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Karat Packaging (KRT)

Participants
Roger Pondel PondelWilkinson
Alan Yu Chief Executive Officer
Jian Guo Chief Financial Officer
Jake Bartlett Truist Securities
Ryan Merkel William Blair
Brian Butler Stifel
Call transcript
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Operator

Good day, and welcome to the Karat Packaging 2021 Fourth Quarter and Year-End Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Roger Pondel, PondelWilkinson, Karat Packaging Investor Relations firm. sir. ahead, go Please

Roger Pondel

pleasure and Chief conference Karat with call. Relations Yu; be Packaging's everyone, Chief the quarter Officer, Officer, Executive PondelWilkinson, XXXX Jian and Investor Alan my will It year-end I'm Karat's firm. to welcome afternoon, introduce Packaging's company's new to and fourth Karat momentarily Financial Good Roger Pondel Guo.

XX-Q the as the company's Yu. to G. with over non-GAAP Alan is could differ today's Packaging it Alan? any Regulation over no which call Private Risk control, by per the to website. A website Securities remind the section to of which that EBITDA, adjusted the the Karat today's and press directly statements, diluted statements, materially company may Before margin time. forward-looking adjusted the Actual defined the of update in measures of statement and the this forward-looking to SEC required company's CEO, Exchange forward-looking my want note meaning Litigation are in XXXX. financial posted to pleasure earnings I that, law. many with SEC the Commission, set our and along statements to time share, by Securities are I www.sec.gov, which will included to Factors of of turn these filings Reform Act SEC's filed are And on recent the company's as except to turn made as Alan, also are available that beyond be those the on discussing the numerous within is now and GAAP forward-looking is copies Please include with call call most comparable non-GAAP of obligation registration statements forth other Such during undertakes Form with including which listeners we at reconciliation measures IPO conditions, its measures from release, results most call, subject from adjusted financial EBITDA

Alan Yu

Thank all pleased with here Good We're today. you you, afternoon, everyone. Roger. be to of

to customer record remains pace as with our fourth continued results today, a continued we we base. expand our tight business ongoing gain quarter favorable. share and strong for demand Earlier product customers margin conditions, trend existing grow net sales XXXX and labor global reported Our and chain wallet Despite fourth expansion. supply market quarter reflect exceptionally and challenges our robust at

by shipments innovative port we provide to to constrained delay of sales shortages, to due resulting somewhat January As continue customers certain challenges. and new labor from were the inventory congestion December from offering, our to

increase, manage efforts in the facilities environment category as year-over-year percentage fourth and again our which through quarter distribution posted to XX% sales the continue labor We of highest supply greater the our shifting in margins. other are we increasing this placing Online on commands chain. higher to recruiting emphasis business,

In and addition channels, growth own we Walmart excellent our through eBay, online sales Amazon. experienced to from

Our also regional results. strong chains distributor very channel and and posted national

restaurant chain regional as chain we During accounts. account new the as more added year, well XX than national

benefited ability we've over XX% inventory achieved points brokerage passing and basis year productivity ocean despite the goal our same the last increasing quarter, to inflation-related mainly the custom higher in higher our through expenses. quarter to margin noted improve increases. fourth As XXX from the margin fourth as land duty costs operational freight efficiency, successfully third release, somewhat freight, XXXX fees. capitalized the also cost to and demonstrated Gross compared This press quarter quarter, in well in as gross and

for continue service to to consumer spending. Karat environmentally in is well XXXX. leading Moreover, for The as progressing experience sector a a in products providers. food bodes demand momentum increase is Our steady friendly continuing positive grow industry which business

of the of for in the million sales of to the As XXXX the last over be to first $XXX favorable we the a range period quarter net at result about outlook, XX% midpoint range year. same targeting currently $XXX are a million, up

full sales to over XXXX grow expect XXXX. the we XX% For XX% year, to

turn part to expand leave semitruck Financial Officer, time Guo, third-party XX to orders just detail. trucks for our of the greater we Jian stop new as in XXXX. have to in that trailers. discuss leased joined the will our services, adequate and so logistics Lastly, financial we who our Karat XX over previously want to questions, announced We in plan and I to results is This arrive expect of our February, Jian? addition to here Chief call in Tesla

Jian Guo

joined I exciting Alan. to have this development. the you, team time the company’s am very growth at pleased Karat and in Thank

XXXX EBITDA reflect line EBITDA or enhance continue adjusted we to quarter improved XX.X% adjusted million strong Our fourth operating from customers margin. growth and We efficiency. new top $XX.X delivered results as margin of existing and our of

portion or the reduction less in year with for enabled being the in X% in implemented channel. sales reflecting XXXX million compared were third net tight in color the investment better and retail the in retail XXXX to staffing to second channels year prior to of on fourth part our freight or of for net quarter XX% fourth XXXX sales year having minimum operating to to Net of starting the distributors with the Online XXXX. Net of XXXX the quarter, of increased quarter. shifted revenues. sales better XXXX $XX.X margin for the to shifted PPE expenses and XX% XX% during and from improved XX% quarter our typically We net for the $XX.X for us quarter the higher quarter. quarter mix of products second company’s $X.X retail third requirements increased Net better management XXXX million X% and other on chains of XXXX the national of in sales grew same the Gross year to XX.X% which quarter and $XX.X demand $XX.X quarter of sales million Net and same Gross for products to for the million. largest XX.X% a our sales due conditions, from cost growth last margin some channel million the the net the demonstrated to quarter, distributors and from more expanded fourth continued XX% shipping critical $XX.X channels decreased rose half a from XX%. over strong efficiencies strong Operating fourth last provide XXXX percentage resources. improvement in leverage. our me and in quarter XXXX sales our quarter Sales million. million channel in prior the $XX.X in as same expended quarter regional XX% to the fourth utilize height XXXX Sales $XXX.X sales products, expenses the manage to over and for operating of or last the XXXX the net let and profit of along sales. sales from with sales Now, sales side. operating year sequential this XX.X% labor both or to slower XX% results million to XXXX full The XX% than year quarter expenses. in sales fourth the sales quarter the in with PPE included principally decreased pandemic increased of the

working common quarter and future from million quarter. pricing favorable the million We October our Net share year with at than more working quarter fourth compared the with quarter adjustment. period And share Net $X.X Inc. I’ll for adjusted million fourth income Provision than million income financial be the growth the in capital will was the a fivefold the XXXX to million we was question. We provided for or line per same same gaining or the Karat XXXX Adjusted refinanced of non-cash strategies. for last on year. year. in versus compared operating diluted year, with cash our basis to $X.X a Adjusted Consolidated labor same EBITDA and share rose consolidated year. taxes XXXX, turn earnings and more higher was threefold million $X.XX more we believe last diluted end $X.X X.X% call back quarter are per compared last fourth ago. XXXX advanced happy and In last positioned to EBITDA better credit for per $X.X capital improved to to the the increased income $XX.X quarter same $X $X.XX quarter prior of from in $X.XX to are million share the income last I year reflecting costs. to Specifically, attributable $XXX,XXX XXXX. $XX.X same shipping XXXX flexibility diluted Alan, execute fourth finished quarter for a net in your the from XXXX changes efficiencies in the activities for per we year. and Net to with quarter from margin $X.X for $XX.X for a XX.X% operator. benefit the covenant. in for on the for by the quarter answer Packaging, fourth facilities, million fourth for increased the $X.XX million the quarter now to million $XXX,XXX of $X.X quarter

Operator

Thank ahead. will from you. Securities. come first question go [Operator Bartlett Jake Truist Instructions] Our Please with

Jake Bartlett

mentioned below first of Alan in – that or in November. quarter kind script revenue supply you in as and January. bit December And a question my you as in is mentioned chain staffing. for the And came provided you’ve for November think is My question. had well was in guidance that Thanks the I fourth you the The taking bottlenecked, others. early

easing make confident are So have or most will kind happened sure also, are understand ease? importantly, how And what I those bottlenecks how want eased there? that just to – or now of I you

Alan Yu

due Well, yes, due Jake. arriving of we due the the holidays. from in shortages you, container and a quarter that product lot port we’ve to late labor to shortage have Thank fourth in to experienced

sick lot were up. of sick or calling a and didn’t that come have show employee We in that

warehouse. ship of So And timely the almost – to from had two and shut not able the – the toward year short even to counting. we container staffed, get end on if inventory the warehouse to manner port we’re with for days everything day the down have a we we also floor, to in the product trying the containers were

of that One of the causes main rate. fulfillment would the be

your a XX% California. Yes. especially it’s ship, The better. improved first months about near rate, quarter. I’m significantly I port the or around even a we lot get not that used and bottleneck in year bit do more three our fulfillment the better? was it It Right To getting Our a see to a back close container warehouse. of is in December, see – December question, to XX in took fulfillment days were to rate from the months, containers two two into over November last it factory four months months little now seeing getting

back XX into the in And kind two the the don’t we before us So days would in could in have – container came Right about delay even than we and the faster. be as it the been about dip also is have the this had warehouse. could delay in port delay a get area offloaded more November over at weeks, it now much container of to only no December. our December take

we a see quarter hiring work we improved lot also the that in filled. the the people, quarters, of we the able especially had first orders more do hire we over were more in our our and of in away terms in after weekend these issues January, get to also to efficiency So fourth people,

the fourth shortage trying purchase I and demand that which to think we back getting was last the The in challenge couldn’t labor we order quarters high, much from we have the customers. as supply. to shortages want get no fulfill biggest of problem it as fulfilled, just was due order to

Jake Bartlett

days Would right heard you think mentioned like impacted the time productivity would way and coincide Omicron others staffing as that sounds – your well? about. spike kind those to we’ve it sick it that in your is that that the talk And great. with in about sick Omicron of in that spike Great,

Alan Yu

I of I COVID that mean, a Yes. with not would we’ve us, the spoken XXXX. in back customers. say lot started only

the catching each well been employee have COVID. labor department the that control the We the At most in XX% our very employee were during shortage we’ve have COVID. experienced one But spike sick. of of of out one amount Omicron, point of

everyone’s when to they it. period work, So that during after people especially it’s really come gathering, just to a gathering time the having a then get challenging actually called and

Jake Bartlett

hoping question for in contribution I that XXXX, taken about is was in a the lot of a different to few can to outlook One I’m that the the XXXX. XX% price next maybe And sense. the is XX% just in – down that throughout buckets growth. you No, makes increases Great. sales And you’ve that break the growth.

much growth? Maybe to then customers, really understand to from on of of is of The contributing how increased you’re you that XX% some, but to be And growth those how dependent new – be them coming how on new signed to haven’t just some is as on. is, existing customers? what that going customers. is is much XX% So that pricing much going other part think selling turned I getting you’ve

just understand what XX% growth this good have you is? I’m main curious really maybe to So the to drivers the But of on of that. kind XX% visibility very

Alan Yu

I being, some prices. X% product, raised our on will to certain we increasing products, where prices prices. are The are be our we also from decrease there there certain say X% coming Sure. would prices reason and

I that majority we’re it such think bringing the that customers increase each would be would say product coming other’s. new line as, new X%, it from of increases would our I in also in. So and kind offset And of

adding online see we would XXX this that driver mainly $XX more possibly We SKUs. approximately do additional that we foresee are big additional that we more revenue online been even that XXX we see to adding This year line. Last have us should to increase be year where XXX XX% sales by XX% seeing XXX our million give for year-over-year to because SKUs sales a online year. product million added possibly would $XX would could in – to I

Jake Bartlett

leverage if The to us the moving the we of missing of perhaps Great. there me. piece if guidance, in should the leverage could give cost. in you get terms help we XXXX wondering, EBITDA on the operating you of kind question pieces to for moving if big think And And just just we then just is last in just missing is operating can piece incurred And labor, would I’m whether and cost in costs leverage. help XXXX us there’s some XXXX? XXXX. some of pieces of the there But maybe operating cost you there, some understand, how one-time of shipping, much But be on costs any expect – should of lapping – know XXXX that how potentially I kind the and helpful. expect

Alan Yu

Sure. month, the I say, have. Mainly the our outside to revenue growth. force all cost would this we increased, operation sales actually month seeing starting be we we starting to fairly stop compared insignificantly – next that that are brokerage we not

that dollars increase outside as that that by we’ve sales So inventory be of load, also can the we we’ve we’ve on in-house pallets terminated agreement, corporate our And been all the more to used in truckload. as to our purchase in side, that ship – people. XX seen cost XX we the as will of the favorable pallets on ship – We’ve now corporate side. on seen we’ve everything the well utilizing shipping done XX sales the seen on our to truck to it’s overseas

dropped just LTL. domestic price And shipment. the maximizing we’re we’ve the recently versus shipping truckload local in increase also seen So an

the ship with Same So a SKU we’re more also cost. efficiency asking we them bring in. the truckload operational in customers that more in our pushing increased to labors. our the That with food

our our that increase We as is of we’re that in operating more staffing cutting costs efficiency in efficiency are well. our another people seeking hiring more out

Jake Bartlett

Got it.

margin expect costs expansion do in operating to leverage contribute margin you – the that is is, XXXX. to message the overall So

Alan Yu

Correct.

Jake Bartlett

on. you it pass so I’ll Great. much. Thank

Alan Yu

Thank you, Jake.

Operator

will Our come next Merkel question Please from Blair. ahead. go Ryan with William

Ryan Merkel

mix? are strong we afternoon, about? be takes and on driver thinking is a for is guide. first should everyone congrats Good margins, Alan, question and Or puts the and XXXX. it the that margin of what on My other gross higher is the quarter primary

Alan Yu

more up, not that more product primary are two, straws only also, with straws. environmentally And our are expanding in of eBay, we product of containers, or which opening a we – Amazon, do as also the on we’re able ESG Walmart, Hawaii We importantly, more better the dollar; line. restaurants and the online ecofriendly And gas gas we’re for actually really we’re and that sales economy hinge and operation, has has ecofriendly see Hawaii one, cities offering. more PLA e-commerce and to margin asking, is, stores. compostable our driver selling operation strong demand increase composed our see packagings, utilized calling such gross plate the high for Hawaiian product for a – we

in to of – side definitely that We looking staffing terms help our will in double our online our our are increase sales. pushing e-commerce by

for gross year year the XX% sales. channels. is this our or to XX% to even more margin the generate than higher XXXX much online goal sales Our Online a side channels growth or online sales for traditional the sales retail distribution on for versus the last

a is where in driver our see this strong So for gross we margin XXXX.

Ryan Merkel

Yes.

Or sort sense. makes in pace? you accelerated XXXX the because unique then able the impressive, you gains Can year your at can was were this new this think you peers? of share and the Okay, in really XXXX XX Or continue And do shortages of to accounts. was share a outservice continue XXXX? gain

Alan Yu

didn’t We XXXX, customers. go in believe actually to – out look our really for sales

the in will the where Midwest been we like in more market able I see, be increase to even have Coast. said, in – XXXX, accounts especially West we the strong in we This new believe market. we So than XX

part even in Midwest. the weak in in been Southeast, We the of weak, U.S., Eastern the have the very

we there haven’t there’s into. So many so we’ve opportunities tapped seen that out

opportunity even versus on regional chain the see XXXX do accounts. new on customer bigger in we XXXX a So size very

Ryan Merkel

it. Got

Okay. out OEM capacity. me, to were lastly then I domestic That’s great just of Alan, hear. your for And competitors think

was up XXXX. think a now? little I assume case ramp bit? they’re capacity. heat expanding bit? in we competition Could up a starting the that stand to Are I they Where do that

Alan Yu

can I do height shortage, hearing labours. by find the Omicron. I In And capacity. That lacking the people operation. Omicron, lacking to It instead that enough having And – that away. well, it the time XXXX, quit, of everybody, can was as of a as what so we labor including consistently, a They for heard I mean, the just XX% there challenge the finding is to have Even – today. of it’s not is not can’t manufacturer, a days that’s was of expanded of it’s day we work. point, XX And come everyone staff until have still have today, in the than certain At they the our domestic of not certain equipment. due that have come has of working caused the don’t to from work a for they competitor I month less been to more ourselves. not the are the see that their and hard challenge. gone challenge only

Ryan Merkel

I’ll for Okay. color. pass Well, the thanks on. it

Alan Yu

you. Thank

Operator

ahead. next [Operator Brian Instructions] Butler come with from question Stifel. Please will our go

Brian Butler

for taking Thanks my questions.

me? hear guys You

Alan Yu

you Brian. Yes. We hear can

Brian Butler

Okay, great.

you of how view in kind that current to kind situation? guys? So do What high food very with cost for model just Russia-Ukraine at is risk the is inflation that risk of the a the hyper of or you high level,

Alan Yu

a have material the is XX%, material, the we’ve Everything and increased nearly import done a in – paper the even we’ve protect we’re plastic little XX%. to ingredients, almost and making food the raw business. on increased, raw spiked that margin Well, we’ve increased. resin seen more we side also side sure by side, increase seen even The protect have profitable our we What has that our up. by

also most pass So basically their on increases the customers to pass well. customers our increases of on we these our and on as to customers

making everything these don’t seems I this inflation we cost of mean, in of and of year, on uncertainties are sure basically, the of the increases think be more if But much I consumer seen, increases that there’s to a material, especially coming and fairly skeptical there’s I any raw stabilized. of holding Well, more passing has aluminum because paper. we’ve a even lot well. see work going the in with taking terms along. So even shortage

just the do more have part. on what to So to cautious protect we it we're that If can happens, margin. we'll

Brian Butler

that – on color or was environmental expectation mentioned products and XXXX then XXXX? the is for the And on some Okay. the you products. ESG mix us you give Can the what in the

Alan Yu

for into has got packaging, and mandated to XXXX, of In in restaurants example, in moved and delayed kind straws, not lids Sure. That compostable out only cups then use all the also of and take-out take Hawaii containers. state XXXX.

do in out areas area. our looking neighboring that's So of are product. these these the even for have they most lot we a deadlines. I asking for the restaurants states York, use And customers going have to in because – products I compostable accounts compostable national product. Francisco, and that they're regulations – Mexico And XXX% to California, – actually local of they a of seen New country hearing are Seattle, compostable are these grow requiring businesses see we've chain and and like San Maryland, Canada, also,

product, recyclable compostable a product. just but like Now

XXXX, of back product started leading we of have we – that of line we're in manufacturer in compostable the the line. been and – So one importer

to seen challenge from because it's really regular in that harder products even this manufacturing. And finding a product to that a to of say more continue they're I most line. see this these produced even And these we've sources overseas, of our not make competitors are It versus So is to is is is, container one. a we it plastic challenge – make the domestic more them for large XXXX. containers. much or faster also, increases none the pace trying compostable finding easy would sale producible grow compostable product not paper XXXX, of see will is – do aspect than every on for a where the we sources. this And

find our these sources challenge, to we to looking from products is more able that our everything customers can and this to get ensure we're to are do So us.

Brian Butler

On much versus compostable more those products products plastic profitable environmental standard years, regular paper? the or is how just your

Alan Yu

I product. XX% more profitable on would say standard XX% than to our

Brian Butler

helpful. That's Okay.

costs, the mean, down that trends other year? coming we volatility how of I the to the through quarter any a rest first Or and kind of quarter? big On out those and difference freight the are evens versus there on some XXXX is going it in XXXX, see then kind the of color in in there?

Alan Yu

The – signed information contract just shipping. The year starting up actually last freight May that we gone freight the down. receive freight, is ocean and – we XX% down recently X coming going is coming indicated domestic has that in versus from

that over little Vegas, the Las far, shipping from, to example, orders. domestic Dallas up. road bit the with gone LTL, But So Arizona. the or actually truckload come has has That to California to for it a is down the Texas for

other. kind it each of offset So

Brian Butler

rebuild inventory that you to growth? when demand about of for your to you're for XXXX, XX% what needs that customers? of there – meet does that Okay. a your do working capital kind seeing what for And is the think XX% revenue And

Alan Yu

For is up quarter reasons that we than we've last one only in of inventory. fourth quarter more more invested this last built is we a basically, And our year than versus company, this stronger the inventory a quarter lot first the see not quarter.

And we've versus all lot terms actually a a give which they’re equipment-wise, in result that will fulfillment us is coming year, last revenue-wise. ordered also which of equipment we better of more our So this rate in better, year see in. terms much

proceeds capacity-wise. margins. now pretty profit our right net of So terms needs that also currently, our On financial our good we're in will – with increase we're our – financial margin needs, from actually

Brian Butler

capital or that about going a be to in working to you're it, to is be XXXX? Is spending? of again going cash right up So way use the think

Alan Yu

Yes.

Brian Butler

CapEx? be? have what you any on outlook number the about what And should Do CapEx

Alan Yu

looking announced still X% at the CapEx. as we We're the on before previously

Brian Butler

for think as tax to interest a right rate side. revenue? going about more on modeling What's X% the to the well XXXX expense? Okay. as And be couple what's the

Alan Yu

on leave I'm going to Jian to that question. this

Jian Guo

is This Yes, Jian. sure.

in to rate the XXXX rate, tax what question – question then comparable the So I'm we income high-level about tax seen the is rate, I effective And have be sorry, terms the... think tax XXXX. income other in fairly of other will

Brian Butler

What's the be I right assuming from we looking to materially rates now. at? mean, where are interest change expense don't right

Jian Guo

Yes, sure.

it's – business expense, it's if probably core interest be the XXXX. of second at fairly you're the the going looking of comparable without rate Karat interest terms the In swap, to half to

– in outlook for the – outstanding amount of down because reduced XXXX. be interest swap significantly On Packaging as to reduced pay proceeds value a significant the consolidated we significantly overall down paid some the we we haven't from of the overall in we've we are amount group, should change fair the High the we the gain we XXXX, have that the looking Karat fairly from consolidated the had rate that have. of the level, debt, but

Brian Butler

last That's Okay. one And then one. helpful.

the for what's M&A growth outlook thoughts there? Just What of in XXXX?

Alan Yu

hot And to been market Well, to also for very of the definitely XXx challenging in the because a there's we've that price and actually seeking acquisition and several made XXx requests lot – seen very terms we've actually very, of I've it we're – XXXX. EBITDA, we've looking has has in it's been do. just M&A not basically something

And have that to something this the within part. should the pipe, things pipeline. needs also of acquire jointly. see can XX manufacturing would any say that in a we're complement in next be, will finalized our something be we the I couple terms days, XX we work there on or in definitely, out that of is to with definitely we've them we what actually that waiting could there So can

Brian Butler

much very you Okay, Thank great. my for taking questions.

Operator

is Truist Please Securities. follow-up question go with Our Bartlett ahead. next from a Jake

Jake Bartlett

Thanks for taking follow-up. the

reasons the was kind think couple gross so margin long-term, the mentioned of considered for be Alan, My And be why quick on a that's long-term. the to ones. Just outlook drivers, I somewhat just XXXX. first seem you of could

that for – So is long-term? kind up before be I about gross long-term XXXX XX% somewhat margins thinking moving think we're XX% model, there abnormal? should the is, just to of is the question Or we

Alan Yu

us and it's ways product With the situation the increase found gross progressing with previous lucrative. And years. in, they higher also for the online going XXXX also in also ESG the bring than different profit product online line. the XXXX, eco-friendly We that that margin. still XX%, the to in – channel, average the margins, offered we XXXX we has sales of very increasing were our seen new of selling do strong see see channel overall be is also And higher sales we've the ESG we're been the that that have the the product especially giving I current And be a around definitely dollar. year line, currently us

the key the we that with because some three in the past will those has import increase gain offset even we the to because significantly the strong risen the about raised product cost have higher from country every margin overseas the dollars overseas two With is have dollars a But seen of product have thing weeks really past increases. price inflation. of months due of in

months. or the So the to even to to stronger dollars six nine and for we grow continue expect do be next strong

the So a XXXX, as we of for XX% margin. gross good this is model XX% think to

be long-term goal, forward. would of terms would of online terms can long-term, thinking guidance say we this our increasing – will going we're online we that In our margin a gross that that's I continue, if still sales, in the is say

Jake Bartlett

it. Got

So margin way move be shifts you're up, to higher the right think the it? mix that that Is targeting. about it would the given could model

Alan Yu

is. it Yes,

Jake Bartlett

sure Alan, a is And also friendly of you the that it's just helpful I the the consider be but But not if environmentally friendly on question you XXXX Okay. such track sales would of big then that be environmentally was answered. percent part in products. a asked, It to able to had because I'm story that.

Alan Yu

this the leave I'll question, Jian the to to which she numbers. answer has

Jian Guo

Yes, sure.

it's about XX%. a close state overall, to So this

of the XXXX. in the sales total for overall So high teens

Jake Bartlett

much Great. importing and your sources that kind where then question the last you're or know been you've geographies of supplying exposure you're supply And from your to import, is from. I your how diversifying China?

are about think spikes, these disruption case would what And and from from risk your to As how we percentage just the understand there? we imports of about days? it think production be coming COVID China helpful should shutdowns

Alan Yu

Sure. moving line Taiwan. country like we in mentioned from import of – mainly Malaysia out was that our and other now Taiwan product are shipping China produced product most that out eco-friendly And previous or conversation I our of actually, China. have Vietnam, been parts the with we calls of products previous and that even from believe the conference of into

that Vietnam we well about Now would moving into Taiwan. XX% over I say And XX%. Indonesia went China. we to the mentioned are was all more down past, that, in companies there's in those dependency then the it XX%, as and as to way

of versus only Our less other out the goal countries. is or to still China XX% import

Jake Bartlett

outlook? And on risk that that's of Okay. now? of kind is XX% that disruption affect going right the you kind your and or for production now, XX% them from halts to that material your ability will the a get you that Is to

Alan Yu

the vendor disruption China, like few in a set China, of shutdown a in in there's a is months ago, up Nepal some as This that good case port. this And they of Most out that order thing. we well. there No. just manufacturing were Vietnam from the

We I have at as And currently, or we Vietnam Indonesia everything we XXX% looking even out Taiwan. plan of in and well. and rely Malaysia, purchase have that think China and now we're a on backup to Taiwan almost Vietnam

Jake Bartlett

And prices. Great. last gas prices, really diesel then the question,

Is model? Just up? we that diesel make material How kind I of much to your us for prices sure exposure are. is remind gone that. the where as they have understand want

Alan Yu

much exposure our I the pretty good nice, out past months I price three don't the in have the pretty into marketplace. know locked – that our a gas gas versus fleet diesel prices. truck for to really have we believe

carrier. So from they I mentioned same we our But gain we shipping gas perspective, request really the prices, absorbed truckloads, the have surcharges, on company in there's The the to Those this due increase do is gas reduction come where to order prices customers costs marketplace in by demand of in the in recently. the truckload. actually independent earlier. terms and implemented not increase the The risk a costs, with the or of increased the trucker trucking FedEx, in UPS LTL fuel what the terms in LTL have the surcharges, truckload That's gas prices. a margin down. pushing have see high

Jake Bartlett

Great, great. much. you so Thank

Alan Yu

Jake. Thank you,

Operator

would like question-and-answer for Alan any session. I CEO, our closing the to over to turn back concludes This Yu, remarks. conference

Alan Yu

joining Well, day, next And call I and you. Thank today. that everyone, your hope a us for look have thank everyone. answer quarter next everyone's nice to you, questions. we to able were And forward conference I

Operator

attending for now has today's presentation. Thank you concluded. conference The

disconnect. now may You