VIRCO MFG CORPORATION 10-Q

Item 1. Financial Statements Virco Mfg. Corporation Unaudited Condensed Consolidated Balance Sheets 10/31/2025 1/31/2025 10/31/2024 (In thousands) Assets Current assets Cash $ 26,509 $ 26,867 $ 38,858 Trade accounts receivables, net 13,799 13,004 28,168 Income tax receivable 409 4,060 — Inventories 53,087 55,647 48,948 Prepaid expenses and other current assets 2,991 2,595 3,479 Total current assets 96,795 102,173 119,453 Non-current assets Property, plant and equipment, net 35,453 36,428 35,621 Operating lease right-of-use assets 31,655 35,593 36,876 Deferred income tax assets, net 5,947 5,821 6,550 Other assets, net 11,687 11,931 11,645 Total assets $ 181,537 $ 191,946 $ 210,145 See accompanying notes to unaudited condensed consolidated financial statements. 3 Virco Mfg. Corporation Unaudited Condensed Consolidated Balance Sheets 10/31/2025 1/31/2025 10/31/2024 (In thousands, except share and par value data) Liabilities Current liabilities Accounts payable $ 5,715 $ 11,593 $ 15,381 Accrued compensation and employee benefits 6,069 11,064 12,439 Income tax payable — — 1,463 Current portion of long-term debt 266 258 256 Current portion of operating lease liability 6,389 1,673 863 Other accrued liabilities 5,875 9,687 11,142 Total current liabilities 24,314 34,275 41,544 Non-current liabilities Accrued self-insurance retention 927 780 1,033 Accrued pension expenses 6,389 6,746 9,345 Income tax payable, less current portion 287 200 261 Long-term debt, less current portion 3,678 3,878 3,943 Operating lease liability, less current portion 31,467 36,007 37,380 Other long-term liabilities 840 795 780 Total non-current liabilities 43,588 48,406 52,742 Commitments and contingencies (Note 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 15,761,141 shares at 10/31/2025, 16,087,082 shares at 1/31/2025, and 16,289,406 shares at 10/31/2024 157 161 163 Additional paid-in capital 113,714 117,549 119,796 Accumulated deficit ( 456 ) ( 8,867 ) ( 2,734 ) Accumulated other comprehensive income (loss) 220 422 ( 1,366 ) Total stockholders’ equity 113,635 109,265 115,859 Total liabilities and stockholders’ equity $ 181,537 $ 191,946 $ 210,145 See accompanying notes to unaudited condensed consolidated financial statements. 4 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Operations Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands, except per share data) Net sales $ 47,636 $ 82,620 $ 173,476 $ 237,774 Costs of goods sold 29,544 45,942 98,490 130,531 Gross profit 18,092 36,678 74,986 107,243 Selling, general and administrative expenses 19,785 25,565 61,402 71,265 Operating (loss) income ( 1,693 ) 11,113 13,584 35,978 Unrealized loss (gain) on investment in trust account 49 ( 246 ) ( 158 ) ( 1,058 ) Pension expense 27 106 81 320 Interest expense (income), net 40 ( 24 ) 305 506 (Loss) income before income taxes ( 1,809 ) 11,277 13,356 36,210 Income tax (benefit) expense ( 484 ) 2,876 3,764 8,836 Net (loss) income $ ( 1,325 ) $ 8,401 $ 9,592 $ 27,374 Cash dividends declared per common share: $ 0.025 $ 0.025 $ 0.075 $ 0.065 Net (loss) income per common share: Basic $ ( 0.08 ) $ 0.52 $ 0.61 $ 1.67 Diluted $ ( 0.08 ) $ 0.52 $ 0.61 $ 1.67 Weighted average shares of common stock outstanding: Basic 15,761 16,289 15,761 16,379 Diluted 15,761 16,296 15,766 16,382 See accompanying notes to unaudited condensed consolidated financial statements. 5 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands) Net (loss) income $ ( 1,325 ) $ 8,401 $ 9,592 $ 27,374 Other comprehensive loss: Pension adjustments (net of tax adjustment of $( 22 ) and $( 29 ) for three months, and $( 68 ) and $( 57 ) for nine months at October 31, 2025 and 2024, respectively) ( 68 ) ( 9 ) ( 202 ) ( 56 ) Net comprehensive (loss) income $ ( 1,393 ) $ 8,392 $ 9,390 $ 27,318 See accompanying notes to unaudited condensed consolidated financial statements. 6 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Cash Flows Nine Months Ended 10/31/2025 10/31/2024 (In thousands) Operating activities Net income $ 9,592 $ 27,374 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,630 4,165 Non-cash lease expense 4,114 302 Provision for credit losses 45 45 Amortization of debt issuance costs 102 81 Deferred income taxes ( 58 ) 272 Stock-based compensation 161 333 Amortization of net actuarial gain for pension plans ( 270 ) ( 113 ) Non-cash unrealized gain on investment ( 158 ) ( 1,058 ) Surrender of life insurance policies ( 219 ) ( 719 ) Loss on disposal of property and equipment 7 — Changes in operating assets and liabilities: Trade accounts receivable ( 840 ) ( 5,052 ) Inventories 2,559 9,423 Income taxes 3,739 1,318 Prepaid expenses and other assets ( 396 ) ( 1,237 ) Accounts payable and accrued liabilities ( 13,026 ) 6,286 Net cash provided by operating activities 9,982 41,420 Investing activities Purchases of property, plant and equipment ( 5,086 ) ( 5,365 ) Purchases of marketable securities in trust accounts — ( 1,285 ) Proceeds from sale of fixed assets — 4 Proceeds from sale of marketable securities in trust accounts — 1,285 Proceeds from surrendering life insurance policies 119 719 Net cash used in investing activities ( 4,967 ) ( 4,642 ) Financing activities Borrowing from long-term debt — 23,165 Repayment of long-term debt ( 192 ) ( 23,350 ) Common stock repurchased ( 4,000 ) ( 1,499 ) Tax withholding payments on share-based compensation — ( 412 ) Payment of deferred financing costs — ( 50 ) Cash dividends paid ( 1,181 ) ( 1,060 ) Net cash used in financing activities ( 5,373 ) ( 3,206 ) Net (decrease) increase in cash ( 358 ) 33,572 Cash at beginning of period $ 26,867 $ 5,286 Cash at end of period $ 26,509 $ 38,858 Supplemental disclosures of cash flow information: Property, plant and equipment acquired and not yet paid at end of period $ 331 $ 350 Cash paid during the period for interest, net of interest income $ 305 $ 506 Cash paid during the period for income taxes, net of refunds $ 104 $ 7,291 Noncash investment in right-of-use assets in exchange for a lease liability $ 372 $ 32,982 See accompanying notes to unaudited condensed consolidated financial statements. 7 Virco Mfg. Corporation Unaudited Consolidated Statements of Changes in Stockholders' Equity Three-Month Period Ended October 31, 2025 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders' Equity Balance at July 31, 2025 15,761,141 $ 157 $ 113,667 $ 1,264 $ 288 $ 115,376 Net loss — — — ( 1,325 ) — ( 1,325 ) Cash dividends — — — ( 395 ) — ( 395 ) Pension adjustments — — — — ( 68 ) ( 68 ) Shares vested and others — — — — — — Stock compensation expense — — 47 — — 47 Stock repurchase — — — — — — Balance at October 31, 2025 15,761,141 $ 157 $ 113,714 $ ( 456 ) $ 220 $ 113,635 Three-Month Period Ended October 31, 2024 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Balance at July 31, 2024 16,289,406 $ 163 $ 119,734 $ ( 10,728 ) $ ( 1,357 ) $ 107,812 Net income — — — 8,401 — 8,401 Cash dividends — — — ( 407 ) — ( 407 ) Pension adjustments — — — — ( 9 ) ( 9 ) Shares vested and others — — ( 1 ) — — ( 1 ) Stock compensation expense — — 63 — — 63 Stock repurchase — — — — — — Balance at October 31, 2024 16,289,406 $ 163 $ 119,796 $ ( 2,734 ) $ ( 1,366 ) $ 115,859 Nine-Month Period Ended October 31, 2025 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity Balance at January 31, 2025 16,087,082 $ 161 $ 117,549 $ ( 8,867 ) $ 422 $ 109,265 Net income — — — 9,592 — 9,592 Cash dividends — — — ( 1,181 ) — ( 1,181 ) Pension adjustments — — — — ( 202 ) ( 202 ) Shares vested and others 23,003 — — — — — Stock compensation expense — — 161 — — 161 Stock repurchase ( 348,944 ) ( 4 ) ( 3,996 ) — — ( 4,000 ) Balance at October 31, 2025 15,761,141 $ 157 $ 113,714 $ ( 456 ) $ 220 $ 113,635 8 Nine-Month Period Ended October 31, 2024 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholder's Equity Balance at January 31, 2024 16,347,314 $ 164 $ 121,373 $ ( 29,048 ) $ ( 1,310 ) $ 91,179 Net income — — — 27,374 — 27,374 Cash dividends — — — ( 1,060 ) — ( 1,060 ) Pension adjustments — — — — ( 56 ) ( 56 ) Shares vested and others 81,794 1 ( 413 ) — — ( 412 ) Stock compensation expense — — 333 — — 333 Stock repurchase ( 139,702 ) ( 2 ) ( 1,497 ) — — ( 1,499 ) Balance at October 31, 2024 16,289,406 $ 163 $ 119,796 $ ( 2,734 ) $ ( 1,366 ) $ 115,859 See accompanying notes to unaudited condensed consolidated financial statements. 9 VIRCO MFG. CORPORATION Notes to Unaudited Condensed Consolidated Financial Statements October 31, 2025 Note 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2025 (“Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended October 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2026. The balance sheet at January 31, 2025 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All references to the “Company”, “we” and “our” refer to Virco Mfg. Corporation and its subsidiaries. Note 2. Seasonality and Management Use of Estimates The market for educational furniture is marked by extreme seasonality, with approximately 50 % of the Company’s total sales typically occurring from June to August each year, the Company’s peak season. Hence, the Company typically builds and carries significant amounts of inventory during and in anticipation of this peak summer season to facilitate the rapid delivery requirements of customers in the educational market. This requires a large up-front investment in inventory, labor, storage and related costs as inventory is built in anticipation of peak sales during the summer months. If the capital required for this build-up exceeds cash available from operations, the Company has generally relied on third-party bank financing to meet cash flow requirements during the build-up period immediately preceding the peak season. In addition, the Company typically is faced with an overall higher accounts receivable balance during the peak season. This occurs for two primary reasons. First, accounts receivable balances typically increase during the peak season as shipments of products increase. Second, many customers during this period are educational institutions and government entities, which tend to pay accounts receivable slower than commercial customers. The Company’s working capital requirements during and in anticipation of the peak summer season require management to make estimates and judgments that affect assets, liabilities, revenues and expenses, and related contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to market demand, labor costs and stocking inventory. Significant estimates made by management include, but are not limited to, valuation of inventory; deferred tax assets and liabilities; useful lives of property, plant and equipment; liabilities under pension, warranty and self-insurance; and the accounts receivable allowance for credit losses. Note 3. Recently Issued Accounting Standards New Accounting Pronouncements Recently Adopted Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. In November 2023, the FASB issued this ASU to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 during the year ended January 31, 2025. Refer to Note 16 for required disclosures. 10 Recently Issued Accounting Pronouncements ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. In July 2025, the FASB issued this ASU which provides a practical expedient to assume that the conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. This guidance is effective for annual reporting periods beginning after December 15, 2025, and for interim periods within those annual reporting periods, with early adoption permitted. The amendments in ASU 2025-05 should be applied prospectively. We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures. ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In November 2024, the FASB issued this ASU which requires a public entity to disclose additional information about specific expense categories in the notes to financial statements on an annual and interim basis. The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. A public entity should apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact that this guidance will have on our consolidated financial statements and disclosures. ASU 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures. In December 2023, the FASB issued this ASU which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. We do not expect that this guidance will have a material impact on our consolidated financial statements and disclosures. The Company evaluates all ASUs issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our condensed consolidated financial statements. We have assessed all ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact. Note 4. Revenue Recognition The Company manufactures, markets and distributes a wide variety of school and office furniture to wholesalers, distributors, educational institutions and governmental entities. Revenue is recorded for promised goods or services when control is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company's sales generally involve a single performance obligation to deliver goods pursuant to customer purchase orders. Prices for our products are based on published price lists and customer agreements. The Company has determined that the performance obligations are satisfied at a point in time when the Company completes delivery per the customer contract. The majority of sales are free on board ("FOB") destination where the destination is specified per the customer contract and may include delivering the furniture into the classroom, school site or warehouse. Sales of furniture that are sold FOB factory are typically made to resellers of our product who in turn provide logistics to the ultimate customer. Once a product has been delivered per the shipping terms, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from the asset. The Company considers control to have transferred upon shipment or delivery in accordance with shipping terms because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset. Sales are recorded net of discounts, sales incentives and rebates, sales taxes and estimated returns and allowances. The Company offers sales incentives and discounts through various regional and national programs to our customers. These programs include product rebates, product returns allowances and trade promotions. Variable consideration for these programs is estimated in the transaction price at contract inception based on current sales levels and historical experience using the expected value method, subject to constraint. The Company generates revenue primarily by manufacturing and distributing products through resellers and direct-to-customers. Control transfers to both resellers and direct customers at a point in time when the delivery process is complete as determined by the corresponding shipping terms. Therefore, we do not consider them to be meaningfully different revenue streams given similarities in the nature of the products, performance obligation and distribution processes. Sales are predominately in the United States and to a similar class of customer. We do not manage or evaluate the business based on product line or any other discernable category. 11 Note 5. Inventories Inventories are valued at the lower of cost or net realizable value (determined on a first-in, first-out basis (“FIFO”) and include material, labor, and factory overhead. The Company records valuation adjustments for the excess cost of the inventory over its estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. Valuation adjustments for slow-moving and obsolete inventory are calculated using an estimated percentage applied to inventories based on a physical inspection of the product in connection with a physical inventory, a review of slow-moving products and component stage, inventory category, historical and forecasted consumption of sales, and consideration of active marketing programs. The market for educational furniture is traditionally driven by value, not style, and the Company has not typically incurred material obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional valuation adjustments may be required. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation. The following table presents a breakdown of the Company’s inventories: 10/31/2025 1/31/2025 10/31/2024 (In thousands) Finished goods $ 21,721 $ 19,599 $ 17,793 Work in process 18,517 21,357 18,137 Raw materials 12,849 14,691 13,018 Total inventories $ 53,087 $ 55,647 $ 48,948 Note 6. Leases The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through the fiscal year 2031. The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement. The Company's lease terms include options to extend or terminate the lease only when it is reasonably certain that we exercise that option. All of the Company’s leases are classified as operating leases. The Company uses the implicit rate when readily determinable, or the incremental borrowing rate. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using Company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term. The Company has an operating lease for its corporate office and manufacturing and distribution facility located in Torrance, California, currently with a remaining lease term through September 2030. The Company leases equipment under a 5-year operating lease arrangement. The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option. In addition, the Company leases trucks and automobiles under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. The Company records lease expense on a straight-line basis based on the contractual lease payments. The Company recognizes the present value of the future lease commitments as an operating lease liability, and a corresponding right-of-use asset (“ROU asset”), net of tenant allowances. Tenant improvements and related tenant allowances are recorded as a reduction to the ROU asset. The Company elected to account for leases with an original term of 12 months or less that do not contain a purchase option as short-term leases. Additionally, certain of the leases provide for variable payment for property taxes, insurance, and common area maintenance payments, among others. The Company recognizes variable lease expenses for these leases in the period incurred. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. 12 The quantitative information regarding our leases is as follows: Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands, except lease term and discount rate) Operating lease cost $ 2,340 $ 2,341 $ 7,057 $ 5,183 Short-term lease cost 135 172 365 406 Sublease income ( 10 ) ( 10 ) ( 30 ) ( 30 ) Variable lease cost 705 4 1,087 622 Total lease cost $ 3,170 $ 2,507 $ 8,479 $ 6,181 Other operating leases information: Cash paid for amounts included in the measurement of lease liabilities $ 2,943 $ 4,881 Right-of-use assets obtained in exchange for new lease liabilities $ 372 $ 34,309 Weighted-average remaining lease term (years) 4.8 5.7 Weighted-average discount rate 9.84 % 9.80 % Minimum future lease payments for operating leases in effect as of October 31, 2025, are as follows: Operating Leases For the year ending January 31, (In thousands) Remaining of 2026 $ 2,448 2027 9,728 2028 9,464 2029 9,616 2030 9,945 Thereafter 6,832 Remaining balance of lease payments 48,033 Short-term lease liabilities 6,389 Long-term lease liabilities (a) 31,467 Total lease liabilities 37,856 Difference between undiscounted cash flows and discounted cash flows $ 10,177 (a) On July 23, 2024, the Company entered into a new lease agreement (the “Lease”) with Starboard Distribution Center, LLC which extends the Company’s tenancy at its 560,000 sq. ft. office, manufacturing and warehouse facility in Torrance, California. The Lease extends the tenancy for 65 months, covering the period from May 1, 2025 through September 30, 2030. Under the Lease, the monthly base rent will be abated for the initial 5-month period from May 1, 2025 to September 30, 2025, then is set at $ 726,700 for October 1, 2025 through April 30, 2026, with subsequent increases of 3.5 % every 12 months thereafter. The Lease also provides for a tenant improvement allowance of up to $ 1.7 million to be used by December 31, 2026. The Landlord has the right to terminate the Lease upon customary events of default. In connection with this lease agreement, in the second quarter ended July 31, 2024, the Company recorded approximately $ 33.0 million (the present value of the future lease commitments) as an operating lease liability, and a corresponding ROU asset. 13 Note 7. Debt Outstanding balances for the Company’s long-term debt are as follows: 10/31/2025 1/31/2025 10/31/2024 (In thousands) Revolving credit line $ — $ — $ — Other 3,944 4,136 4,199 Total debt 3,944 4,136 4,199 Less current portion 266 258 256 Non-current portion $ 3,678 $ 3,878 $ 3,943 The Company and Virco Inc., its wholly-owned subsidiary (collectively, the “Borrowers”) have a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”). The Credit Agreement was amended numerous times since its origination in December 2011, most recently on December 5, 2025. The Credit Agreement as currently in effect permits the Company to issue cash dividends or make payments with respect to the Company’s capital stock in an aggregate amount up to $ 8.0 million during any fiscal year, provided that no default shall have occurred or is continuing or would result from any such payment, and the Company must demonstrate pro forma compliance with a 12-month trailing Fixed Charge Coverage Ratio ("FCCR") of not less than 1.20 :1.00 as of the fiscal quarter immediately preceding the date of any such dividend or payment. The Credit Agreement also requires the Company to maintain a minimum FCCR, and contains numerous other covenants that limit under certain circumstances the ability of the Borrowers and their subsidiaries to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, sell assets outside of the ordinary course of business, enter into transactions with affiliates, or substantially change the general nature of the business of the Borrowers. In addition to the financial covenants, the Credit Agreement provides for customary events of default, subject to certain cure periods and other limitations. Substantially all of the Borrowers' accounts receivable are automatically and promptly swept to repay amounts outstanding under the Credit Agreement upon receipt by the Borrowers. Due to this automatic liquidating nature of the Credit Agreement, if the Borrowers breach any covenant, violate any representation or warranty, or suffer a deterioration in their ability to borrow pursuant to the borrowing base calculation, the Borrowers may not have access to cash liquidity unless provided by PNC at its discretion. The other material terms of the Credit Agreement as currently in effect include the following: (i) a revolving line of credit with a stated Maximum Revolving Advance Amount that is subject to a borrowing base limitation and generally provides for advances of up to 85 % of eligible accounts receivable, plus a percentage equal to the lesser of 60 % of the value of eligible inventory or 85 % of the liquidation value of eligible inventory, plus $ 10.0 million from January through June of each year, minus undrawn amounts of letters of credit and reserves; (ii) inventory sublimit of $ 35.0 million and assemble-to-ship ("ATS") inventory sublimit of $ 15.0 million during the months of May through August; and (iii) an equipment loan of $ 2.0 million. The Credit Agreement is secured by substantially all of the Borrowers’ personal property and certain of the Borrowers’ real property. The Credit Agreement is subject to certain prepayment penalties upon early termination. Prior to the maturity date, principal amounts outstanding under the Credit Agreement may be repaid and reborrowed at the option of the Borrowers without premium or penalty, subject to borrowing base limitations, seasonal adjustments and certain other conditions, including reduced borrowings under the revolving line to less than or equal to $ 10.0 million for a period of 30 consecutive days during the fourth quarter of each fiscal year. The Credit Agreement also contains certain financial covenants, including covenants requiring a minimum FCCR and limits on capital expenditures. The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $ 16.6 million was available for borrowing as of October 31, 2025. The interest rate is determined as a sum of the applicable margin rate, which is 3.00 % from January through July and 2.50 % from August through December, plus the Secured Overnight Financing Rate ("SOFR"). The Company incurred a fee on the unused portion of the revolving line of credit at a rate of 0.25 %. The Company did not have an outstanding amount under the Credit Agreement as of October 31, 2025. 14 On December 5, 2025, the Company entered into Amendment No. 7 to the Credit Agreement with PNC. Amendment No. 7 amended the Credit Agreement and the secured revolving line of credit provided to the Company by PNC to reflect the following material changes: i. Modify the stock repurchase window, originally from February 1, 2025 to January 31, 2026, changed to November 1, 2024 to October 31, 2025 for the $ 7.5 million of permitted share repurchases that are excluded from a) the FCCR testing, b) the Payment Conditions governing stock repurchases, and c) the trailing twelve months ("TTM") $ 8 million aggregate limit on stock repurchases and dividends. ii. Commencing with respect to the fiscal quarter ending October 31, 2025, modify the definition of Earnings Before Interest, Taxes, Depreciation, and Amortization as it relates to the FCCR testing to add back non-cash lease expense or subtract non-cash lease income for each TTM reporting period. iii. Reduce the Revolving Line of Credit limit by $ 10 million, except for the months of October, December, and January. The maximum Revolving Line of Credit limit during June through August was reduced from $ 70 million to $ 60 million. iv. Reduce the $ 15 million seasonal over-advance to $ 10 million and limit to the months of January through June (removing access in the month of July). In connection with this amendment, the Company incurred fees totaling $20,000 which will be capitalized as deferred financing costs when paid. On April 9, 2025, the Company entered into Amendment No. 6 to the Credit Agreement with PNC, which established a new category of permitted share repurchases in an amount up to $ 7.5 million, which was a new category in addition to the share repurchases otherwise permitted under the Credit Agreement. The share repurchases under the new category were required to occur during the fiscal year ending January 31, 2026, may not occur while any Default or Event of Default exists or would result from such repurchases, and must be made solely from cash on hand and not from the proceeds of advances under the Credit Agreement. The permitted share repurchases under this new category were also not counted as “Restricted Payments” when calculating the Company’s compliance with the FCCR covenants in the Credit Agreement. On November 22, 2024, the Company entered into Amendment No. 5 to Amended and Restated Revolving Credit and Security Agreement (“Amendment No. 5”) with PNC, with an effective date of October 1, 2024. Amendment No. 5 amended the Credit Agreement and the secured revolving line of credit provided to the Company by PNC to reflect the following material changes: i. Reduced the facility fee on the unused portion of the revolving line of credit to 0.250 % from 0.375 % per annum, commencing October 1, 2024; ii. Increased limits on permitted acquisitions (as defined in the Credit Agreement) from $ 5 million to $ 8 million during the term of the Credit Agreement; iii. Increased limits on cash dividends and common stock repurchase payments from $ 5 million to $ 8 million in the aggregate during any fiscal year. The Company also carries a mortgage on a manufacturing building in Conway, Arkansas. The original note was dated August 2017 with a principal balance of $ 5.8 million, at a fixed rate of 4.0 % per year and 20 -year term. The outstanding amount under this note was approximately $ 3.9 million as of October 31, 2025. Management believes that the carrying value of debt approximated fair value at October 31, 2025, as all of the long-term debt bears interest at variable rates based on prevailing market conditions, except the mortgage for the manufacturing building in Conway, Arkansas. Note 8. Income Taxes In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carrybacks, tax-planning strategies, and results of recent operations, to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. Valuation allowances of $ 217,000 , $ 236,000 and $ 218,000 as of October 31, 2025, January 31, 2025 and October 31, 2024, respectively, are needed for certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more likely than not to be realized. There was an increase in the valuation allowance of $ 1,000 for the three months ended October 31, 2025 and a decrease of $ 19,000 for the nine months ended October 31, 2025. There was no change in the valuation allowance during the three months ended October 31, 2024. The valuation allowance decreased $ 33,000 during the nine months ended October 31, 2024. 15 For the three months ended October 31, 2025 and 2024, the effective income tax rates were 26.8 % and 25.5 %, respectively. For the nine months ended October 31, 2025 and 2024, the effective income tax rates were 28.2 % and 24.4 %, respectively. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes. The January 31, 2022 and subsequent fiscal years remain open for examination by the IRS and some state jurisdictions. The January 31, 2021 and subsequent fiscal years remain open for the remaining state jurisdictions. The Company is not currently under federal or state examination. On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of tax reform provisions, was signed into law in the United States. FASB Topic 740, Income Taxes , requires the effects of tax law changes to be recognized in the period of enactment. As the legislation was signed into law before the close of the second quarter, the impacts are contemplated in our operating results for the nine months ended October 31, 2025. Among other provisions, the OBBB repealed the capitalization of domestic research and development expenditures, extended bonus depreciation on fixed assets, and reduced the deduction rate on foreign-derived deduction eligible income and income from non-U.S. subsidiaries. The Company is still evaluating these provisions, but we do not expect them to have a material impact on our effective tax rate and deferred tax assets in the fiscal year ending January 31, 2026, or in future period s. Note 9. Net (Loss) Income per Share Net (loss) income per share is calculated by dividing net income by the basic weighted-average number of common shares outstanding. The following table sets forth the computation of basic and diluted net (loss) income per share: Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands, except per share data) Net (loss) income $ ( 1,325 ) $ 8,401 $ 9,592 $ 27,374 Weighted average shares of common stock outstanding - basic 15,761 16,289 15,761 16,379 Dilutive effect of common stock equivalents from equity incentive plans — 7 5 3 Weighted average shares of common stock outstanding - diluted 15,761 16,296 15,766 16,382 Net (loss) income per share - basic $ ( 0.08 ) $ 0.52 $ 0.61 $ 1.67 Net (loss) income per share - diluted $ ( 0.08 ) $ 0.52 $ 0.61 $ 1.67 There were 14,000 anti-dilutive shares excluded from the computation of diluted earnings per share for the three months ended October 31, 2025. Note 10. Stock-Based Compensation Stock Incentive Plan Under the Company's 2019 Omnibus Equity Incentive Plan (the “2019 Plan”), the Company may grant an aggregate of up to 1,000,000 shares to its employees and non-employee directors in the form of restricted stock units, restricted stock awards and stock options. Restricted stock units and awards granted under the 2019 Plan are expensed ratably over the vesting period of the units and awards. The Company determines the fair value of its restricted stock units or awards and related compensation expense as the difference between the market value of the units or awards on the date of grant less the exercise price of the units or awards granted. During the nine months ended October 31, 2025, the Company granted 23,003 awards, vested 16,066 shares according to their terms and forfeited zero shares under the 2019 Plan. As of October 31, 2025, there were approximately 498,856 shares available for future issuance under the 2019 Plan. 16 The following table summarizes the stock-based compensation expense related to restricted stock units and awards recognized in the Company's statements of income: Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands) Cost of goods sold $ — $ — $ — $ 38 Selling, general and administrative expenses 47 63 161 295 Total stock-based compensation expense $ 47 $ 63 $ 161 $ 333 As of October 31, 2025, there was $ 109,000 of unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over seven months. Note 11. Retirement Plans The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2025, benefit accruals under the Pension Plan were frozen effective December 31, 2003. There is no service cost incurred under the Pension Plan. The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2025, benefit accruals under the VIP Plan were frozen since December 31, 2003. There is no service cost incurred under the VIP Plan. In September 2025, the Company’s Board of Directors approved the termination of the VIP Plan. The termination became effective on November 1, 2025. The VIP Plan’s benefit obligation is expected to be settled by offering lump sum distributions to participants funded by the liquidation of assets held in a rabbi trust. Pension settlement charges related to the VIP Plan termination, which include the recognition of VIP Plan gains or losses recorded within accumulated other comprehensive income on the Company’s unaudited condensed consolidated balance sheets, are currently expected to be recognized during the fourth quarter of fiscal year 2027. The Company anticipates that the termination will not materially impact the Company's consolidated financial statements. The following table summarizes the net periodic pension cost for the Pension Plan and the VIP Plan: Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands) Service cost $ — $ — $ — $ — Interest cost 325 311 975 933 Expected return on plan assets ( 208 ) ( 167 ) ( 624 ) ( 500 ) Plan settlement — — — — Amortization of prior service cost — — — — Recognized net actuarial gain ( 90 ) ( 38 ) ( 270 ) ( 113 ) Benefit cost $ 27 $ 106 $ 81 $ 320 401(k) Retirement Plan The Company’s 401(k) retirement plan, which covers all U.S. employees, allows participants to defer from 1 % to 75 % of their eligible compensation through a 401(k) retirement program. The plan includes Virco stock as one of the investment options. At October 31, 2025 and 2024, the plan held 1,067,754 shares and 1,105,376 shares of Virco stock, respectively. For the three months ended October 31, 2025 and 2024, the compensation costs incurred for employer match, which are paid in the form of Company stock, were $ 456,000 and $ 387,000 respectively. For the nine months ended October 31, 2025 and 2024, the compensation costs incurred for employer match, which are paid in the form of Company stock, were $ 1,470,000 and $ 1,165,000 respectively. 17 Note 12. Warranty Accrual Effective February 1, 2014, the Company modified its warranty to a limited lifetime warranty. The modification is not anticipated to have a significant effect on warranty expense. Effective January 1, 2017, the Company modified the standard warranty offered on products sold after January 1, 2017 to provide specific warranty periods by product component, with no warranty period longer than ten years . The Company’s warranty is not a guarantee of service life, which depends upon events outside the Company’s control and may be different from the warranty period. The Company accrues an estimate of its exposure to warranty claims based upon both product sales data and an analysis of actual warranty claims incurred. T he following is a summary of the Company’s warranty-claim activity: Three Months Ended Nine Months Ended 10/31/2025 10/31/2024 10/31/2025 10/31/2024 (In thousands) Beginning balance $ 500 $ 500 $ 500 $ 500 Provision 84 60 160 111 Costs incurred ( 84 ) ( 60 ) ( 160 ) ( 111 ) Ending balance $ 500 $ 500 $ 500 $ 500 Note 13. Contingencies The Company has a self-insured retention for product liability losses up to $ 250,000 per occurrence, workers’ compensation liability losses up to $ 250,000 per occurrence, general liability losses up to $ 50,000 per occurrence and automobile liability losses up to $ 50,000 per occurrence. The Company has purchased insurance to cover losses in excess of the self-insurance retention or deductible up to a limit of $ 30.0 million. The Company has obtained an actuarial estimate of its total expected future losses for liability claims and recorded a liability equal to the net present value. The Company and its subsidiaries are defendants in various legal proceedings resulting from operations in the normal course of business. It is the opinion of management, in consultation with legal counsel, that the ultimate outcome of all such matters will not materially affect the Company’s financial position, results of operations or cash flows. Note 14. Delivery Costs For the three months ended October 31, 2025 and 2024, shipping and classroom delivery costs of approximately $ 5.4 million and $ 8.8 million, respectively, were included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. For the nine months ended October 31, 2025 and 2024, shipping and classroom delivery costs of approximately $ 18.7 million and $ 23.1 million, respectively, were included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Note 15. Property, Plant and Equipment, Net Property, plant and equipment consists of the following: 10/31/2025 1/31/2025 10/31/2024 (In thousands) Land $ 3,731 $ 3,731 $ 3,731 Land improvements 706 706 697 Buildings and building improvements 52,050 52,030 51,950 Machinery and equipment 123,422 119,972 118,324 Leasehold improvements 649 657 523 Property, plant and equipment, gross 180,558 177,096 175,225 Less accumulated depreciation and amortization ( 145,105 ) ( 140,668 ) ( 139,604 ) Property, plant and equipment, net $ 35,453 $ 36,428 $ 35,621 18 Depreciation and amortization expenses related to property, plant and equipment recorded within cost of goods sold were $ 1.2 million and $ 1.1 million for the three months ended October 31, 2025 and 2024, respectively. Depreciation and amortization expenses related to property, plant and equipment recorded within selling, general and administrative expenses were $ 0.4 million and $ 0.3 million for the three months ended October 31, 2025 and 2024, respectively. Depreciation and amortization expenses related to property, plant and equipment recorded within cost of goods sold were $ 3.5 million and $ 3.2 million for the nine months ended October 31, 2025 and 2024, respectively. Depreciation and amortization expenses related to property, plant and equipment recorded within selling, general and administrative expenses were $ 1.1 million and $ 1.0 million for the nine months ended October 31, 2025 and 2024, respectively. Note 16. Segment Information The Company operates in one segment and has one reportable segment. The Company determines operating segments based on how its Chief Operating Decision Maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. The Company’s CODM is a group of individuals comprised of our senior executives, who regularly review the Company’s operating results on a consolidated basis. The Company’s CODM regularly reviews financial information presented on a consolidated basis. The CODM uses consolidated revenue, gross profit and net income to allocate operating and capital resources and assess performance by comparing actual results to historical results and previously forecasted financial information. The Company’s measure of segment assets is reported on the consolidated balance sheets as total assets. Note 17. Subsequent Events In September 2025, the Company’s Board of Directors approved the termination of the VIP Plan. The termination became effective on November 1, 2025. Pension settlement charges related to the VIP Plan termination are currently expected to be recognized during the fourth quarter of fiscal year 2027. See Note 11 . On December 4, 2025, the Company’s Board of Directors declared a cash dividend for the Company’s fourth fiscal quarter of $ 0.025 on each outstanding share of common stock. The dividend is payable on January 9, 2026 to stockholders of record of the common stock as of the close of business on December 19, 2025. While the Company currently intends to pay future dividends on a quarterly basis, following review and approval by the Board of Directors, the declaration and payment of future dividends, as well as the amounts thereof, are subject to the discretion of the Board as well as restrictive covenants in the Company’s lending agreements. There can be no assurance that the Company will declare and pay dividends in future periods. On December 5, 2025, the Company executed Amendment No. 7 to the Restated Credit Agreement. See Note 7 . 19