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VIRCO MFG CORPORATION (VIRC)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 2026 revenue fell 15.1% year over year to $92.1M as the U.S. school furniture market softened and comparisons lapped a large one-time disaster recovery order; operating income was $15.4M and net income $10.2M, reflecting resilient profitability despite lower volumes .
  • Against Wall Street consensus, Q2 missed on revenue ($92.1M vs $113.8M*) and EPS ($0.65 vs $0.84*); Q1 2026 had also missed revenue but beat EPS versus expectations (-$0.13* expected vs $0.05 actual)*.
  • Gross margin quality remained high (Q2: 44.4%; YTD: 45.2%) driven by domestic manufacturing and a higher mix of full‑service orders; management is cautious for the remainder of the year given tariffs, funding uncertainty, and a 25.8% decline in Shipments + Backlog to $165.9M .
  • Board declared a $0.025 quarterly dividend (payable Oct 10, 2025), up from $0.020 in the prior year; dividend was maintained sequentially from Q1 .

Consensus values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • Strong profitability despite downturn: Q2 operating income $15.4M and net income $10.2M; through six months, operating income $15.3M (third-highest in the past decade) .
  • Gross margin resilience: Q2 gross profit $40.9M on $92.1M sales (≈44.4%); YTD gross margin 45.2% vs 45.5% LY, supported by domestic fabrication and higher full‑service mix .
  • Management confidence and strategic positioning: “Our status as a vertically‑integrated manufacturer/supplier … liquidity and strong balance sheet put us in position to benefit from whatever the new equilibrium turns out to be.” — Robert A. Virtue, Chairman & CEO .

What Went Wrong

  • Top-line pressure: Q2 shipments/revenue down 15.1% to $92.1M; six months down 18.9% to $125.8M due to market slowdown and absence of last year’s counter‑seasonal disaster recovery order (~$13M) .
  • Backlog signal turned negative: Shipments + Backlog at 7/31/2025 fell 25.8% to $165.9M, prompting management caution for H2 .
  • SG&A deleverage with lower volume: Q2 SG&A $25.5M; six months SG&A at 33.1% of revenue vs 29.5% LY, reflecting inflationary pressures and service intensity .

Financial Results

MetricQ2 2025Q1 2026Q2 2026
Revenue ($USD Millions)$108.4 $33.8 $92.1
Gross Profit ($USD Millions)$50.2 $16.0 $40.9
Gross Margin (%)46.3% (50.2/108.4) 47.5% 44.4% (40.9/92.1)
SG&A ($USD Millions)$28.3 $16.1 $25.5
SG&A (% of Sales)26.1% (28.3/108.4) 47.7% (16.1/33.8) 27.7% (25.5/92.1)
Operating Income ($USD Millions)$21.9 -$0.09 $15.4
Net Income ($USD Millions)$16.8 $0.73 $10.2
Diluted EPS ($USD)$1.04 $0.05 $0.65
Net Income Margin (%)15.5% (16.8/108.4) 2.2% (0.73/33.8) 11.1% (10.2/92.1)
EBIT Margin (%)20.2% (21.9/108.4) -0.3% (-0.09/33.8) 16.7% (15.4/92.1)

Actual vs Consensus

MetricQ1 2026 ActualQ1 2026 Consensus*Q2 2026 ActualQ2 2026 Consensus*
Revenue ($USD Millions)$33.8 $41.1*$92.1 $113.8*
EPS ($USD)$0.05 -$0.13*$0.65 $0.84*
# of Estimates—1.0*—1.0*

Consensus values retrieved from S&P Global.*

Segment breakdown: Not applicable; Virco reports consolidated results only .

KPIs

KPIQ4 2025 (FY-end)Q1 2026Q2 2026
Shipments + Backlog ($USD Millions)$316.4 $105.6 $165.9
Dividend per Share ($)$0.09 FY dividend $0.025 declared (pay 7/11/2025) $0.025 declared (pay 10/10/2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial GuidanceFY 2026None provided None provided; management uses Shipments + Backlog Maintained (no guidance)
Shipments + Backlog ($M)As of Q2 2026 (7/31/2025)$223.7 at 7/31/2024 $165.9 Lower
Dividend per Share ($)Q2 2026$0.020 in Q2 2025 $0.025 (pay 10/10/2025) Raised YoY; Maintained QoQ

Earnings Call Themes & Trends

Note: A Q2 2026 earnings call transcript was not available in our document catalog after targeted search; themes are drawn from press releases and 8‑K disclosures (no transcript found).

TopicPrevious Mentions (Q4 2025)Previous Mentions (Q1 2026)Current Period (Q2 2026)Trend
Supply chain & domestic manufacturingEmphasized domestic fabrication/service; 5‑year lease extension supports operations Confident in peak-season delivery despite disruptions; gross margin aided by full‑service mix Domestic capabilities cited as advantage in uncertain tariff/trade environment Stable positive; strategic pillar
Tariffs/macro policyWarned input costs likely to rise; potential margin pressure Underlying demand aligns with election bond cycles “Full economic impacts of recent tariff announcements… yet to be seen”; cautious stance Heightened caution
Demand trajectoryFY Shipments + Backlog $316.4M; down slightly YoY Shipments + Backlog down 22.9% to $105.6M Shipments + Backlog down 25.8% to $165.9M; Q2 revenue down 15.1% Weak near-term
Pricing/marginsFY gross margin steady at 43.1% GM improved to 47.5% on mix; tariffs unlikely to impact GM materially YTD GM 45.2%; Q2 GM ≈44.4%; SG&A % higher YTD amid inflation/service Margin quality resilient
Capital allocationFY cash $26.9M; $5M dividends+buybacks; $6M capex $4.4M shareholder returns Q1; >$2M platform capex Quarterly dividend maintained; liquidity supports working capital Continued returns/capex

Management Commentary

  • “We think our status as a vertically‑integrated manufacturer/supplier with over 2 million square feet of domestic infrastructure and a deeply experienced workforce, as well as our liquidity and strong balance sheet, put us in position to benefit from whatever the new equilibrium turns out to be.” — Robert A. Virtue, Chairman & CEO .
  • “It’s our sense now… that the full economic impacts of recent tariff announcements and related supply‑chain responses have yet to be seen… This moment reminds us of the summer of 2021, when the short‑term prospects were discouraging but the longer‑term looked bright.” — Robert A. Virtue .
  • Strategy focus remains on investing through cycles, with platform processes expanding controllable operating leverage and enabling rapid deployment of new technologies across production, service, and distribution .

Q&A Highlights

  • A Q2 2026 earnings call transcript was not available; therefore, Q&A themes and any call-specific guidance clarifications cannot be assessed from primary sources (transcript search returned no documents).

Estimates Context

  • Q2 missed consensus revenue and EPS: $92.1M vs $113.8M* and $0.65 vs $0.84*, respectively; coverage remains thin (1 estimate), increasing forecast uncertainty.
  • Q1 2026 had a revenue miss ($33.8M vs $41.1M*) but an EPS beat ($0.05 vs -$0.13*), likely reflecting better margin mix and opex control despite lower volumes .
  • With Shipments + Backlog down and management caution, Street models may need to revise H2 revenue assumptions lower while maintaining relatively resilient margin expectations given domestic manufacturing and mix.

Consensus values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term demand softness and backlog declines drove a significant revenue miss in Q2; the absence of last year’s disaster recovery order amplified y/y pressure .
  • Profitability remained solid (Q2 operating margin ≈16.7%; net margin ≈11.1%), underscoring the defensibility of Virco’s domestic manufacturing/service model even in downturns .
  • Management’s cautious tone on tariffs and school funding suggests H2 risk to volumes; monitor election-cycle bond dynamics and public school funding trends .
  • Dividend increased year over year to $0.025 and maintained sequentially, signaling balance sheet strength and ongoing shareholder returns despite macro uncertainty .
  • Mix-led margin resilience (YTD GM 45.2%) and lower interest expense reflect operational discipline and strong liquidity; however, SG&A % is elevated with service intensity and inflation .
  • With only one Street estimate, consensus visibility is limited; Q2 miss likely drives model reset on revenue, while margins and cash flow could outperform relative to reduced top-line expectations.*
  • Trading lens: Expect sensitivity to backlog/order updates and any tariff developments; upward catalysts include signs of demand normalization post-election cycle, improved bond funding, and continued margin durability .

Consensus values retrieved from S&P Global.*

Appendix: Context Data (from primary sources)

  • Q2 2026 statement of income: Net sales $92.086M; gross profit $40.874M; SG&A $25.503M; operating income $15.371M; net income $10.186M; diluted EPS $0.65 .
  • Q1 2026 statement: Net sales $33.754M; gross profit $16.020M; SG&A $16.114M; operating loss $0.094M; net income $0.732M; diluted EPS $0.05 .
  • Q2 2025 statement: Net sales $108.419M; gross profit $50.218M; SG&A $28.324M; operating income $21.894M; net income $16.833M; diluted EPS $1.04 .
  • Shipments + Backlog: $316.4M at FY-end (1/31/2025) ; $105.6M at Q1 (4/30/2025) ; $165.9M at Q2 (7/31/2025) .