Virco Mfg. Corporation Reports Q3 Financial Results with Decrease in Net Income

Virco Mfg. Corporation reported its financial results for the third quarter and nine months ended October 31, 2024, revealing a net income of $8.4 million on sales of $82.6 million. This marks a decrease from the net income of $10.2 million on sales of $84.3 million in the same period last year. The company's gross profit for the quarter was $36.7 million, resulting in a gross margin of 44.4%, down from 45.4% in the prior year. For the nine-month period, net income increased to $27.4 million from $24.3 million, with sales rising to $237.8 million from $226.5 million, reflecting a 5% increase attributed to higher volume and an improved product mix.

The company experienced a significant shift in its operational metrics compared to the previous fiscal period. Notably, the total current assets increased to $119.5 million from $98.8 million a year earlier, driven by a substantial rise in cash reserves, which reached $38.9 million, up from $4.9 million. However, trade accounts receivable decreased by approximately $4.9 million, indicating improved collection efficiency. The inventory also saw a reduction of $10 million, attributed to increased shipments and effective inventory management.

Strategically, Virco has benefited from a series of disaster recovery orders, which contributed approximately $19 million in additional revenue over the past nine months. This influx of orders has positively impacted production and inventory management, allowing the company to reduce its reliance on external financing. The company also executed a significant lease renewal for its Torrance, California facility, resulting in an increase in right-of-use assets and lease liabilities by approximately $33 million.

Operationally, the company reported a decrease in order volume of about 13% for the third quarter compared to the previous year, although there was a 2% increase in orders for the nine-month period. The order backlog at the end of October 2024 was approximately $25 million, down from $42.6 million a year prior, reflecting improved delivery performance and a smaller beginning backlog. The company’s employee headcount remained stable, supporting its operational needs without significant fluctuations.

Looking ahead, Virco's management anticipates a return to more typical seasonal patterns following the completion of the disaster recovery project. The company remains cautious about potential impacts from political changes affecting school funding, although it believes that its strong position in the domestic market and investments in local manufacturing will mitigate risks associated with supply chain disruptions. The company expects to maintain compliance with its financial covenants and believes that its cash flows, combined with available credit, will be sufficient to meet its operational and capital needs in the coming year.