expense                34        1,499            (17)            1,516 
  Provision for 
   income 
   taxes               9,045           --             --             9,045 
  Depreciation 
   and 
   amortization        7,148          910             --             8,058 
  Stock-based 
   compensation 
   expense               743           --             --               743 
  Secondary 
   offering 
   transaction 
   costs (1)             453           --             --               453 
  Write-off of 
   inventory 
   (2)                 1,710           --             --             1,710 
  Impairment 
   expense and 
   loss, net, 
   on disposal 
   of machinery 
   (2)                 2,135           --             --             2,135 
                 ---  ------       ------   ----  ------      ---  ------- 
Adjusted EBITDA    $  49,078    $   2,613      $     (68)       $   51,623 
                 ===  ======       ======   ====  ======      ===  ======= 
 

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

(2) The write-off of inventory and impairment expense and (gain) loss, net, on disposal of machinery represent amounts recognized in connection with the scaling back of production in certain locations. As part of the execution of this strategy, certain machinery and equipment was disposed of or impaired, and raw materials associated with those machinery and equipment were written-off.

Use of Non-GAAP Financial Measures

Karat utilizes certain financial measures and key performance indicators that are not defined by, or calculated in accordance with, GAAP to assess our financial and operating performance. 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 GAAP in the statement of operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented. The following non-GAAP measures are presented in this press release:

   -- 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) secondary offering transaction costs, (vii) write-off of 
      certain inventory items outside the normal course of business, (viii) 
      impairment expense and (gain) loss, net, on disposal of machinery outside 
      the normal course of business, and (ix) operating right-of-use asset 
      impairment. 
 
   -- Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net 
      sales. 
 
   -- Adjusted diluted earnings per common share is calculated as diluted 
      earnings per common share, plus the per share impact of stock-based 
      compensation, operating right-of-use asset impairment, write-off of 
      certain inventory items outside the normal course of business, impairment 
      expense and (gain) loss, net, on disposal of machinery outside the normal 
      course of business, and adjusted for the related tax effects of these 
      adjustments. 

We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the core performance of Karat and facilitate a comparison of such performance from period to period. These are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with GAAP for purposes of analyzing our profitability or liquidity. These measures should be considered in addition to, and not as a substitute for, revenue, net income, earnings per share, cash flows or other measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently.

(END) Dow Jones Newswires

November 07, 2024 16:10 ET (21:10 GMT)