000 |
| Dividends paid | 606,000 | 0.00 | 6,964,000 | 20,909,000 | 31,016,000 | 36,100,000 |
| Share buybacks | 248,000 | 0.00 |  |  | 0.00 | 2,998,000 |
| Assets | 181,104,000 | 207,599,000 | 252,175,000 | 276,397,000 | 294,522,000 | 287,686,000 |
| Liabilities | 141,236,000 | 75,574,000 | 100,242,000 | 113,707,000 | 132,323,000 | 130,816,000 |
| Stockholders' equity | 32,404,000 | 122,900,000 | 141,682,000 | 154,118,000 | 155,569,000 | 149,417,000 |
| Cash and cash equivalents | 448,000 | 6,483,000 | 16,041,000 | 23,076,000 | 31,584,000 | 37,880,000 |
| Free cash flow | -14,989,000 | 4,504,000 | 26,817,000 | 50,544,000 | 47,048,000 | 33,059,000 |

### Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

| Metric | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net margin | 5.93% | 5.70% | 5.59% | 8.00% | 7.09% | 6.73% |
| Operating margin | 9.37% | 6.35% | 7.10% | 10.37% | 8.93% | 8.85% |
| Return on equity | 54.06% | 16.91% | 16.69% | 21.07% | 19.27% | 21.07% |
| Return on assets | 9.67% | 10.01% | 9.38% | 11.75% | 10.18% | 10.94% |
| Liabilities / equity | 4.36 | 0.61 | 0.71 | 0.74 | 0.85 | 0.88 |
| Current ratio | 1.85 | 3.34 | 3.15 | 3.49 | 3.47 | 2.30 |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001758021.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2022-Q2 | 2022-06-30 |  |  | 0.32 | reported discrete quarter |
| 2022-Q3 | 2022-09-30 |  |  | 0.31 | reported discrete quarter |
| 2023-Q1 | 2023-03-31 |  |  | 0.45 | reported discrete quarter |
| 2023-Q2 | 2023-06-30 | 108,740,000 | 10,502,000 | 0.53 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 105,528,000 | 9,065,000 | 0.45 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 95,582,000 | 3,898,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2024-Q1 | 2024-03-31 | 95,613,000 | 6,166,000 | 0.31 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 112,600,000 | 9,100,000 | 0.45 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 112,771,000 | 9,094,000 | 0.45 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 101,649,000 | 5,615,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q1 | 2025-03-31 | 103,624,000 | 6,409,000 | 0.32 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 123,986,000 | 10,934,000 | 0.54 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 124,516,000 | 7,325,000 | 0.36 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 115,617,000 | 6,810,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2026-Q1 | 2026-03-31 | 116,947,000 | 6,741,000 | 0.34 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/1758021/000175802126000021/krt-20260331.htm

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high
Filing date: 2026-05-08
Report date: 2026-03-31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes. This discussion and analysis contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to expectations concerning matters that are not historical facts. For example, statements discussing, among other things, business strategies, growth strategies and initiatives, future revenues and future performance and expected costs and liabilities are forward-looking statements. Such forward-looking statements may be identified by words such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “remain,” “should,” or “will” or the negative of these terms or other comparable terminology. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to:

•fluctuations in the demand for our products in light of changes in laws and regulations applicable to food and beverages and changes in consumer preferences;

•supply chain disruptions that could interrupt product manufacturing and increase product costs;

•our ability to source raw materials and navigate a shortage of available materials;

•our ability to compete successfully in our industry;

•the impact of earthquakes, fire, power outages, floods, pandemics and other catastrophic events, as well as the impact of any interruption by problems such as terrorism, cyberattacks, or failure of key information technology systems;

•our ability to accurately forecast demand for our products or our results of operations;

•the impact of problems relating to delays or disruptions in the shipment of our goods through operational ports;

•our ability to expand into additional foodservice and geographic markets;

•our ability to successfully design and develop new products;

•fluctuations in freight carrier costs related to the shipment of our products could have a material adverse impact on our results of operations;

•the effects of public health crises including pandemics;

•our ability to attract and retain skilled personnel and senior management; and

•other risks and uncertainties described in “Risk Factors" as set forth in Item I, Part 1A, “Risk Factors” of the Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the Securities and Exchange Commission (the "SEC") on March 13, 2026 (the "2025 Form 10-K").

As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “Karat,” “the Company” or “our Company” refer to Karat Packaging Inc., a Delaware corporation, and, unless the context requires otherwise, our operating subsidiaries. References to “Global Wells” or “our variable interest entity” refer to Global Wells Investment Group LLC, a Texas limited liability company and our consolidated variable interest entity, in which the Company has an equity interest and which is controlled by one of our stockholders. References to “Lollicup” refer to Lollicup USA Inc., a Texas corporation, our wholly-owned subsidiary.

Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide, and percentages may not precisely reflect the absolute figures.

Overview

21

We are a rapidly-growing and nimble distributor and manufacturer of disposable foodservice products and related items, including food and take-out containers, bags, boxes, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, gloves, janitorial supplies, and other products. Our products are available in plastic, paper, biopolymer-based and other compostable forms. We are a leader in product innovation, offering a growing line of environmentally-friendly products to our customers, who are increasingly focused on sustainability. We also offer customized solutions to our customers, including new product design and development, custom printing, distribution of specialty food and beverage products, and logistics services.

We operate our business strategically and with broad flexibility to provide both our large and small customers with the wide spectrum of products they need to successfully run and grow their businesses. We believe we have established ourselves as a differentiated provider of high-quality products relative to our competitors. Our operating model entails generating the majority of our revenue from the distribution of our vendors' products complemented by select manufacturing capabilities in the U.S., which allows us to provide customers with broad product choices and customized offerings with short lead times. This model provides us with the flexibility to adjust the mix of our product offering from import and manufacturing in an evolving economic environment to drive operating efficiency and sustained margin expansion. We have strengthened our supply chain resilience and efficiency by prioritizing strong partnerships with reliable and cost-efficient sources and diversifying sourcing to countries with more favorable trade conditions and minimal tariffs in a dynamic global trade landscape. This has enabled us to expand our supplier base, minimize reliance on individual suppliers, enhance the resilience of our supply chain, expand our margin and improve our operating cash flows.

We operate an approximately 500,000 square foot distribution center located in Rockwall, Texas, an approximately 300,000 square foot distribution center in Chino, California, and an approximately 76,000 square foot distribution center located in Kapolei, Hawaii. We have selected manufacturing capabilities in all of these facilities. In addition, we operate eight other distribution centers located in Chino, California; Puyallup, Washington; Summerville, South Carolina; Branchburg, New Jersey; Kapolei, Hawaii; Aurora, Illinois; Mesa, Arizona; and Sugar Land, Texas. Our distribution centers are strategically located in proximity to major population centers, including the Los Angeles, New York, Chicago, Dallas, Houston, Seattle, Phoenix, Atlanta, and Honolulu metro areas. On October 17, 2025, we announced that Lollicup, our wholly-owned business operating subsidiary, relocated its headquarters to Rockwall, Texas, from Chino, California.

We manage and evaluate our operations in one reportable segment.

Business Highlights and Trends

•We continue to realign our global supply chain within a dynamic global trade environment. We increased domestic purchases to 18.3% from 13.8% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 and diversified sourcing to countries with more favorable trade conditions. Specifically, we reduced sourcing from Taiwan from 53.7% to 46.3% and from China from 18.4% to 11.3% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, respectively. Further, we increased our purchases from Malaysia and Vietnam from an aggregate of 12.2% to 17.2% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

•We recorded quarterly net sales of $116.9 million for the three months ended March 31, 2026, an increase of 12.9% in amount and 10.4% in volume, compared to the three months ended March 31, 2025.

•Our gross margin was 35.5% for the three months ended March 31, 2026, a decrease of 380 basis points compared to the three months ended March 31, 2025, reflecting the expected unfavorable impact from higher tariffs.

•We recorded quarterly net income of $7.1 million for the three months ended March 31, 2026, an increase of 4.8% compared to the three months ended March 31, 2025.

•Our net income margin was 6.1% for the three months ended March 31, 2026, a decrease of 50 basis points compared to the three months ended March 31, 2025.

•We generated $7.2 million in net cash from operating activities for the three months ended March 31, 2026, a decrease of 6.9% compared to the three months ended March 31, 2025.

•We generated consolidated Adjusted EBITDA, a non-GAAP measure defined below, of $12.5 million for the three months ended March 31, 2026, an increase of 4.8% compared to the three months ended March 31, 2025.

22

•Our Adjusted EBITDA margin, a non-GAAP measure defined below, was 10.7% for the three months ended March 31, 2026, a decrease of 80 basis points compared to the three months ended March 31, 2025.

•As of March 31, 2026, we had financial liquidity of $36.4 million, consisting of $28.7 million in cash and cash equivalents and $7.7 million in availability under Line of Credit. In addition, we had $5.7 million in short-term investments as of March 31, 2026.

•On May 5, 2026, our Board of Directors declared another quarterly cash dividend of $0.45 per share on our common stock, which will be paid on or about May 28, 2026 to shareholders of record at the close of business on May 21, 2026.

Trends in Our Business

The following trends have contributed to the results of our operations, and we anticipate that they will continue to affect our future results:

•A significant trend in the restaurant industry is the changing perception of food delivery and take-out compared to traditional on-premise dining. There is a clear growing preference for delivery and take-out, and we expect this trend to continue positively, influencing our operating results, as more customers will need packaging and containers to support the rising demand from food delivery and take-out consumers.

•Environmental concerns regarding disposable products, broadly, have resulted in a number of significant changes to the food-service industry, including regulations applicable to our customers. We believe this trend will have a positive long-lasting impact on our results of operations, as we expect there will be an increased demand for eco-friendly and compostable single-use disposable products.

•Most of our products are sourced from vendors abroad and as a result we incur freight costs from these overseas import shipments, which could be a significant component of our cost of goods sold. Elevated ocean freight rates could pressure our gross margin, and if we raise our price, dampen the demand for our products. Steady or dropping ocean freight could yield significant opportunities for us to expand our margin. However, it could also reduce the barrier of entry, intensifying the competition.

•U.S. foreign trade policy continues to evolve, such as the imposition of tariffs on imports from China and other countries. We believe this trend will have either a positive or a negative impact on our results of operations, depending on whether we are able to continue to strengthen our global supply chain, whether any previously imposed tariffs are removed and whether we can implement procedures to mitigate the impact from the tariffs.

•The cost of raw materials used to manufacture our products, including polyethylene terephthalate, or PET, plastic resin, aluminum, and paper boards, may continue to fluctuate, and the availability and cost of such raw materials are subject to global geopolitical risks. Since negotiated sales contracts and the market largely determine the pricing for our products, we are, at times, limited in our ability to raise prices and pass through any impacts of inflation on our costs. There can also be lags between cost inflation and the im

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in Part I, Item 1A. “Risk Factors.” and elsewhere in this Annual Report on Form 10-K. See “Forward Looking Statements” above for further explanation.

Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figures.

Overview

We are a rapidly-growing and nimble distributor and manufacturer of disposable foodservice products and related items, including food and take-out containers, bags, boxes, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, gloves, janitorial supplies, and other products. Our products are available in plastic, paper, biopolymer-based, and other compostable forms. We are a leader in product innovation, offering a growing line of environmentally-friendly products to our customers, who are increasingly focused on sustainability. We also offer customized solutions to our customers, including new product development, design, printing, and logistics services.

We operate our business strategically and with broad flexibility to provide both our large and small customers with the wide spectrum of products they need to successfully run and grow their businesses. We believe we have established ourselves as a differentiated and reliable provider of high-quality products relative to our competitors. Our operating model entails generating the majority of our revenue from the distribution of products sourced from a diversified global network, complemented by select manufacturing capabilities in the U.S., which allows us to provide customers with broad product choices and customized offerings with short lead times. This model provides us with the flexibility to adjust the mix of our product offering from import and manufacturing in evolving economic environments to drive operating efficiency and sustained margin expansion and ensure quality of our customer service and product availability during global supply chain disruptions. Starting in 2023 and continuing into 2025, in light of the rising domestic labor and other operating costs and dropping ocean freight rates, we executed a strategy to pivot into a more asset-light model by increasing imports and scaling back domestic manufacturing. Amidst the evolving tariff environment throughout 2025, we have placed our strategic emphasis on expanding and diversifying our global vendor network to enhance the resilience of our supply chain, minimize tariff impact on our operations and financial results, and maintain a strong margin profile and operating cash flows. We are prioritizing strong partnerships with reliable and cost-efficient sources and more favorable trade terms, negotiating additional vendor support, exploring opportunities to collaborate with vendors in new countries and geographies, while reallocating our own domestic production capabilities to optimize overall product margin.

We operate an approximately 500,000 square foot distribution center located in Rockwall, Texas, an approximately 300,000 square foot distribution center in Chino, California, and an approximately 76,000 square foot distribution center located in Kapolei, Hawaii. We have selected manufacturing capabilities in all of these facilities. In addition, we operate seven other distribution centers located in Puyallup, Washington; Branchburg, New Jersey; Kapolei, Hawaii; Aurora, Illinois; Mesa, Arizona; Sugar Land, Texas, and Chino, California. Our distribution centers are strategically located in proximity to major population centers, including the Los Angeles, New York, Chicago, Dallas, Houston, Seattle, Phoenix, Atlanta, and Honolulu metro areas. On October 17, 2025, we announced that Lollicup, our wholly-owned business operating subsidiary, relocated its headquarters to Rockwall, Texas, from Chino, California.

We manage and evaluate our operations in one reportable segment.

2025 Business Highlights and Trends

•We have strategically and swiftly realigned our global supply chain in 2025 against a backdrop of higher tariffs. We reduced purchases from China from approximately 22% of global sourcing in 2024 to approximately 15% in 2025, maintained purchases from Taiwan at approximately 50% of our global sourcing, and diversified sourcing to countries with more favorable trade conditions, including Malaysia and Vietnam, which in aggregate accounted for approximately 17% of our global sourcing in 2025 compared to 9% in 2024.

35

•We continued to expand our eco-friendly product offerings, contributing to meaningful sales growth. Sales from eco-friendly products as a percentage of total sales increased from 33.6% for the year ended December 31, 2024 to 34.1% for the year ended December 31, 2025. We started shipment on a newly-acquired paper bag contract with a chain account in the second half of 2025, growing paper bags sales from $7.9 million for the year ended December 31, 2024 to $13.7 million for the year ended December 31, 2025.

•We continued our transition to a more asset-light model by further scaling back manufacturing in the U.S. and increasing imports from diversified sources to continue to improve our margin profile. For the year ended December 31, 2025, manufacturing accounted for approximately 9% of our net sales, down from 11% in the prior year.

•We achieved record net sales of $467.7 million for the year ended December 31, 2025, an increase of 10.7% in net sales amount and 11.2% in volume compared to the year ended December 31, 2024.

•We recorded gross margin of 36.8% for the year ended December 31, 2025, reflecting an expected decrease of 210-basis-point compared to the year ended December 31, 2024, as cost of goods sold in 2025 reflected elevated inventory cost due to tariffs in place.

•We recorded net income of $32.7 million for the year ended December 31, 2025, an increase of 6.0% compared to the year ended December 31, 2024.

•We recorded net income margin of 7.0% for the year ended December 31, 2025, compared to 7.3% for the year ended December 31, 2024, reflecting the decrease in gross margin, as discussed above, and an improvement in operating cost leverage.

•Net cash provided by operating activities was $33.8 million for the year ended December 31, 2025, a decrease of $14.2 million compared to the year ended December 31, 2024.

•We generated Adjusted EBITDA, a non-GAAP measure defined below, of $55.2 million for the year ended December 31, 2025, a decrease of 0.2% compared to the year ended December 31, 2024.

•Our Adjusted EBITDA margin, a non-GAAP measure defined below, was 11.8% for the year ended December 31, 2025, a decrease of 130 basis points compared to the year ended December 31, 2024.

•We had financial liquidity of $45.6 million as of December 31, 2025.

•During the year ended December 31, 2025, we returned a total of $36.1 million to our shareholders in the form of regular quarterly cash dividends.

•On November 4, 2025, our Board of Directors approved a first-ever share repurchase program of up to $15.0 million in common stock. We repurchased approximately $3.0 million of common stock during the period.

•On February 5, 2026, our Board of Directors declared another regular quarterly cash dividend of $0.45 per share on our common stock, which was paid on or about February 27, 2026 to the stockholders of record at the close of business on February 20, 2026.

Trends in Our Business

The following trends have contributed to the results of our operations, and we anticipate that they will continue to affect our future results:

•A significant trend in the restaurant industry is the changing perception of food delivery and take-out compared to traditional on-premise dining. There is a clear growing preference for delivery and take-out, and we expect this trend to continue positively influencing our operating results, as more customers will need packaging and containers to support the rising demand from food delivery and take-out consumers.

•Environmental concerns regarding disposable products, broadly, have resulted in a number of significant changes to the food-service industry, including regulations applicable to our customers. We believe this trend will have a positive long-lasting impact on our results of operations, as we expect there will be an increased demand for eco-friendly and compostable single-use disposable products. Our eco-friendly products made up 34.1% of total sales during the year ended December 31, 2025, compared to 33.6% during the prior year, and we expect sales generated from eco-friendly products as percentage of total sales to continue to grow.

•Most of our products are sourced from vendors abroad and as a result we incur freight costs from these overseas import shipments, which could be a significant component of our cost of goods sold. Elevated ocean freight rates

36

could pressure our gross margin, and if we raise our price, dampen the demand for our products. Steady or dropping ocean freight could yield significant opportunities for us to expand our margin. However, it could also reduce the barrier of entry, intensifying the competition.

•Beginning in the first quarter of 2025, the U.S. government announced additional tariffs on goods imported into the U.S. from numerous countries and multiple nations have responded with reciprocal tariffs and other actions. We believe this trend will have either a positive or a negative impact on our results of operations, depending on whether we are able to source our raw materials or manufactured products from countries with minimum tariffs, whether any previously imposed tariffs are removed and whether we can implement procedures to mitigate the impact from the tariffs. The Company continues to monitor the economic effects of such announcements. The Company has implemented short- and long-term mitigation efforts. Based on the current tariff policies, the Company expects to partially offset the operating profit impact of the enacted tariffs with supply chain adjustments and productivity and cost savings actions. To the extent additional tariffs or other trade restrictions are enacted and the Company is unable to offset the tariffs or the tariffs negatively impact demand, the Company’s revenue and profitability could be adversely impacted.

•The cost of raw materials used to manufacture our products, including polyethylene terephthalate, or PET, plastic resin, aluminum, and paper boards, may continue to fluctuate. Since negotiated sales contracts and the market largely determine the pricing for our products, we are, at times, limited in our ability to raise prices and pass through any impacts of inflation to our costs. There can also be lags between cost inflation and the implementation of price increases, which could negatively impact our gross margin. Conversely, periods of deflation, where raw material costs decrease, may create pricing pressure and start price wars, potentially requiring us to lower prices, which could also affect our gross margin. We believe price fluctuations will have either a positive or a negative impact on our results of operations in the future, depending on whether raw material costs increase or decrease and whether we can successfully implement price adjustments to maintain gross margin.

•Supplier chain effectiveness could have a long-lasting impact on our operations and financial results. We believe this trend will have either a positive or a negative impact on our results of operations, depending on whether we are able to manage our global supply chain effectively, including the accurate forecast of demand, the successful procurement and transportation of raw materials and products, and the effective management of our inventory, production and distribution.

•Fluctuations in foreign currency exchange rates could impact either positively or negatively various aspects of our business activities, including but not limited to our purchasing power and capacity to source inventory.

•Since early 2023, we have pivoted into a more asset-light growth model by increasing import and scaling back manufacturing in the U.S. We believe this will have either a positive or a negative impact on our results of operations, depending on whether we can successfully source and import finished goods at a price that is more favorable than domestically manufacturer products, and effectively realize savings from reduced manufacturing capabilities.

Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, management evaluates those estimates. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. We believe the following critical accounting estimates and policies have the most significant impact on our consolidated financial statements:

Allowance for doubtful accounts

We recognize an allowance for doubtful accounts on accounts receivable in an amount equal to the estimated expected losses net of recoveries. The allowance is based on an analysis of historical bad debt write-offs, current past due customers

37

in the aging, risk profiles associated with different customer types, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. While such losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates we have in the past. A significant change in the liquidity or financial position of our customers could cause unfavorable trends in receivable collections and additional allowances may be required. These additional allowances could materially affect our future financial results. As of December 31, 2025, and 2024, we had a total allowance for doubtful accounts of $0.6 million and $0.8 million, respectively.

Inventory reserve

We maintain a reserve for excess and obsolete inventory and carry our inventory at net realizable value, taking into account various factors including historic usage, expected demand, anticipated sales price, and product expiration and obsolescence. While such losses have historically been within our expectations and the provisions established, we cannot guarantee that the future trend will be similar to what we have experienced in the past. A significant change in demand or selling prices could result in additional reserve and materially affect our future financial results. We had an inventory reserve of $0.7 million and $0.6 million as of December 31, 2025, and 2024, respectively.

Results of Operations

Year ended December 31, 2025 compared to the year ended December 31, 2024

Year Ended December 31,

2025

2024

(in thousands)

Net sales

$

467,743

$

422,633

Cost of goods sold

295,607

258,304

Gross profit

172,136

164,329

Operating expenses

130,722

126,568

Operating income

41,414

37,761

Other income, net

1,608

2,934

Provision for income taxes

10,358

9,871

Net income

$

32,664

$

30,824

Net sales

Net sales were $467.7 million for the year ended December 31, 2025 compared to $422.6 million for the year ended December 31, 2024, representing an increase of $45.1 million, or 10.7%. Net sales for the year ended December 31, 2024 were understated by $0.7 million, which represented products shipped and recognized as revenue in 2023 but not delivered until 2024. Including this impact, the year-over-year increase is primarily driven by an increase of $39.7 million from volume and an increase of $11.9 million from product mix. Such increases were partially offset by a $6.5 million unfavorable year-over-year pricing comparison, as the overall pricing environment remained competitive due to customers' heightened focus on value.

Cost of goods sold

Cost of goods sold was $295.6 million for the year ended December 31, 2025 compared to $258.3 million for the year ended December 31, 2024, representing an increase of $37.3 million, or 14.4%. Cost of goods sold for the year ended December 31, 2024 was understated by $0.4 million related to products shipped and recognized as cost of goods sold in 2023 but not delivered until 2024, as discussed above. Including this impact, the year-over-year increase in cost of goods sold was primarily driven by an increase in ocean freight and duty costs of $20.6 million, resulting from higher duties and tariffs, which nearly doubled from $14.7 million for the year ended December 31, 2024 to $29.3 million for the year ended December 31, 2025. This increase was further driven by a 22.0% increase in import volume, partially offset by a 5.4% decrease in average freight container rates. In addition, product costs increased by $18.1 million due to higher sales volume and better product mix, partially offset by more favorable vendor pricing.

Gross profit

38

Gross profit was $172.1 million for the year ended December 31, 2025 compared to $164.3 million for the year ended December 31, 2024, representing an increase of $7.8 million, or 4.8%. Gross profit for the year ended December 31, 2024 was understated by $0.3 million related to products shipped and recognized as revenue and cost of goods sold in 2023 but not delivered until 2024, as discussed above. Gross margin was 36.8% for the year ended December 31, 2025 compared to 38.9% for the year ended December 31, 2024, a decrease of 210 basis points. Gross margin was negatively impacted by rising freight and duty costs, as discussed above, which as a percentage of net sales increased to 11.8% during the year ended December 31, 2025 from 8.2% during the year ended December 31, 2024. This erosion in margin was partially offset by a decrease in product costs as a percentage of net sales from 49.9% during the year ended December 31, 2024 to 48.9% during the year ended December 31, 2025, as a result of more favorable vendor pricing and increased imports as a percentage of total product mix, as discussed above. Depreciation expense on production equipment as a percentage of net sales also decreased to 1.3% during the year ended December 31, 2025 from 1.5% during the year ended December 31, 2024.

Operating expenses

Operating expenses were $130.7 million for the year ended December 31, 2025 compared to $126.6 million for the year ended December 31, 2024, representing an increase of $4.2 million, or 3.3%. Shipping and transportation costs increased $7.0 million during the year ended December 31, 2025 primarily due to increases in both offline sales shipping volume and shipping rates. Rent expense increased $3.3 million primarily due to a higher rate on our Chino, California facility lease extension plus the opening of a new Chino distribution center in 2025. Salaries and benefits also increased $1.4 million during the year ended December 31, 2025. These increases were partially offset by a decrease in online platform fees of $3.8 million due to a shift away from third-party order fulfillments of online orders and a decrease in marketing expense of $1.1 million. In addition, 2025 included total gain, net, on disposal of machinery of $0.5 million. In comparison, 2024 included impairment expense and loss, net, on disposal of machinery of $2.8 million made up of a $0.8 million loss, net, on disposal of machinery and a $2.0 million non-cash ROU asset impairment charge resulting from the sublease of our City of Industry warehouse in California, as we optimized our distribution footprint in the southwest region with the opening of a new warehouse in Mesa, Arizona.

Operating income

Operating income was $41.4 million for the year ended December 31, 2025 compared to $37.8 million for the year ended December 31, 2024, representing an increase of $3.7 million, or 9.7%. The increase was primarily due to an increase in gross profit of $7.8 million, as discussed above, partially offset by an increase in operating expenses of $4.2 million.

Other income, net

Other income, net was $1.6 million for the year ended December 31, 2025 compared to $2.9 million for the year ended December 31, 2024, representing a decrease of $1.3 million, or 45.2%. The decrease was primarily driven from a loss on foreign currency transactions of $1.5 million, due to the weakening of the U.S. Dollar against the New Taiwan Dollar during the year ended December 31, 2025, compared to a gain on foreign currency transactions of $0.5 million during the year ended December 31, 2024. This negative impact was partially offset by an increase of $0.8 million in rental income as we sublet our City of Industry warehouse in California in 2024.

Provision for income taxes

Provision for income taxes was $10.4 million for the year ended December 31, 2025 compared to $9.9 million for the year ended December 31, 2024, representing an increase of $0.5 million, or 4.9%. The Company’s effective tax rate was 24.1% for the year ended December 31, 2025 compared to 24.3% for the year ended December 31, 2024. The year-over-year decrease in effective tax rate was primarily due to the deferred taxes true-up.

Net income

Net income was $32.7 million for the year ended December 31, 2025 compared to $30.8 million for the year ended December 31, 2024, representing an increase of $1.8 million, or 6.0%. The increase was primarily driven by an increase in operating income of $3.7 million, partially offset by a decrease in other income, net of $1.3 million, as discussed above.

Non-GAAP Financial Measures

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We use certain non-GAAP financial measures to assess our financial and operating performance that are not defined by, or calculated in accordance with U.S. GAAP. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with U.S. GAAP; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure calculated and presented in accordance with U.S. GAAP.

Our primary non-GAAP financial measures are listed below and reflect how we evaluate our operating results.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is a financial measure calculated as net income excluding (i) interest income, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation expense, (vi) impairment of operating right-of-use asset, and (vii) secondary offering transaction costs by certain executive officers and stockholders of the Company. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.

We present Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our financial performance. Adjusted EBITDA and Adjusted EBITDA margin assist management in assessing our core operating performance. We believe these measures provide investors with useful perspective on underlying business results and trends and facilitate a comparison of our performance from period to period.

Adjusted EBITDA and Adjusted EBITDA margin should not be considered in isolation or as alternatives to net income, net income margin, or other measures determined in accordance with US GAAP. Also, Adjusted EBITDA and Adjusted EBITDA margin are not necessarily comparable to similarly titled measures presented by other companies.

Set forth below is a reconciliation of net income to Adjusted EBITDA and net income margin to Adjusted EBITDA margin.

Year Ended December 31,

Reconciliation of Adjusted EBITDA (unaudited):

2025

2024

(in thousands, except percentages)

Amount

% of Net Sales

Amount

% of Net Sales

Net income

$

32,664 

7.0 

%

$

30,824 

7.3 

%

Add (deduct):

Interest income

(2,210)

(0.5)

(2,299)

(0.5)

Interest expense

2,055 

0.4 

2,123 

0.5 

Provision for income taxes

10,358 

2.3 

9,871 

2.3 

Depreciation and amortization

10,891 

2.3 

10,675 

2.5 

Stock-based compensation expense

1,182 

0.3 

2,065 

0.5 

Secondary offering transaction costs (1)

214 

— 

— 

— 

Impairment of operating right-of-use asset

— 

— 

1,993 

0.5 

Adjusted EBITDA

$

55,154 

11.8 

%

$

55,252 

13.1 

%

(1) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses.

Free Cash Flow

Free Cash Flow is a financial measure calculated as cash from operating activities less cash used in (i) purchases of property and equipment and (ii) deposits paid for property and equipment.

40

We present Free Cash Flow as a supplemental measure of our financial liquidity. Free Cash Flow assists management in assessing our ability to fund growth through generation of additional cash from business operations. We believe this measure also provides investors with an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business.

Free Cash Flow should not be considered in isolation or as alternatives to net income or cash flows from operating activities. Also, Free Cash Flow is not necessarily comparable to similarly titled measures presented by other companies.

Set forth below is a reconciliation of net cash provided by operating activities to Free Cash Flow:

Year Ended December 31,

Reconciliation of Free Cash Flow (unaudited):

2025

2024

(in thousands)

Net cash provided by operating activities

$

33,815 

$

47,982 

Add (deduct):

Purchases of property and equipment

(756)

(934)

Deposits paid for property and equipment

(3,749)

(3,134)

Free Cash Flow

$

29,310 

$

43,914 

Liquidity and Capital Resources

Sources and uses of funds

Our primary sources of liquidity are cash provided by operations, borrowings under our line of credit with the Hanmi Bank (the “Line of Credit”), and promissory notes. On an annual basis, we have typically generated positive cash flows from operations. Our ability to generate positive cash flow from operations in the future will be, at least in part, dependent on global economic conditions and our ability to navigate challenging macro environment at times.

As described in Note 7 — Line of Credit in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, the Line of Credit is available for working capital and general corporate purposes, and is secured by our assets. It consists of a $20.0 million revolving loan facility and a standby letter of credit sublimit. We are not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly. On March 3, 2025, the Company amended the Line of Credit. Prior to March 3, 2025, the revolving loan facility had a maximum borrowing capacity of $40.0 million and interest accrued at an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.00%. The amendment on March 3, 2025 among other things, (1) extended the maturity date to March 14, 2027, (2) reduced the revolving loan facility to $20.0 million, and (3) revised the interest on any Line of Credit borrowings to an annual rate of one month term SOFR plus 2.25%, with a SOFR floor of 1.00%. On March 17, 2025, August 21, 2025, and October 3, 2025, the Company entered into three separate amendments of the Line of Credit, increasing the standby letter of credit sub-limit, respectively, from $5.0 million to $7.5 million, from $7.5 million to $10.0 million, and from $10.0 million to $15.0 million. As of December 31, 2025, the amount issued under the standby letter of credit was $12.3 million, and the maximum remaining amount that could be borrowed under the Line of Credit was $7.7 million.

As described in Note 9 — Long-Term Debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on June 17, 2022, we entered into a $28.7 million term loan agreement which matures July 1, 2027 (the “2027 Term Loan”). The 2027 Term Loan had an initial balance of $20.7 million and an option to request for additional advances up to a maximum of $8.0 million through June 2023, which we exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Principal and interest payments of $0.1 million are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. On September 5, 2025, we made an early payment of $3.5 million to reduce the remaining principal balance due at maturity, with total monthly payments remaining the same for the remainder of the loan term. The 2027 Term Loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of our stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio.

Additionally, as of December 31, 2025, we have a $23.0 million term loan that matures September 30, 2026 (the “2026 Term Loan”). The 2026 Term Loan had an initial balance of $16.1 million and an option to request for additional advances

41

up to a maximum of $6.9 million through September 2022, which we exercised in February 2022. Interest accrues at a fixed rate of 3.50% per annum. Principal and interest payments of $0.1 million are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. On December 18, 2025, we made an early payment of $8.0 million to reduce the remaining principal balance due at maturity, with total monthly payments remaining the same for the remainder of the loan term. The 2026 Term Loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of our stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. The entire remaining balance of $12.3 million under the 2026 Term Loan is reported in long-term debt, current portion on the consolidated balance sheet as of December 31, 2025. We intend to repay the 2026 Term Loan at maturity using available liquidity, which includes $37.9 million in cash and cash equivalents as of December 31, 2025.

As of December 31, 2025, we were in compliance with the financial covenants under all of our loan agreements, and do not expect material uncertainties in our continued ability to be in compliance with all financial covenants through the remaining term of all of our loan agreements. As of December 31, 2025, we had no borrowing on the Line of Credit, $23.6 million in outstanding balance under the 2027 Term Loan, and $12.3 million in outstanding balance under the 2026 Term Loan.

Additionally, as discussed in Note 17 — Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on February 5, 2024, we received a Notice of Determination from U.S. Customs and Border Protection ("CBP") related to its investigation to determine whether we have evaded the anti-dumping and countervailing duty on certain imported thermal paper products. On March 19, 2024, we initiated an appeal process by submitting a request for an administrative review of the initial determination issued by CBP. On June 11, 2024, CBP completed the administrative review and upheld its initial conclusion. In February 2025, we started to receive bills related to certain of our thermal paper shipments. During the year ended December 31, 2025, we submitted protests of certain bills received with CBP and made total payments of $1.9 million related to certain shipments under the investigation. We are also evaluating other appeal options. Payments on bills received will be due upon the resolution of the protests, currently expected to occur within the next 12 months. Although we have an import duty liability reserve of $1.7 million as of December 31, 2025, the amount of the final payments could vary significantly from the estimated liability reserve.

Our ongoing operations and growth strategy may require us to continue to make investments in new markets and products, logistics and manufacturing infrastructure, e-commerce platform, talent, and technology capabilities. In addition, we may consider making strategic acquisitions and investments which could require significant liquidity. The rapidly changing macroeconomic and geopolitical dynamics have created significant uncertainty in the global economy and capital markets, which could have long-lasting adverse effects.

In addition, we pay a regular quarterly dividend to our stockholders, subject to approval each quarter by our Board of Directors. During the year ended December 31, 2025 and 2024, we paid out regular quarterly cash dividend totaling $36.1 million and $31.0 million, respectively. Additionally, as described in Note 20 — Subsequent Events in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on February 5, 2026, our Board of Directors declared another regular quarterly cash dividend of $0.45 per share on our common stock, which was paid on or about February 27, 2026 to the stockholders of record at the close of business on February 20, 2026. Continuation of the regular quarterly dividend is at the discretion of the Board of Directors and depends upon our financial condition, results of operations, capital requirements, general business condition, and other factors deemed relevant by our Board of Directors.

As described in Note 10 — Stockholder's Equity in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, in November 2025, our Board of Directors approved a share repurchase program (the “Share Repurchase Program”) of up to $15.0 million, under which we are authorized to repurchase shares of our outstanding common stock from time to time through open market purchases. The timing and amount of stock repurchases will depend on a variety of factors, including the market conditions as well as corporate and regulatory considerations. The Share Repurchase Program has no set expiration date, and may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common stock under the program of our common stock. During the year ended December 31, 2025, we repurchased approximately $3.0 million shares of our common stock at an average per share cost of $21.74. As of December 31, 2025, we had approximately $12.0 million of remaining authorization for purchases under the Share Repurchase Program.

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Additionally, we have certain contractual obligations, such as operating lease obligations and purchase obligations that require us to make periodic payments. At December 31, 2025, we had operating leases, primarily for manufacturing and distribution facilities, expiring at various dates through 2031. As described further in Note 13 — Leases in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we had a total of $44.1 million of operating lease liabilities as of December 31, 2025 with minimum lease payments ranging from approximately $0.7 million to $14.6 million on an annual basis over the next five years. Other than these contractual obligations, our off-balance sheet arrangements primarily consists of letters of credits issued under our Line of Credit. As of December 31, 2025, we had $12.3 million of letters of credits issued and outstanding under our Line of Credits.

We currently believe that our cash on hand, ongoing cash flows from our operations and funding available under our borrowings will be adequate to meet our working capital needs, service our debt, make lease payments, and fund capital expenditures for at least the next 12 months. We continue to explore other options to further expand our liquidity to support business growth and enhance shareholder value.

Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisition, we may seek to sell additional equity securities, increase use of the Line of Credit, and acquire additional debt. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future. In the event we are unable to obtain additional financing when needed, we may be compelled to delay or curtail our plans to develop our business, which could have a material adverse effect on our operations, market position and competitiveness. Notwithstanding the potential liquidity challenges described above, we expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

Liquidity position

The following table summarizes total current assets, current liabilities, and working capital at December 31, 2025 compared to December 31, 2024:

December 31, 2025

December 31, 2024

Increase/(Decrease)

(in thousands)

Current assets

$

161,188

$

160,997

$

191

Current liabilities

70,220

46,447

23,773

Working capital

$

90,968

$

114,550

$

(23,582)

As of December 31, 2025, we had working capital of $91.0 million, compared with $114.6 million as of December 31, 2024, representing a decrease of $23.6 million, or 20.6%, driven by an increase of $23.8 million in current liabilities partially offset by an increase of $0.2 million in current assets. The increase in current liabilities was primarily due to an increase in the current portion of long-term debt of $11.8 million as the 2026 Term Loan became mature within twelve months, an increase in accounts payable and related party payables of $10.0 million, and an increase in operating lease liabilities, current portion of $3.0 million primarily due to a higher rate on our Chino, California facility lease extension plus the opening of a new Chino distribution center in 2025, partially offset by a decrease in other current liability of $0.8 million, as the Company paid Global Well's noncontrolling membership interest redemption gain tax withholding. The increase in current assets was primarily driven by an increase in inventories of $11.0 million as inventory cost reflected elevated duty and tariffs, an increase in accounts receivable of $9.7 million as a result of stronger sales in the three months ended December 31, 2025 compared to the three months ended December 31, 2024, and an increase in prepaid expenses and other current assets of $1.6 million partially offset by a decrease in cash and cash equivalents and short-term investments of $22.0 million.

Cash flows

The following table summarizes cash flow for the years ended December 31, 2025 and 2024:

43

Year Ended December 31,

2025

2024

(in thousands)

Net cash provided by operating activities

$

33,815 

$

47,982 

Net cash provided by (used in) investing activities

25,399 

(5,855)

Net cash used in financing activities

(52,918)

(33,619)

Net change in cash and cash equivalents

$

6,296 

$

8,508 

Cash flows provided by operating activities. Net cash provided by operating activities was $33.8 million for the year ended December 31, 2025, primarily the result of net income of $32.7 million, adjusted for certain non-cash items totaling $25.3 million, consisting mainly of depreciation and amortization of fixed, operating right-of-use assets, and loan fees, stock-based compensation, write-off of inventory, gain, net, on disposal of machinery and equipment, adjustments to the allowance for doubtful accounts and inventory reserve, deferred income taxes, and government grant income. In addition, cash decreased $24.1 million primarily as a result of changes in working capital, which included a decrease of $11.9 million from increased inventory purchases, a decrease of $10.3 million from increased operating lease liabilities, a decrease of $9.8 million from higher accounts receivable balance, and a decrease of $1.3 million from increased prepaid expenses and other current assets, partially offset by an increase of $9.3 million from higher accounts payable and related party payable balance.

Net cash provided by operating activities was $48.0 million for the year ended December 31, 2024, primarily the result of net income of $30.8 million, adjusted for certain non-cash items totaling $21.2 million, consisting mainly of depreciation and amortization of fixed and operating right-of-use assets, stock-based compensation, impairment of operating right-of-use asset, write-off of inventory, loss, net, on disposal of machinery and equipment, adjustments to the allowance for doubtful accounts and inventory reserve, deferred income taxes, and government grant income. In addition, cash decreased $4.1 million primarily as a result of changes in working capital, which included a decrease of $6.7 million from a reduction in operating lease liabilities, a decrease of $2.4 million from a reduction in accounts payable and related party payable, and a decrease of $0.9 million from increased inventory purchases, partially offset by an increase of $2.8 million from a reduction in prepaid expenses and other current assets due to tax prepayments as of December 31, 2023 being applied in 2024, an increase of $3.0 million from increases in accrued expenses, and an increase of $0.6 million from a reduction in accounts receivable.

Cash flows provided by (used in) investing activities. Net cash provided by investing activities was $25.4 million for the year ended December 31, 2025, which primarily included $44.6 million in redemptions of short-term investments and $1.5 million in proceeds from disposal of property and equipment, partially offset by $16.3 million in purchases of short-term investments, $3.7 million in deposits made towards the purchase of property and equipment, and $0.8 million paid to directly acquire property and equipment. Net cash used in investing activities was $5.9 million for the year ended December 31, 2024, which primarily included $50.8 million in purchases of short-term investments, $3.1 million in deposits made towards the purchase of property and equipment, and $0.9 million paid to directly acquire property and equipment, partially offset by $48.9 million in redemptions of short-term investments.

Cash flows used in financing activities. Net cash used in financing activities was $52.9 million for the year ended December 31, 2025, which primarily included $36.1 million of dividend payments to shareholders, $12.7 million of payments towards long-term debt, $4.5 million of repayments on the Line of Credit, $3.0 million of share repurchases, and $0.9 million of payments for Global Wells noncontrolling membership interest redemption gain tax withholdings, partially offset by $4.5 million proceeds from Line of Credit . Net cash used in financing activities was $33.6 million for the year ended December 31, 2024, which primarily included $31.0 million of dividend payments to shareholders, $2.3 million paid for the redemption of a non-controlling member's interest in Global Wells, and $1.1 million of payments towards long-term debt, partially offset by cash proceeds of $0.7 million received from the exercise of stock options

Related Party Transactions

For a description of significant related party transactions, see Note 14 — Related Party Transactions in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Recent Accounting Pronouncements

44

Information regarding recent accounting pronouncements is contained in Note 2 — Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.