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Virco Mfg. Corporation (NASDAQ:VIRC), the leading manufacturer and supplier of moveable furniture and equipment for educational environments in the United States, today reported financial results for the fourth quarter and full fiscal year ended January 31, 2024.
Net revenue for the full year ended January 31, 2024 increased 16.5% to $269.1 million from $231.1 million in the prior year. For the seasonally light fourth quarter, revenue increased 9.8% to $42.6 million from $38.8 million.
For the full year, the Company's domestically-based vertical business model continued to support timely delivery of highly seasonal school furniture, approximately 50% of which is installed during the summer months of June through August, when schools are out of session. This seasonality creates operational, logistical, and financing challenges for the school furniture market. Virco's 74-year history of serving public and private schools, along with its experienced workforce—40% of whom have over twenty years' service with the Company—has resulted in an integrated strategy that combines reliable customer service with good control of the order-to-cash cycle. At fiscal year-end, other than a small mortgage on one of its Conway, Arkansas facilities, the Company was effectively debt-free, having emerged from the pandemic financially stronger than in 2019.
Gross margin for the full year improved to 43.1% compared to 36.9% in the prior year. For the seasonally light fourth quarter, gross margin improved to 37.7% vs. 33.5% in the prior year. The improved gross margin was due to stabilizing raw material costs and operating efficiencies generated by higher overall volume.
Selling, General, and Administrative expenses for the full year declined to 31.3% of revenue compared to 32.3% in the prior year. Demand for the Company's PlanSCAPE project-management services continued to grow, along with more traditional full service delivery and installation—all of which are part of Virco's vertically integrated sales, manufacturing, and service model. The Company estimates that over two-thirds of its revenue now includes some degree of enhanced services, continuing a trajectory that began over twenty years ago. The control offered by this vertical model, which provides better visibility than more fragmented models, allowed the Company to modulate its inventories and borrowings despite the uncertainties and disruptions in the supply chain over the past few years.
Operating Income for the full year ended January 31, 2024 was $31.9 million compared to $10.6 million the prior year. Interest expense as a percent of revenue was 1.0% compared to 0.9% the prior year, due to higher interest rates. Overall borrowing under the Company's seasonal working capital revolver was substantially lower despite the growth in shipments, allowing the Company to completely pay down its credit facility at year end. Other than a small mortgage on one of its Arkansas facilities, Virco was effectively debt-free as of this press release. Management fully expects to utilize its revolving credit facility during the peak summer season, but it also views the Company's strong financial position as essential to providing continuity of service to schools as well as a balanced portfolio of returns to investors.
Total Net Income after taxes for the full year was $21.9 million compared to $16.5 million the prior year. This comparison includes the reversal last year of an $8.5 million valuation allowance for potentially un-recoverable net operating loss (NOL) tax credits. Because of this, Management believes the most accurate comparison of year-over-year operating performance is Net Income before Taxes, which reached $29.2 million in FYE 1.31.24. This compares to $8.0 million in the prior year, a more than three-fold improvement.
Looking forward, Management notes that its preferred early-season measure of business velocity: "Shipments + Backlog" exceeded $317.6 million at year end, compared to $289.6 million FYE 1.31.23. Management uses this non-GAAP metric to plan production, staffing, and borrowings ahead of the busy summer delivery season, when the metric, which is heavily weighted toward backlog in the offseason, converts to shipments and receivables. This seasonal transition is of sufficient magnitude to represent an obvious burden on financing, but also on the systems and people who manage it. The Company has developed these systems, many of which are proprietary and not available "off the shelf," over its continuous 74-year history of serving America's public and private schools.
Commenting on the year's results, Virco Chairman and CEO Robert Virtue said: "While we are extremely pleased with last year's results, we've been at this long enough to know that markets and competition are always evolving. We have meaningful opportunities and challenges ahead of us, but I feel confident in our ability to address these with the same discipline and optimism that we've exhibited over our 74-year history. I also want to thank our loyal investors, whose support made it possible to realize the vision of our long-term strategy. A visit to our factories, or to one the thousands of schools that we furnished last year, will validate the qualitative elements of our strategy. Good jobs and good schools: two things we're honored to support."
Posted In: VIRC
