Virco Manufacturing Corporation (VIRC) unveiled mixed results for its second-quarter fiscal 2024 (ending July 31, 2024), reporting earnings that surpassed analysts’ expectations but falling short on sales. Following the release, the company’s shares took a 9.3% dip on September 9th. Despite the sales miss, both the top and bottom lines saw year-over-year growth. This positive performance was driven by a combination of factors, including higher factory production, improved operational efficiencies, and a significant counter-seasonal disaster recovery order. This order, however, is now blending into the company’s usual seasonal delivery pattern, which peaks during the second and third quarters when schools are closed. While order rates have slightly decreased as summer progresses, Virco reports that shipments plus backlog remain higher than last year.
The company is confident in its ability to adapt to these shifting market conditions, citing its strong financial position as a foundation for ongoing investments in new manufacturing equipment and service expansions. Virco believes its adaptability positions the company to capitalize on unexpected opportunities as the market navigates a new post-pandemic phase. Looking ahead, Virco aims to leverage potential acquisition opportunities to expand and strengthen its current business capabilities. Beyond organic growth, the company aims to enhance shareholder value through consistent quarterly dividends and share repurchases.
Delving deeper into the results, Virco reported adjusted earnings of $1.04 per share, surpassing the Zacks Consensus Estimate of $1.00 by 4%. This represents an improvement from the adjusted earnings of 95 cents per share reported in the previous quarter. Net sales reached $108.4 million, missing the consensus mark of $115.9 million by 6.5%, but still representing a 1% increase from the prior-year quarter.
During the fiscal second quarter, Virco’s gross profit rose 3.4% year-over-year to $50.2 million. The gross margin expanded by 100 basis points (bps) to 46.3%, compared to 45.3% a year ago. Selling, general, and administrative expenses, expressed as a percentage of sales, climbed by 60 bps to 26.1% from 25.5% reported a year earlier. The increase in operating expenses was attributed to a modest rise in full-service orders and the associated installation costs. Ultimately, the company reported an operating profit of $21.9 million, compared to $21.2 million in the prior-year quarter.
At the end of the fiscal second quarter, Virco held $0.8 million in cash, a decrease from $5.3 million at the end of fiscal 2023. As of July 31, long-term debt (less current portion) stood at $4 million, a slight reduction from $4.1 million at the end of fiscal 2023. The company’s inventory at the end of the second quarter of fiscal 2024 came in at $58.6 million, marginally higher than the $58.4 million reported in the year-ago period. Virco currently holds a Zacks Rank #3 (Hold).
