Virco Mfg. Corporation — Six Months Ended July 31, 2026 Earnings Summary

Financial Performance

• Net sales for the six months ended July 31, 2026, totaled $118.2 million, a 6.1% decline from $125.8 million in the prior year period.
• Net sales for the second quarter ended July 31, 2026, were $87.5 million, down from $92.1 million in the same quarter last year.
• Operating income for the six months was $6.9 million, compared to $15.3 million in the prior year; quarterly operating income was $10.5 million versus $15.4 million.
• Net income for the six months was $5.8 million, a 46.5% decrease from $10.9 million in the prior year; quarterly net income was $8.6 million, a 15.4% decline from $10.2 million.
• Gross margin for the six months was 40.4%, with a quarterly gross margin of 40.0%.
• Selling, general, and administrative (SG&A) expenses were 34.5% of revenue for the six months, up from 33.1% in the prior year.
• Interest expense remained flat at $0.3 million for the six-month period.
• The current ratio was 2.5 as of July 31, 2026.
• Total assets were $192.2 million as of July 31, 2026, compared to $174.2 million at January 31, 2026, and $198.6 million at July 31, 2025.
• Total stockholders' equity was $110.5 million as of July 31, 2026.
• Cash and cash equivalents were $9.2 million as of July 31, 2026.
• Inventories were $53.0 million as of July 31, 2026.
• Long-term debt (less current portion) was $3.5 million as of July 31, 2026.

Guidance and Future Outlook

• Recent trends indicate a slight improvement in demand following the approval of new budgets for the school year of July 2026 through June 2027.
• Management cautions that while trends are positive, they occur at a low point in the annual revenue cycle and are unlikely to meaningfully improve full-year results.
• The typical lower volume of the second half of the year is expected to moderate the impact of recent positive trends on full-year results.
• Management anticipates that supply chain rebalancing in Virco's favor may take several years.
• New investments in products and "platform processes" are expected to fall within the typical $4 million to $6 million annual capital expenditures budget.

Business Segments and Product Lines

• Virco operates a domestically-based fabrication and service model with facilities in Torrance, CA, and Conway, AR.
• Business development efforts in adjacent markets with similar products, processes, and distribution channels are showing consistent data.
• Domestic manufacturers like Virco are nearing cost parity with global competitors while maintaining advantages in flexibility, customization, and response time.
• The company manufactures mobile tables, mobile storage equipment, desks, computer furniture, chairs, activity tables, and folding chairs.

Market and Competitive Landscape

• The market for school furniture and equipment remains fluid due to ongoing global supply chain rebalancing.
• Uncertainties among school administrators regarding the just-ended budget cycle contributed to cautious spending in the first and second quarters.
• Most public schools operate on a fiscal year from July 1 through June 30.
• Virco's U.S. manufacturing provides competitive advantages in speed of service, quality, and customization, particularly as the school delivery season becomes more compressed.
• Supply chain relationships are described as "sticky," with initial responses to rebalancing efforts being encouraging.

Risks and Challenges

• Ongoing rebalancing of the school furniture market following uncertainties of the past few years.
• Uncertainties among school administrators regarding budget cycles leading to cautious spending.
• The low point in the annual revenue cycle limits the potential for recent positive trends to impact full-year results.
• Forward-looking statements involve risks including impacts of tariffs, global trade uncertainties, changes in economic conditions, raw material costs, state and municipal bond funding, and order rates.

Management Commentary and Tone

• Chairman and CEO Robert Virtue stated that the company's foundation is strong despite the current year being challenging compared to recent record performance.
• Management emphasized that the company is actively using its financial strength to gain market share and develop new customers.
• Virtue highlighted that 40% of the workforce has been with Virco for more than 20 years, noting that collective know-how is now generating meaningful financial advantage.
• Management expressed confidence in the sustainability of their operations, citing a record environmental performance and support for local communities.
• The tone was confident regarding the company's ability to compete on quality and speed while operating with virtually no debt.

Other Key Points

• Shipments plus backlog totaled $162.5 million, which is 2.1% lower than the same period last year.
• The Board of Directors declared a quarterly cash dividend of $0.025 per share for the third fiscal quarter.
• The dividend is payable on October 9, 2026, to shareholders of record as of September 18, 2026.
• Cash dividends declared per common share for the six months ended July 31, 2026, totaled $0.050.
• Net income per diluted share was $0.37 for the six months ended July 31, 2026, compared to $0.69 in the prior year.
• The company has no preferred stock issued or outstanding.
• Weighted average diluted shares outstanding were 15.7 million for the six months ended July 31, 2026.