VIRCO MFG CORPORATION

Previous wording

During the three-month period ended April 30, 2025, the Company experienced approximately a 27.8% decrease in net revenue compared to the same period last year. In the same period last year, the Company benefited from a large series of one-time, disaster recovery orders that resulted in approximately $9 million of additional counter-seasonal shipments. These deliveries positively affected the Company’s traditional cycle in the prior year, with positive impacts on production, overhead absorption, accounts receivable, collections, and reductions in inventory, as well as lower borrowings to support that inventory.

Current wording

During the three months and six months ended July 31, 2025, the Company experienced a decrease in net revenue of approximately 15.1% and 18.9%, respectively, compared to last year. In the same periods last year, the Company benefited from a large series of one-time, disaster recovery counter-seasonal shipments that resulted in approximately $4 million of additional shipments for the three months ended July 31, 2024 and approximately $13 million for the six months ended July 31, 2024. These deliveries positively affected the Company’s traditional cycle in the prior year, with positive impacts on production, overhead absorption, accounts receivable, collections, and reductions in inventory, as well as lower borrowings to support that inventory.

Previous wording

Reflecting the absence of these unusual orders, as of April 30, 2025 the Company’s backlog was $70.4 million compared to $88.5 million on April 30, 2024. Management has moderated production levels and will continue to monitor incoming order rates in pursuit of an appropriate balance between on-time summer deliveries and inventory investment. The Company believes that the majority of the current backlog will be delivered and recognized as revenue during June, July and August of the current fiscal year.

Current wording

The current dynamic macroeconomic environmentand uncertainty surrounding the government’s budget and spending levels have adversely affectedthe demand for our products. Reflecting the absence of these unusual disaster recovery counter-seasonal orders as of July 31, 2025, the Company’s shipments plus backlog was approximately 25.8% lower than last year. Management has moderated production levels and will continue to monitor incoming order rates in pursuit of an appropriate balance between on-time summer deliveries and inventory investment. The Company believes that the majority of the current backlog will be delivered and recognized as revenue during the third quarter of the current fiscal year.

Previous wording

As discussed in the Risk Factors section of the Company’s Form 10-K for the fiscal year ended January 31, 2025, the Company’s recent revenue growth in fiscal 2025 and 2024 was partly a result of the delayed recovery from Covid-related school closures and subsequent supply-chain disruptions. Management cautions that future growth rates are unlikely to match those of the past several years. As with the unpredictable outcomes of school closures and supply chain disruptions, future events beyond the Company’s control—such as tariffs and trade realignments—may have both negative and positive impacts on the Company’s revenue and operating margins. Management intends to position the Company to respond to these uncertainties by continuing to reinvest in operating systems, employee training, and customer development and retention. The recent shift in political direction nationally may also cause uncertainty regarding specific funding for school furniture, although Management estimates that more than 85% of public school funding and virtually all bond-funded new-school construction derives from state and local sources, which are less dependent on federal funding. For example, the Company’s two largest states by revenue are California and Florida, which occupy opposite ends of the political spectrum, but both states continue to invest heavily in public education.

Current wording

As discussed in the Risk Factors section of the Company’s Form 10-K for the fiscal year ended January 31, 2025, the Company’s recent revenue growth in fiscal 2025 and 2024 was partly a result of the delayed recovery from COVID-related school closures and subsequent supply-chain disruptions. Management cautions that future growth rates are unlikely to match those of the past several years. As with the unpredictable outcomes of school closures, supply chain disruptions, and school funding decisions, future events beyond the Company’s control—such as tariffs and trade realignments—may have both negative and positive impacts on the Company’s revenue and operating margins. Management intends to position the Company to respond to these uncertainties by continuing to reinvest in operating systems, employee training, and customer development and retention. Management estimates that more than 85% of public school funding and virtually all bond-funded new-school construction derives from state and local sources.

Previous wording

For the three months ended April 30, 2025, the Company earned a net income of $0.7 million on sales of $33.8 million, compared to net income of $2.1 million on sales of $46.7 million in the same period of the prior year. Sales for the first quarter decreased by approximately $13.0 million or 27.8%, compared to the prior year. First quarter revenue in the prior year was boosted by the previously-noted disaster recovery order, which contributed approximately $9 million in counter-seasonal shipments to the seasonally light quarter in the prior year.

Current wording

For the three months ended July 31, 2025, the Company earned a net income of $10.2 million on sales of $92.1 million, compared to net income of $16.8 million on sales of $108.4 million in the same period of the prior year. Sales for the three months ended July 31, 2025 decreased by approximately $16.3 million or 15.1%, compared to the prior year. Second quarter revenue in the prior year was boosted by the previously-noted disaster recovery order, which contributed approximately $4 million in shipments in the prior year. The remaining decrease was driven by the current dynamic macroeconomic environmentand uncertainty surrounding the government’s budget and spending levels, which adversely affectedthe demand for our products.

Previous wording

Cost of sales was 52.5% for the quarter ended April 30, 2025, compared to 56.5% for the period ended April 30, 2024. Gross margin for first quarter was 47.5% compared to 43.5% in the prior year. The increase in gross margin was attributable to an increase in the proportion of orders delivered with full service. These orders carry higher margins than orders with simple delivery.

Current wording

Cost of sales was 55.6% for the quarter ended July 31, 2025, compared to 53.7% for the same quarter ended last year. Gross margin for the second quarter was 44.4% compared to 46.3% in the prior year. The decrease in gross margin was attributable to a slight decline in the proportion of orders delivered with full service. These orders carry higher margins than orders with simple delivery.

Previous wording

Selling, general and administrative expenses for the three months ended April 30, 2025 decreased slightly by approximately $1.3 million compared to the same period last year. The decrease in SG&A was primarily due to lower variable selling expenses related to overall lower revenue.

Current wording

Selling, general and administrative expenses ("SG&A") as a percentage of sales for the three months ended July 31, 2025 was 27.7% compared to 26.1% the same period last year. The increase in SG&A was primarily due to higher delivery costs.

Previous wording

The Company holds equity securities in a Rabbi Trust to fund benefits under its VIP Pension Plan. The Company benefited from $1.2 and $0.2 million of unrealized gains during the three months ended April 30, 2025 and 2024, respectively. These non-operating gains provided a partial offset to the operating impacts of the overall lower revenue in the first quarter.

Current wording

The Company holds equity securities in a Rabbi Trust to fund benefits under its VIP Pension Plan. The Company recorded approximately $1.0 million of unrealized loss and $0.6 million of unrealized gain during the three months ended July 31, 2025 and 2024, respectively.

Previous wording

Net interest expense was $60,000 for the three months ended April 30, 2025, compared to net interest expense of $208,000 for the same period last year. The decrease was attributable to less demand for seasonal working capital and related lower borrowings under the Company’s credit facility with PNC National Bank.

Current wording

Net interest expense was $0.2 million for the three months ended July 31, 2025, compared to $0.3 million for the same period last year. The decrease was attributable to less demand for seasonal working capital and related lower borrowings under the Company’s credit facility with PNC Bank.

Previous wording

For the three months ended April 30, 2025 and 2024, the effective income tax rates were 26.4% and 25.5%, respectively. The change in effective tax rates was due to a change in the forecasted mix of income before actual federal and state income taxes and estimated permanent differences.

Current wording

For the three months ended July 31, 2025 and 2024, the effective income tax rates were 28.1% and 23.7%, respectively. The change in effective tax rates was due to a change in the forecasted mix of income before actual federal and state income taxes and estimated permanent differences. The OBBB did not have a material impact on our effective income tax rate for the three months ended July 31, 2025.

Previous wording

Accounts Receivable decreased by $7.5 million at April 30, 2025 compared to the same period last year. The decrease is attributable to decreased shipments (as discussed above under “Overview”) and improved collections.

Current wording

Accounts Receivable decreased by $9.2 million at July 31, 2025 compared to last year. The change is primarily due to a decrease in shipments (as discussed above under “Overview”) and offset slightly by improved collections.

Previous wording

Inventory increased by $2.7 million at April 30, 2025 compared to April 30, 2024. The slight increase is primarily attributable to increased material costs during the quarter.

Current wording

Inventory increased by $1.3 million at July 31, 2025 compared to last year. The slight increase is primarily driven by higher material costs and offset slightly by decreased production hours during the year.

Previous wording

Accrual basis capital expenditures for the three months ended April 30, 2025 were $1.6 million compared to $0.8 million for the same period last year. Capital expenditures are being financed through the Company's operating cash flow and restricted to not exceed $8.0 million per year by covenant.

Current wording

Accrual basis capital expenditures for the six months ended July 31, 2025 were $2.8 million compared to $3.1 million for the same period last year. Capital expenditures are being financed through the Company's operating cash flow and restricted to not exceed $8.0 million per year by covenant.

Previous wording

For the three months ended April 30, 2025, the Company spent $4.0 million to repurchase 348,944 shares of its common stock. As of April 30, 2025, $7.2 million was authorized by the Board and available for repurchase of shares by the Company, subject to the restrictions on repurchases under its Credit Agreement with PNC Bank. The Company may elect to opportunistically purchase shares based on excess cash generation and share price considerations.

Current wording

For the six months ended July 31, 2025, the Company spent $4.0 million to repurchase 348,944 shares of its common stock. As of July 31, 2025, $7.2 million was authorized by the Board and available for repurchase of shares by the Company, subject to the restrictions on repurchases under its Credit Agreement with PNC Bank. The Company may elect to opportunistically purchase shares based on excess cash generation and share price considerations.