[FORM 10-Q](index=1&type=section&id=FORM%2010-Q) [PART I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This item provides the unaudited condensed consolidated financial statements for Virco Mfg. Corporation, including balance sheets, income statements, comprehensive income statements, cash flow statements, and statements of changes in stockholders' equity, along with comprehensive notes detailing accounting policies, seasonality, debt, income taxes, and other financial disclosures [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Unaudited Condensed Consolidated Balance Sheets (In thousands) | Metric (In thousands) | 7/31/2025 | 1/31/2025 | 7/31/2024 | | :-------------------- | :-------- | :-------- | :-------- | | **Assets** | | | | | Total current assets | $111,885 | $102,173 | $125,331 | | Total assets | $198,641 | $191,946 | $216,348 | | **Liabilities** | | | | | Total current liabilities | $37,739 | $34,275 | $55,506 | | Total non-current liabilities | $45,526 | $48,406 | $53,030 | | **Stockholders' Equity** | | | | | Total stockholders' equity | $115,376 | $109,265 | $107,812 | [Unaudited Condensed Consolidated Statements of Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Unaudited Condensed Consolidated Statements of Income (In thousands, except per share data) | Metric (In thousands, except per share data) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Net sales | $92,086 | $108,419 | $125,840 | $155,154 | | Gross profit | $40,874 | $50,218 | $56,894 | $70,565 | | Operating income | $15,371 | $21,894 | $15,277 | $24,865 | | Net income | $10,186 | $16,833 | $10,918 | $18,973 | | Basic EPS | $0.65 | $1.04 | $0.69 | $1.16 | | Diluted EPS | $0.65 | $1.04 | $0.69 | $1.16 | - Net sales decreased by **15.1%** for the three months ended July 31, 2025, and by **18.9%** for the six months ended July 31, 2025, compared to the prior year, partly due to the absence of one-time disaster recovery shipments in the current period[81](index=81&type=chunk)[86](index=86&type=chunk)[91](index=91&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Unaudited Condensed Consolidated Statements of Comprehensive Income (In thousands) | Metric (In thousands) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :-------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Net income | $10,186 | $16,833 | $10,918 | $18,973 | | Pension adjustments | $(67) | $(19) | $(134) | $(47) | | Net comprehensive income | $10,119 | $16,814 | $10,784 | $18,926 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) | Metric (In thousands) | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :-------------------- | :------------------------- | :------------------------- | | Net cash (used in) provided by operating activities | $(15,826) | $7,963 | | Net cash used in investing activities | $(3,516) | $(2,741) | | Net cash used in financing activities | $(4,915) | $(2,737) | | Net (decrease) increase in cash | $(24,257) | $2,485 | | Cash at end of period | $2,610 | $7,771 | - The company experienced a significant net decrease in cash of **$24.26 million** for the six months ended July 31, 2025, compared to a net increase of **$2.49 million** in the prior year, primarily driven by cash used in operating activities[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (In thousands, except share data) | Metric (In thousands, except share data) | Balance at 1/31/2025 | Net Income (6M) | Cash Dividends (6M) | Pension Adjustments (6M) | Stock Repurchase (6M) | Balance at 7/31/2025 | | :------------------------------------- | :------------------- | :-------------- | :------------------ | :----------------------- | :-------------------- | :------------------- | | Common Stock (Amount) | $161 | — | — | — | $(4) | $157 | | Additional Paid-in Capital | $117,549 | — | — | — | $(3,996) | $113,667 | | Retained Earnings (Accumulated Deficit) | $(8,867) | $10,918 | $(787) | — | — | $1,264 | | Accumulated Other Comprehensive Income (Loss) | $422 | — | — | $(134) | — | $288 | | Total Stockholders' Equity | $109,265 | $10,918 | $(787) | $(134) | $(4,000) | $115,376 | - Total stockholders' equity increased from **$109.27 million** at January 31, 2025, to **$115.38 million** at July 31, 2025, driven by net income and offset by cash dividends and stock repurchases[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) - Interim financial statements are prepared under U.S. GAAP and SEC rules, not including all disclosures required for complete annual statements, and should be read in conjunction with the latest Form 10-K[30](index=30&type=chunk) [Note 2. Seasonality and Management Use of Estimates](index=11&type=section&id=Note%202.%20Seasonality%20and%20Management%20Use%20of%20Estimates) - Approximately **50%** of the Company's total sales typically occur from **June to August**, requiring significant upfront investment in inventory, labor, and storage, often necessitating third-party bank financing[31](index=31&type=chunk) - Key management estimates include inventory valuation, deferred tax assets/liabilities, useful lives of property/plant/equipment, pension/warranty/self-insurance liabilities, and accounts receivable allowance for credit losses[32](index=32&type=chunk) [Note 3. Recently Issued Accounting Standards](index=11&type=section&id=Note%203.%20Recently%20Issued%20Accounting%20Standards) - The Company adopted ASU **2023-07** (Segment Reporting) during the **fiscal year ended January 31, 2025**, which updates reportable segment disclosure requirements[33](index=33&type=chunk) - The Company is evaluating ASU **2024-03** (Expense Disaggregation Disclosures), effective for annual periods beginning after **December 15, 2026**, and does not expect ASU **2023-09** (Income Taxes) to have a material impact[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 4. Revenue Recognition](index=12&type=section&id=Note%204.%20Revenue%20Recognition) - Revenue is recognized when control of goods is transferred to customers, primarily for school and office furniture, with performance obligations satisfied at a point in time upon shipment or delivery according to FOB terms[37](index=37&type=chunk)[38](index=38&type=chunk) - Sales are recorded net of discounts, sales incentives, rebates, sales taxes, and estimated returns and allowances, with variable consideration estimated using the expected value method[39](index=39&type=chunk) [Note 5. Inventories](index=12&type=section&id=Note%205.%20Inventories) - Inventories are valued at the lower of cost (FIFO) or net realizable value, including material, labor, and factory overhead, with valuation adjustments for slow-moving/obsolete inventory based on estimates[41](index=41&type=chunk) Inventories (In thousands) | Inventory Category (In thousands) | 7/31/2025 | 1/31/2025 | 7/31/2024 | | :-------------------------------- | :-------- | :-------- | :-------- | | Finished goods | $23,317 | $19,599 | $23,498 | | Work in process | $23,133 | $21,357 | $20,938 | | Raw materials | $13,416 | $14,691 | $14,138 | | Total inventories | $59,866 | $55,647 | $58,574 | [Note 6. Leases](index=13&type=section&id=Note%206.%20Leases) Leases (In thousands) | Lease Cost (In thousands) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :------------------------ | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Operating lease cost | $2,359 | $1,423 | $4,717 | $2,842 | | Short-term lease cost | $112 | $130 | $230 | $234 | | Sublease income | $(10) | $(10) | $(20) | $(20) | | Variable lease cost | $109 | $690 | $382 | $618 | | Total lease cost | $2,570 | $2,233 | $5,309 | $3,674 | - As of July 31, 2025, the weighted-average remaining lease term is **5.0 years**, and the weighted-average discount rate is **9.83%**[45](index=45&type=chunk) - On July 23, 2024, the Company entered into a new lease agreement for its Torrance, California facility, extending tenancy through **September 2030**, resulting in a **$33.0 million** operating lease liability and corresponding ROU asset[46](index=46&type=chunk) [Note 7. Debt](index=14&type=section&id=Note%207.%20Debt) Debt (In thousands) | Debt (In thousands) | 7/31/2025 | 1/31/2025 | 7/31/2024 | | :------------------ | :-------- | :-------- | :-------- | | Revolving credit line | $— | $— | $— | | Other (Mortgage) | $4,008 | $4,136 | $4,261 | | Total debt | $4,008 | $4,136 | $4,261 | | Non-current portion | $3,745 | $3,878 | $4,008 | - The Credit Agreement with PNC Bank was amended on April 9, 2025, to establish a new category of permitted share repurchases up to **$7.5 million** for the **fiscal year ending January 31, 2026**, in addition to existing limits[53](index=53&type=chunk) - The company was in compliance with its debt covenants as of July 31, 2025[51](index=51&type=chunk)[101](index=101&type=chunk) [Note 8. Income Taxes](index=16&type=section&id=Note%208.%20Income%20Taxes) Income Taxes | Effective Income Tax Rate | 7/31/2025 (3 Months) | 7/31/2024 (3 Months) | 7/31/2025 (6 Months) | 7/31/2024 (6 Months) | | :------------------------ | :------------------- | :------------------- | :------------------- | :------------------- | | Rate | **28.1%** | **23.7%** | **28.0%** | **23.9%** | - Valuation allowances for certain state net operating loss carryforwards were **$216,000** as of July 31, 2025[57](index=57&type=chunk) - The One Big Beautiful Bill (OBBB) Act, signed into law on July 4, 2025, is not expected to have a material impact on the company's effective tax rate and deferred tax assets for the **fiscal year ending January 31, 2026**, or future periods[60](index=60&type=chunk)[80](index=80&type=chunk) [Note 9. Net Income per Share](index=16&type=section&id=Note%209.%20Net%20Income%20per%20Share) Net Income per Share (Per share data) | Metric (Per share data) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :---------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Net income | $10,186 | $16,833 | $10,918 | $18,973 | | Basic EPS | $0.65 | $1.04 | $0.69 | $1.16 | | Diluted EPS | $0.65 | $1.04 | $0.69 | $1.16 | | Weighted average shares outstanding - basic | 15,741 | 16,214 | 15,749 | 16,305 | [Note 10. Stock-Based Compensation](index=17&type=section&id=Note%2010.%20Stock-Based%20Compensation) Stock-Based Compensation (In thousands) | Stock-Based Compensation Expense (In thousands) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :-------------------------------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Cost of goods sold | $— | $10 | $— | $38 | | Selling, general and administrative expenses | $51 | $88 | $114 | $232 | | Total stock-based compensation expense | $51 | $98 | $114 | $270 | - As of July 31, 2025, there was **$156,000** of unrecognized compensation expense related to unvested restricted stock awards, expected to be recognized in **one month**[63](index=63&type=chunk) [Note 11. Retirement Plans](index=17&type=section&id=Note%2011.%20Retirement%20Plans) Retirement Plans (In thousands) | Net Periodic Pension Cost (In thousands) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :------------------------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Interest cost | $325 | $311 | $650 | $622 | | Expected return on plan assets | $(208) | $(169) | $(416) | $(338) | | Recognized net actuarial gain | $(90) | $(40) | $(180) | $(75) | | Benefit cost | $27 | $102 | $54 | $209 | - Employer match compensation costs for the **401(k)** retirement plan were **$1.014 million** for the six months ended July 31, 2025, an increase from **$778,000** in the prior year[68](index=68&type=chunk) [Note 12. Warranty Accrual](index=18&type=section&id=Note%2012.%20Warranty%20Accrual) Warranty Accrual (In thousands) | Warranty-Claim Activity (In thousands) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Beginning balance | $500 | $500 | $500 | $500 | | Provision | $33 | $21 | $76 | $51 | | Costs incurred | $(33) | $(21) | $(76) | $(51) | | Ending balance | $500 | $500 | $500 | $500 | [Note 13. Contingencies](index=18&type=section&id=Note%2013.%20Contingencies) - The Company has self-insured retention for product, workers' compensation, general, and automobile liability losses, with insurance covering losses up to **$30.0 million** in excess of retention[70](index=70&type=chunk) - Management believes that the ultimate outcome of various legal proceedings in the normal course of business will not materially affect the Company's financial position, results of operations, or cash flows[71](index=71&type=chunk) [Note 14. Delivery Costs](index=18&type=section&id=Note%2014.%20Delivery%20Costs) Delivery Costs (In millions) | Delivery Costs (In millions) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :--------------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Shipping and classroom delivery costs | $10.0 | $10.1 | $13.4 | $14.3 | [Note 15. Property, Plant, and Equipment, Net](index=19&type=section&id=Note%2015.%20Property%2C%20Plant%2C%20and%20Equipment%2C%20Net) Property, Plant, and Equipment, Net (In thousands) | Property, Plant, and Equipment (In thousands) | 7/31/2025 | 1/31/2025 | 7/31/2024 | | :-------------------------------------------- | :-------- | :-------- | :-------- | | Property, plant and equipment, gross | $179,682 | $177,096 | $173,134 | | Less accumulated depreciation and amortization | $(143,562) | $(140,668) | $(138,154) | | Property, plant and equipment, net | $36,120 | $36,428 | $34,980 | Property, Plant, and Equipment, Net (In millions) | Depreciation and Amortization Expenses (In millions) | Three Months Ended 7/31/2025 | Three Months Ended 7/31/2024 | Six Months Ended 7/31/2025 | Six Months Ended 7/31/2024 | | :--------------------------------------------------- | :--------------------------- | :--------------------------- | :------------------------- | :------------------------- | | Cost of goods sold | $1.1 | $1.1 | $2.3 | $2.1 | | Selling, general, and administrative expenses | $0.5 | $0.3 | $0.8 | $0.6 | [Note 16. Segment Information](index=19&type=section&id=Note%2016.%20Segment%20Information) - The Company operates in one segment and has one reportable segment, with its CODM reviewing consolidated financial information to manage the business[76](index=76&type=chunk)[77](index=77&type=chunk) [Note 17. Subsequent Events](index=19&type=section&id=Note%2017.%20Subsequent%20Events) - On September 2, 2025, the Board of Directors declared a cash dividend of **$0.025** per common share for the second fiscal quarter, payable **October 10, 2025**[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial performance, liquidity, and capital resources, highlighting the impact of seasonality, macroeconomic conditions, and the absence of prior-year one-time disaster recovery shipments on revenue and profitability. It also covers recent tax law changes, debt covenants, and share repurchase activities [Overview](index=20&type=section&id=Overview) - The Company's core market for education furniture is highly seasonal, with approximately **50%** of total annual revenue typically occurring from **June to August**[79](index=79&type=chunk) - Net revenue decreased by approximately **15.1%** for the three months and **18.9%** for the six months ended July 31, 2025, compared to the prior year, partly due to the absence of one-time disaster recovery shipments and adverse macroeconomic conditions[81](index=81&type=chunk)[82](index=82&type=chunk) - Shipments plus backlog were approximately **25.8%** lower than last year, leading management to moderate production levels[82](index=82&type=chunk) [Three Months Ended July 31, 2025](index=21&type=section&id=Three%20Months%20Ended%20July%2031%2C%202025) Three Months Ended July 31, 2025 (In millions) | Metric (In millions) | 7/31/2025 | 7/31/2024 | Change ($) | Change (%) | | :------------------- | :-------- | :-------- | :--------- | :--------- | | Net income | **$10.2** | **$16.8** | **$(6.6)** | **(39.3%)** | | Net sales | **$92.1** | **$108.4** | **$(16.3)** | **(15.1%)** | Three Months Ended July 31, 2025 | Metric | 7/31/2025 | 7/31/2024 | | :--------------------- | :-------- | :-------- | | Cost of sales % | **55.6%** | **53.7%** | | Gross margin | **44.4%** | **46.3%** | | SG&A as % of sales | **27.7%** | **26.1%** | | Effective income tax rate | **28.1%** | **23.7%** | - The decrease in gross margin was attributable to a slight decline in the proportion of orders delivered with full service, which carry higher margins[87](index=87&type=chunk) [Six Months Ended July 31, 2025](index=21&type=section&id=Six%20Months%20Ended%20July%2031%2C%202025) Six Months Ended July 31, 2025 (In millions) | Metric (In millions) | 7/31/2025 | 7/31/2024 | Change ($) | Change (%) | | :------------------- | :-------- | :-------- | :--------- | :--------- | | Net income | **$10.9** | **$19.0** | **$(8.1)** | **(42.6%)** | | Net sales | **$125.8** | **$155.2** | **$(29.4)** | **(18.9%)** | Six Months Ended July 31, 2025 | Metric | 7/31/2025 | 7/31/2024 | | :--------------------- | :-------- | :-------- | | Cost of sales % | **54.8%** | **54.5%** | | Gross margin | **45.2%** | **45.5%** | | SG&A as % of sales | **33.1%** | **29.5%** | | Effective income tax rate | **28.0%** | **23.9%** | - The increase in SG&A for both periods was primarily due to higher delivery costs[88](index=88&type=chunk)[93](index=93&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company's liquidity is heavily influenced by the extreme seasonality of the education furniture market, with significant inventory build-up and accounts receivable financing during the **June to August** peak season[96](index=96&type=chunk) Liquidity and Capital Resources (In millions) | Metric (In millions) | 7/31/2025 | 7/31/2024 | Change ($) | | :------------------- | :-------- | :-------- | :--------- | | Accounts Receivable | **$46.8** | **$56.1** | **$(9.3)** | | Inventory | **$59.9** | **$58.6** | **$1.3** | - The Company spent **$4.0 million** to repurchase **348,944 shares** of its common stock for the six months ended July 31, 2025, with **$7.2 million** authorized and available for future repurchases[100](index=100&type=chunk) - Management believes cash flows from operations and unused borrowing capacity will be sufficient to fund debt service, capital expenditures, and working capital for the **next twelve months**[102](index=102&type=chunk) [Off Balance Sheet Arrangements](index=22&type=section&id=Off%20Balance%20Sheet%20Arrangements) - The Company has no off-balance sheet arrangements[103](index=103&type=chunk) [Critical Accounting Policies and Estimates](index=22&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies and estimates are consistent with those disclosed in the Annual Report on Form 10-K for the **fiscal year ended January 31, 2025**[104](index=104&type=chunk) [Forward-Looking Statements](index=22&type=section&id=Forward-Looking%20Statements) - Forward-looking statements are subject to risks and uncertainties, including funding for educational institutions, material/labor costs, demand, competition, capital costs, and general economic conditions[105](index=105&type=chunk) - The Company assumes no duty to update forward-looking statements to reflect new, changed, or unanticipated events or circumstances[106](index=106&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Virco Mfg. Corporation is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Virco Mfg. Corporation is exempt from providing quantitative and qualitative disclosures about market risk[107](index=107&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of July 31, 2025. There have been no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=23&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of July 31, 2025[108](index=108&type=chunk) [Changes in Internal Control Over Financial Reporting](index=23&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended July 31, 2025[110](index=110&type=chunk) [PART II. Other Information](index=23&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, but management believes these will not materially affect the company's financial position, results of operations, or cash flows - Management believes that the ultimate outcome of various legal proceedings will not materially affect the Company's financial position, results of operations, or cash flows[112](index=112&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) The risk factors associated with the company's business have not materially changed from those disclosed in its Annual Report on Form 10-K for the fiscal year ended January 31, 2025 - The risk factors associated with the Company's business have not materially changed compared to those disclosed in the Annual Report on Form 10-K for the **fiscal year ended January 31, 2025**[113](index=113&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not repurchase any common stock during the fiscal quarter ended July 31, 2025. As of July 31, 2025, $7.19 million was available for repurchase under existing programs, subject to discretion and credit agreement limitations Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Number of Shares (or Approximate Dollar Value) that May Yet be Purchased Under the Programs | | :-------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------- | | May 2025 | — | $— | — | **$7,190,210** | | June 2025 | — | $— | — | **$7,190,210** | | July 2025 | — | $— | — | **$7,190,210** | | Total | — | | — | | - As of July 31, 2025, **$7.19 million** was available for repurchase of shares by the Company under existing programs, subject to discretion and credit agreement limitations[114](index=114&type=chunk)[115](index=115&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reported period - There were no defaults upon senior securities[116](index=116&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[117](index=117&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended July 31, 2025 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended July 31, 2025[118](index=118&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and SVP of Finance, and XBRL-related documents - The exhibits include certifications from the Chief Executive Officer and Senior Vice President, Finance, pursuant to the Securities Exchange Act and Sarbanes-Oxley Act, along with XBRL instance and taxonomy documents[119](index=119&type=chunk) [SIGNATURES](index=26&type=section&id=SIGNATURES) [Signatures](index=26&type=section&id=Signatures) The report is signed by Bassey Yau, Senior Vice President — Finance (Principal Financial Officer), on behalf of Virco Mfg. Corporation, dated September 5, 2025 - The report was signed by Bassey Yau, Senior Vice President — Finance (Principal Financial Officer), on September 5, 2025[123](index=123&type=chunk)

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) [Second Quarter and Six Months Financial Performance Overview](index=1&type=section&id=Second%20Quarter%20and%20Six%20Months%20Financial%20Performance%20Overview) Virco Mfg. Corporation reported strong profitability for the Second Quarter and first six months ended July 31, 2025, despite a significant reduction in revenue due to a general downturn in demand for educational furniture and the absence of a large prior-year disaster recovery order Shipments and Operating Income Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YTD 2025 (Millions) | YTD 2024 (Millions) | YoY Change (YTD) | | :----------------- | :----------------- | :----------------- | :------------------ | :------------------ | :--------------- | | Shipments | $92.1 | $108.4 | $125.8 | $155.2 | -18.9% | | Operating Income | $15.4 | $21.9 | $15.3 | $24.9 | -38.6% | - The year-over-year decline in revenue reflects a general slowdown in demand for school furniture and the absence of a large, counter-seasonal disaster recovery order from the prior year, which contributed approximately **$13 million** to total revenue through six months of last year[2](index=2&type=chunk) [Key Financial Metrics and Ratios](index=1&type=section&id=Key%20Financial%20Metrics%20and%20Ratios) The company maintained high revenue quality with a strong gross profit margin, although SG&A expenses increased as a percentage of revenue, and net income for the six months declined compared to the prior year but remained the third-best in the last decade Key Financial Ratios (Six Months Ended July 31) | Metric | YTD 2025 | YTD 2024 | | :---------------------- | :------- | :------- | | Gross Profit Margin | 45.2% | 45.5% | | SG&A as % of Revenue | 33.1% | 29.5% | | Interest Expense | $0.3M | $0.5M | | Net Income | $10.9M | $19.0M | - Despite unfavorable year-over-year comparisons, the current year's six-month net income of **$10.9 million** is the Company's third-best in the last decade, contributing to a strong balance sheet[4](index=4&type=chunk) [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) The Board of Directors declared a quarterly cash dividend for the second fiscal quarter, payable in October 2025, with the company intending to continue quarterly dividends, subject to Board review and lending agreement covenants Second Fiscal Quarter Dividend Details | Detail | Value | | :-------------- | :-------------- | | Dividend Amount | $0.025 per share| | Payment Date | October 10, 2025| | Record Date | September 19, 2025| - The declaration and payment of future dividends are subject to the discretion of the Board and restrictive covenants in the Company's lending agreements, with no assurance of future payments[9](index=9&type=chunk) [Management Outlook and Market Conditions](index=1&type=section&id=Management%20Outlook%20and%20Market%20Conditions) Management acknowledges the current market slowdown but remains optimistic about long-term opportunities, drawing parallels to 2021, and is leveraging its domestic capabilities and strong financial position to navigate uncertainties and prepare for a potential market recovery - Management is cautious about the remainder of the year due to ongoing uncertainties over economic conditions and related school funding[5](index=5&type=chunk) Shipments plus Backlog (as of July 31) | Metric | 2025 (Millions) | 2024 (Millions) | YoY Change | | :-------------------- | :-------------- | :-------------- | :--------- | | Shipments plus Backlog| $165.9 | $223.7 | -25.8% | - The company is actively working to balance output, inventories, and expenses while preparing for a possible market recovery in the next two years, noting that spending for school furniture typically fluctuates around the election cycle[8](index=8&type=chunk) - Management observes similarities between current market conditions and those of **2021**, when supply chains were readjusting to pandemic disruptions, and believes the company's vertically-integrated domestic manufacturing, liquidity, and strong balance sheet position it to benefit from future market equilibrium[4](index=4&type=chunk)[11](index=11&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) [About Virco Mfg. Corporation](index=4&type=section&id=About%20Virco%20Mfg.%20Corporation) Virco Mfg. Corporation, founded in 1950, is a leading US-based manufacturer and supplier of educational furniture and equipment, serving a broad range of markets beyond K-12 education with all operations based in the United States - Founded in **1950**, Virco Mfg. Corporation is the largest manufacturer and supplier of moveable educational furniture and equipment for the preschool through 12th grade market in the United States[13](index=13&type=chunk) - The company manufactures a wide assortment of products including mobile tables, storage equipment, desks, computer furniture, chairs, and folding furniture[13](index=13&type=chunk) - In addition to the education market, Virco supplies furniture and equipment to convention centers, arenas, the hospitality industry, government facilities, and places of worship, with all operations based in the United States[13](index=13&type=chunk) [Statement Concerning Forward-Looking Information](index=4&type=section&id=Statement%20Concerning%20Forward-Looking%20Information) This section outlines the company's forward-looking statements, which are subject to known and unknown risks and uncertainties, advising against undue reliance on these statements and listing various factors that could cause actual results to differ materially - Forward-looking statements include those regarding future financial results, business growth, strategies, market demand, backlog estimates, order rates, economic conditions, and supply chain challenges[14](index=14&type=chunk) - Key risk factors include impacts of tariffs and global trade uncertainties, changes in general economic conditions (raw material, energy, freight costs), state and municipal bond funding, tax receipts, market seasonality, and the competitive landscape[14](index=14&type=chunk) - The company disclaims any obligation to update forward-looking statements, reserving the right to do so via press release, periodic reports, or other public disclosure methods[14](index=14&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The unaudited condensed consolidated balance sheets provide a snapshot of the company's financial position at July 31, 2025, January 31, 2025, and July 31, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | 7/31/2025 | 1/31/2025 | 7/31/2024 | | :-------------------------- | :-------- | :-------- | :-------- | | Total Assets | $198,641 | $191,946 | $216,348 | | Total Liabilities | $83,265 | $82,681 | $108,536 | | Total Stockholders' Equity | $115,376 | $109,265 | $107,812 | | Cash | $2,610 | $26,867 | $7,771 | | Trade Accounts Receivables, net | $46,817 | $13,004 | $56,065 | | Inventories | $59,866 | $55,647 | $58,574 | [Unaudited Condensed Consolidated Statements of Income](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) The unaudited condensed consolidated statements of income present the company's financial performance for the three and six months ended July 31, 2025, and 2024, showing declines in net sales, gross profit, operating income, and net income across both periods Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | | Net Sales | $92,086 | $108,419 | $125,840 | $155,154 | | Gross Profit | $40,874 | $50,218 | $56,894 | $70,565 | | Operating Income | $15,371 | $21,894 | $15,277 | $24,865 | | Net Income | $10,186 | $16,833 | $10,918 | $18,973 | | Basic Net Income Per Share | $0.65 | $1.04 | $0.69 | $1.16 | | Cash Dividends Declared Per Share | $0.025 | $0.020 | $0.050 | $0.040 |

Company Performance - Virco Manufacturing Corporation (VIRC) reported quarterly earnings of $0.7 per share, missing the Zacks Consensus Estimate of $0.84 per share, and down from $1.04 per share a year ago, representing an earnings surprise of -16.67% [1] - The company posted revenues of $92.09 million for the quarter ended July 2025, missing the Zacks Consensus Estimate by 19.08%, and down from $108.42 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates only once and has not beaten consensus revenue estimates during the same period [2] Stock Performance - Virco Manufacturing shares have declined approximately 15.4% since the beginning of the year, contrasting with the S&P 500's gain of 10.6% [3] - The current consensus EPS estimate for the upcoming quarter is $0.47 on revenues of $85.9 million, and for the current fiscal year, it is $1.00 on revenues of $263.1 million [7] Industry Outlook - The Furniture industry, to which Virco belongs, is currently ranked in the bottom 15% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Virco's stock performance [5][6]

Core Insights - Virco Mfg. Corporation reported strong profitability in Q2 and the first half of 2025 despite a downturn in demand for educational furniture and equipment [1][4] - Shipments in Q2 totaled $92.1 million, down from $108.4 million in the same quarter last year, reflecting a 15.1% decline [1][5] - For the first six months, total shipments were $125.8 million, an 18.9% decline from $155.2 million in the previous year [2][5] Financial Performance - Operating income for Q2 was $15.4 million compared to $21.9 million in the prior year [1][5] - Year-to-date operating income was $15.3 million, down from $24.9 million last year, marking the third highest in the past decade [2][5] - Net income for the first half was $10.9 million, down from $19.0 million last year, but still the third-best result in the last decade [4][5] Revenue Quality - The gross profit margin for the first six months was 45.2%, slightly down from 45.5% last year, indicating high revenue quality [2][5] - The company’s SG&A expenses increased to 33.1% of revenue from 29.5% in the prior year, reflecting cost control amidst inflationary pressures [3][5] Market Conditions - Management noted a general slowdown in the school furniture market and the absence of a large counter-seasonal disaster recovery order from the previous year, which had contributed approximately $13 million to revenue [2][5] - The company is preparing for potential market recovery in the next two years, with spending on school furniture typically fluctuating around election cycles [7][10] Dividend Declaration - The Board declared a quarterly dividend of $0.025 per share, payable on October 10, 2025, to shareholders of record as of September 19, 2025 [5][8] Strategic Outlook - Management is cautious about the remainder of the year due to ongoing economic uncertainties and school funding issues [5][10] - The company aims to leverage its domestic manufacturing capabilities to navigate supply chain challenges and capitalize on future opportunities [4][10]

Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks across various market conditions, utilizing established valuation metrics to uncover potential opportunities [2][3]. Company Summary: Virco Manufacturing (VIRC) - Virco Manufacturing holds a Zacks Rank of 1 (Strong Buy) and an A grade for Value, indicating strong investment potential [4]. - The current P/E ratio for VIRC is 7.71, significantly lower than the industry average of 9.58, suggesting it may be undervalued [4]. - VIRC's Forward P/E has fluctuated between 6.52 and 11.62 over the past year, with a median of 8.04 [4]. - The P/B ratio for VIRC is 1.24, which is favorable compared to the industry average of 1.44, indicating solid valuation relative to its book value [5]. - Over the past 12 months, VIRC's P/B has ranged from 1.20 to 3.03, with a median of 1.70 [5]. - VIRC's P/CF ratio stands at 4.94, which is attractive compared to the industry average of 6.52, highlighting its strong cash flow outlook [6]. - The P/CF for VIRC has varied between 4.79 and 9.19 over the past year, with a median of 6.70 [6]. - Overall, the metrics suggest that Virco Manufacturing is likely undervalued, making it one of the strongest value stocks in the market [7].

Group 1 - The article discusses the performance of Virco Mfg. Corporation (NASDAQ: VIRC) since fiscal Q2 2025, indicating that previous analyses have materialized over the past three quarters [1] Group 2 - The investment approach focuses on long-only strategies, emphasizing operational evaluations and long-term earnings potential rather than market-driven dynamics [2] - The company aims to hold investments regardless of future price movements, with most recommendations being holds rather than buys [2] - The articles serve to provide valuable information for future investors and maintain a skeptical view in a generally bullish market [2]

Financial Performance - Net income for the first quarter was $0.7 million, down from $2.1 million in the same period last year, primarily due to a large disaster recovery order last year [1]. - Net sales for the first quarter were $33.754 million, down from $46.735 million in the same period last year [19]. - Operating loss for the first quarter was $94, compared to an operating income of $2.971 million in the prior year [19]. Margins and Costs - Gross margin improved to 47.5%, up 400 basis points from 43.5% in the prior year, attributed to lower margins on last year's disaster recovery order and a higher proportion of full-service orders [2]. Shareholder Returns - The company repurchased $4.0 million worth of shares and paid $0.4 million in cash dividends during the first quarter [7]. - A quarterly dividend of $0.025 per share was declared, payable on July 11, 2025 [3]. Market Outlook - Shipments plus backlog declined by 22.9% to $105.6 million compared to the previous year [3]. - The current year is expected to represent a "pause" in the recovery of the school furniture market post-COVID, but there are hopeful signs for mid-term growth in school construction [10]. - The company maintains an opportunistic stance to navigate challenges and opportunities in the upcoming year [9]. Investments - The company invested over $2.0 million in major platform processes to expand operations and support domestic market expansion [7].

Financial Performance - For the three months ended April 30, 2025, the Company reported a net income of $0.7 million on sales of $33.8 million, a decrease of approximately 27.8% in sales compared to $46.7 million in the same period last year [81]. - Gross margin for the first quarter of 2025 was 47.5%, an increase from 43.5% in the prior year, attributed to a higher proportion of full-service orders [82]. - Selling, general and administrative expenses decreased by approximately $1.3 million compared to the same period last year, primarily due to lower variable selling expenses [83]. - The effective income tax rate for the three months ended April 30, 2025, was 26.4%, compared to 25.5% in the prior year [86]. Backlog and Orders - The Company's backlog as of April 30, 2025, was $70.4 million, down from $88.5 million on April 30, 2024, reflecting a decrease in incoming orders [77]. Share Repurchase - The Company spent $4.0 million to repurchase 348,944 shares of its common stock, with $7.2 million authorized for future repurchases as of April 30, 2025 [91]. Accounts and Inventory - Accounts Receivable decreased by $7.5 million at April 30, 2025, due to decreased shipments and improved collections [88]. - Inventory increased by $2.7 million at April 30, 2025, primarily due to increased material costs during the quarter [88]. Compliance and Future Outlook - The Company believes it will maintain compliance with its financial covenants under the Credit Agreement, despite risks related to economic conditions and raw material costs [92]. - Management cautions that future growth rates are unlikely to match those of the past several years due to various uncertainties, including trade policies and funding for educational institutions [78].

Group 1: Earnings Performance - Virco Manufacturing Corporation reported a quarterly loss of $0.01 per share, outperforming the Zacks Consensus Estimate of a loss of $0.13, compared to earnings of $0.13 per share a year ago, representing an earnings surprise of 92.31% [1] - The company posted revenues of $33.75 million for the quarter ended April 2025, missing the Zacks Consensus Estimate by 17.87%, and down from $46.74 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times [2] Group 2: Stock Performance and Outlook - Virco Manufacturing shares have declined approximately 19.9% since the beginning of the year, while the S&P 500 has gained 1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.81 on revenues of $113.8 million, and $0.79 on revenues of $270.5 million for the current fiscal year [7] - The estimate revisions trend for Virco Manufacturing is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Group 3: Industry Context - The Furniture industry, to which Virco Manufacturing belongs, is currently ranked in the bottom 22% of over 250 Zacks industries, suggesting a challenging environment [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment [5]

Core Insights - Virco Mfg. Corporation reported a net income of $0.7 million for the first quarter of 2025, a decrease from $2.1 million in the same period last year, primarily due to a significant disaster recovery order in the previous year [1][6] - The company experienced a 22.9% decline in shipments and backlog, totaling $105.6 million, while gross margin improved from 43.5% to 47.5% [6][2] - Management remains optimistic about underlying demand, which is believed to be within normal parameters for multi-year, election-related bond cycles [1][9] Financial Performance - Net sales for the first quarter were $33.754 million, down from $46.735 million year-over-year [18] - Gross profit decreased to $16.020 million from $20.347 million, while selling, general, and administrative expenses were $16.114 million compared to $17.376 million last year [18] - The company repurchased $4.0 million worth of shares and declared a cash dividend of $0.025 per share for the second fiscal quarter [5][6] Operational Insights - The company is focusing on financing seasonal inventories and accounts receivable, alongside investing in major capital equipment [5] - Management believes that tariffs will not significantly impact gross margins due to the domestic manufacturing of most products [2] - The company is confident in its ability to manage peak-season deliveries despite supply chain disruptions in other markets [2][8] Market Outlook - The current year is viewed as a "pause" in the recovery of the school furniture market post-COVID, but there are positive signs in the mid-term school bond environment [9] - The company is investing in training and technology to maintain operational efficiency and capitalize on future opportunities [8]