Virco Operating Income Nearly Doubles as Second Quarter Revenue Jumps 30%
Virco Mfg. Corporation reports strong Q2 results with revenue up 30% YoY to $107.3 million and operating income nearly doubling to $21.3 million. Year-to-date revenue increased 23.8% to $142.3 million and operating income improved to $19.9 million. Gross margin for Q2 improved from 38.5% to 45.3%.
Positive
Revenue up 30% YoY to $107.3 million
Operating income nearly doubled to $21.3 million
Year-to-date revenue increased 23.8% to $142.3 million
Gross margin improved from 38.5% to 45.3%
09/11/2023 - 08:30 AM
Exemplary Performance by U.S. Factories and Delivery Teams convert record backlog to on-time deliveries for Back-to-School Year-to Date Revenue up 24% to $142 million Year-to-Date Operating Income improves to $20 million TORRANCE, Calif., Sept. 11, 2023 (GLOBE NEWSWIRE) -- Virco Mfg. Corporation (NASDAQ: VIRC), the largest manufacturer and supplier of movable furniture and equipment for educational environments in the United States, today reported financial results for the quarterly period ended July 31, 2023 (second quarter of fiscal 2024).
Virco Mfg. Corporation today reported that revenue for the second quarter ended July 31 grew 30% YOY from $82,797,000 t o $107,321,000 as the Company’s U.S. factories and logistics converted a record backlog to nationwide on-time deliveries for the new school year. In combination with stabilizing material and freight costs, the Company’s domestic operations generated improved profitability on the higher volume. For the second quarter, operating income nearly doubled from $11,174,000 t o $21,254,000.
Year-to-date, revenue increased 23.8% from $114,881,000 in the first six months of last year to $142,264,000 t his year. Operating income for the first six months improved from $6,430,000 last year to $19,942,000 in the current year.
Gross Margin for the second quarter improved from 38.5% to 45.3% , due to a combination of moderating raw material costs and improved operating efficiencies in the Company’s U.S. factories. SG&A as a percent of sales increased slightly from 25.0% last year to 25.5% this year. For the first six months, gross margin improved from 36.2% last year to 43.4% in the current year. For the same period, SG&A as a percent of sales declined from 30.6% to 29.4% .
Interest expense on the Company’s seasonal credit facility was $1,083,000 for the current quarter compared to $698,000 for the same period last year. Year-to-date, interest expense was $1,795,000 , or 1.3% of revenue, compared to $1,125,000 , or 1.0% of revenue for the first six months of last year. The Company has adequate availability under its current facility and is able to finance its growth organically, with improved profitability and cash flows being generated by the higher revenue. Management observes that timely deliveries have contributed to timely collections on accounts receivable, leading to strong cash flows through the middle of the Company’s busy season. Other key balance sheet items such as inventories, accounts payable, and accounts receivable remain favorably balanced with the increase in revenue and earnings.
Commenting on the strong second quarter and first six months, Virco CEO and Chairman Robert Virtue said: “We performed exceptionally well in this year’s back-to-school season. We had a record backlog of deliveries to make, and we made them. This ability to execute is directly tied to our domestic U.S. factories and logistics teams. As schools have extended their instruction calendar to make up for pandemic-related learning loss, our summer delivery window has effectively been narrowed. We have the physical footprint and the operating know-how to make and deliver millions of pounds of furniture in what is now a six- to eight-week delivery season. This environment has been increasingly challenging for import-based competitors. We are seeing a meaningful gain in new customers in this new competitive landscape.”
Virco President Doug Virtue offered these additional comments: “We consider ourselves fortunate to have come out of the pandemic stronger than we went in. We are uniquely positioned to help schools as they modify their calendars and curricula to address the learning challenges faced by today’s students. Our vertical model has proven highly adaptable to these accelerations. We have good control over inventories, delivery performance, and the entire order-to-cash cycle. Ultimately, this allows us to better serve educators and students as they seek creative solutions to the challenges of the last few years.”
Contact:
Statement Concerning Forward-Looking Information
This news release contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding: our future financial results and growth in our business; business strategies; market demand and product development; estimates of unshipped backlog; order rates and trends in seasonality; product relevance; economic conditions and patterns; the educational furniture industry generally, including the domestic market for classroom furniture; cost control initiatives; absorption rates; and supply chain challenges. Forward-looking statements are based on current expectations and beliefs about future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors, many of which are out of our control and difficult to forecast. These factors may cause actual results to differ materially from those that are anticipated. Such factors include, but are not limited to: uncertainties surrounding the severity, duration and effects of the COVID-19 pandemic; changes in general economic conditions including raw material, energy and freight costs; state and municipal bond funding; state, local, and municipal tax receipts; order rates; the seasonality of our markets; the markets for school and office furniture generally, the specific markets and customers with which we conduct our principal business; the impact of cost-saving initiatives on our business; the competitive landscape, including responses of our competitors and customers to changes in our prices; demographics; and the terms and conditions of available funding sources. See our Annual Report on Form 10-K for the year ended January 31, 2023, our Quarterly Reports on Form 10-Q, and other reports and material that we file with the Securities and Exchange Commission for a further description of these and other risks and uncertainties applicable to our business. We assume no, and hereby disclaim any, obligation to update any of our forward-looking statements. We nonetheless reserve the right to make such updates from time to time by press release, periodic reports, or other methods of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements which are not addressed by such an update remain correct or create an obligation to provide any other updates.
Financial Tables Follow
Virco Mfg. Corporation
Unaudited Condensed Consolidated Balance Sheets
7/31/2023 1/31/2023 7/31/2022 (In thousands) Assets Current assets Cash $ 1,600 $ 1,057 $ 2,179 Trade accounts receivables, net 68,592 18,435 44,286 Other receivables 58 68 95 Income tax receivable — 19 111 Inventories 71,853 67,406 61,228 Prepaid expenses and other current assets 2,228 2,083 2,068 Total current assets 144,331 89,068 109,967 Non-current assets Property, plant and equipment Land 3,731 3,731 3,731 Land improvements 686 686 653 Buildings and building improvements 51,441 51,310 51,456 Machinery and equipment 115,899 113,662 115,029 Leasehold improvements 977 983 1,012 Total property, plant and equipment 172,734 170,372 171,881 Less accumulated depreciation and amortization 137,392 135,810 136,973 Net property, plant and equipment 35,342 34,562 34,908 Operating lease right-of-use assets 8,285 10,120 12,115 Deferred tax assets, net 7,100 7,800 488 Other assets, net 9,279 8,576 8,051 Total assets $ 204,337 $ 150,126 $ 165,529
Virco Mfg. Corporation
Unaudited Condensed Consolidated Balance Sheets
7/31/2023 1/31/2023 7/31/2022 (In thousands, except share and par value data) Liabilities Current liabilities Accounts payable $ 27,854 $ 19,448 $ 27,290 Accrued compensation and employee benefits 10,983 9,554 6,873 Income tax payable 3,325 — — Current portion of long-term debt 32,256 7,360 22,736 Current portion operating lease liability 5,386 5,082 4,909 Other accrued liabilities 11,259 7,081 10,057 Total current liabilities 91,063 48,525 71,865 Non-current liabilities Accrued self-insurance retention 934 1,050 1,436 Accrued pension expenses 10,827 10,676 15,238 Income tax payable 81 79 73 Long-term debt, less current portion 14,261 14,384 14,504 Operating lease liability, less current portion 4,317 6,796 9,241 Other long-term liabilities 559 555 667 Total non-current liabilities 30,979 33,540 41,159 Commitments and contingencies (Notes 6, 7 and 13) Stockholders’ equity Preferred stock: Authorized 3,000,000 shares, $0.01 par value; none issued or outstanding — — — Common stock: Authorized 25,000,000 shares, $0.01 par value; issued and outstanding 16,347,314 shares at 7/31/2023 and 16,210,985 at 1/31/2023 and 7/31/2022 164 162 162 Additional paid-in capital 121,030 120,890 120,684 Accumulated deficit (36,539 ) (50,631 ) (62,582 ) Accumulated other comprehensive loss (2,360 ) (2,360 ) (5,759 ) Total stockholders’ equity 82,295 68,061 52,505 Total liabilities and stockholders’ equity $ 204,337 $ 150,126 $ 165,529
Virco Mfg. Corporation
Unaudited Condensed Consolidated Statements of Income
Three months ended 7/31/2023 7/31/2022 (In thousands, except per share data) Net sales $ 107,321 $ 82,797 Costs of goods sold 58,743 50,952 Gross profit 48,578 31,845 Selling, general and administrative expenses 27,324 20,671 Operating income 21,254 11,174 Unrealized (gain) loss on investment in trust account (325 ) 305 Pension expense 161 196 Interest expense 1,083 698 Income before income taxes 20,335 9,975 Income tax expense 4,801 295 Net income $ 15,534 $ 9,680 Net income per common share: Basic $ 0.95 $ 0.60 Diluted $ 0.95 $ 0.60 Weighted average shares of common stock outstanding: Basic 16,272 16,108 Diluted 16,294 16,108
Virco Mfg. Corporation
Unaudited Condensed Consolidated Statements of Income
Six months ended 7/31/2023 7/31/2022 (In thousands, except per share data) Net sales $ 142,264 $ 114,881 Costs of goods sold 80,484 73,329 Gross profit 61,780 41,552 Selling, general and administrative expenses 41,838 35,122 Operating income 19,942 6,430 Unrealized (gain) loss on investment in trust account (624 ) 305 Pension expense 322 391 Interest expense 1,795 1,125 Income before income taxes 18,449 4,609 Income tax expense 4,357 13 Net income $ 14,092 $ 4,596 Net income per common share: Basic $ 0.87 $ 0.29 Diluted $ 0.87 $ 0.29 Weighted average shares of common stock outstanding: Basic 16,242 16,071 Diluted 16,257 16,071
