Virco's Q2 Earnings Beat Estimates, Revenues Miss, Stock Falls

Virco Manufacturing Corporation VIRC reported mixed second-quarter fiscal 2024 (ended July 31, 2024) results, wherein earnings surpassed the Zacks Consensus Estimate but sales missed the same. Following the results, the company's shares lost 9.3% on Sept. 09.

On a year-over-year basis, the top and the bottom lines increased. This was primarily driven by higher factory output and improved operating efficiencies. A large counter-seasonal disaster recovery order also contributed to the positive results. This order is now blending into the company's usual seasonal delivery pattern, which peaks during the second and third quarters when schools are closed.

Although order rates declined slightly with the progress of summer, Shipments plus Backlog remained higher compared to last year. The company is confident in its ability to adapt to these changes. Its strong financial position supports the ongoing investments in new manufacturing equipment and service expansions. VIRC is well-positioned to seize unexpected opportunities as the market adjusts to a new post-pandemic phase.

Going forward, the company aims to seek potential acquisition opportunities to expand and strengthen its current business capabilities. Also, along with driving its prospects, Virco expects to add shareholder value through quarterly dividends and share repurchases.

Delving Deeper

The company reported adjusted earnings of $1.04 per share, which surpassed the Zacks Consensus Estimate of $1.00 by 4%. In the last reported quarter, it reported adjusted earnings of 95 cents per share.

Operating Highlights

During the fiscal second quarter, Virco's gross profit increased 3.4% year over year to $50.2 million. The gross margin expanded 100 basis points (bps) to 46.3% from 45.3% a year ago.

Selling, general and administrative expenses, as a percentage of sales, increased 60 bps to 26.1% from 25.5% reported a year ago. The uptick in operating expenses stemmed from a modest increase in full-service orders and the associated installation costs.

The company reported an operating profit of $21.9 million compared with $21.2 million in the prior-year quarter.

Financials

At the end of the fiscal second-quarter, Virco had cash of $0.8 million, down from $5.3 million at fiscal 2023-end. As of July 31, long-term debt (less current portion) was $4 million, slightly down from $4.1 million at fiscal 2023-end.

At the end of second-quarter fiscal 2024, the company's inventory came in at $58.6 million, slightly up from $58.4 million in the year-ago period.

VIRC's Zacks Rank

Virco currently carries a Zacks Rank #3 (Hold).

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