Virco Mfg. Corporation Reports 42.3% Decline in Third Quarter Net Sales

Virco Mfg. Corporation reported a significant decline in financial performance for the three and nine months ended October 31, 2025, as detailed in its latest 10-Q filing. The company recorded net sales of $47.6 million for the third quarter, a decrease of approximately 42.3% compared to $82.6 million in the same period last year. For the nine-month period, sales totaled $173.5 million, down 27.0% from $237.8 million in the prior year. The decline in revenue is attributed to the absence of one-time disaster recovery shipments that had positively impacted the previous year's results, alongside a challenging macroeconomic environment affecting demand for educational furniture.

The company's gross profit for the third quarter was $18.1 million, resulting in a gross margin of 38.0%, down from 44.4% in the prior year. The increase in cost of goods sold as a percentage of sales, which rose to 62.0% from 55.6%, reflects the impact of lower sales volume and reduced production levels. Selling, general, and administrative expenses decreased by $5.8 million, primarily due to lower variable selling expenses, but increased as a percentage of sales to 41.5% from 30.9% in the previous year, highlighting the fixed nature of many SG&A costs.

Operationally, the company has moderated production levels in response to the decreased demand and is closely monitoring incoming orders to balance inventory investment with timely summer deliveries. As of October 31, 2025, the order backlog was approximately $26 million, slightly down from $27 million in the prior year. The company’s inventory increased to $53.1 million, driven by rising costs and decreased production levels. Additionally, accounts receivable decreased by $14.4 million, reflecting the overall decline in shipments.

In terms of strategic developments, Virco's Board of Directors approved the termination of the VIP Retirement Plan, which is expected to be settled through lump-sum distributions funded by a rabbi trust. This decision aims to reduce benefit obligations and administrative costs. The company also amended its credit agreement with PNC Bank, allowing for a new category of permitted share repurchases and adjusting the revolving line of credit limits. As of October 31, 2025, the company had approximately $26.5 million in cash, down from $38.9 million a year earlier, and no outstanding amounts under its credit agreement.

Looking ahead, Virco's management anticipates that the current macroeconomic uncertainties, including government budget constraints and trade policy changes, may continue to impact demand for its products. The company is focused on reinforcing its domestic capabilities and relationships to navigate these challenges. Management believes that cash flows from operations, along with available borrowing capacity, will be sufficient to meet the company's financial obligations and support its operational needs in the coming year.