VIRCO MFG CORPORATION 10-Q

Item 1. Financial Statements Virco Mfg. Corporation Unaudited Condensed Consolidated Balance Sheets 4/30/2026 1/31/2026 4/30/2025 (In thousands) Assets Current assets Cash $ 3,734 $ 14,437 $ 935 Trade accounts receivable, net 15,028 13,590 12,279 Income tax receivable 4,766 3,863 3,806 Inventories 68,333 56,735 74,029 Prepaid expenses and other current assets 10,464 10,104 3,233 Total current assets 102,325 98,729 94,282 Non-current assets Property, plant and equipment, net 33,746 34,578 36,482 Operating lease right-of-use assets 28,988 30,415 34,384 Deferred income tax assets, net 5,551 5,437 5,862 Other assets, net 4,868 5,020 12,772 Total assets $ 175,478 $ 174,179 $ 183,782 Liabilities Current liabilities Accounts payable $ 12,275 $ 7,393 $ 15,706 Accrued compensation and employee benefits 11,267 11,434 5,202 Income tax payable — — — Current portion of long-term debt 271 269 261 Current portion of operating lease liability 6,557 6,490 2,562 Other accrued liabilities 7,442 6,396 7,458 Total current liabilities 37,812 31,982 31,189 Non-current liabilities Long-term debt, less current portion 3,541 3,609 3,812 Operating lease liability, less current portion 28,392 30,006 34,628 Other long-term liabilities 3,323 2,651 8,553 Total non-current liabilities 35,256 36,266 46,993 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 15,729,543 shares at 4/30/2026, 15,761,141 shares at 1/31/2026, and 15,738,138 shares at 4/30/2025 157 157 157 Additional paid-in capital 113,618 113,761 113,616 Accumulated deficit ( 11,046 ) ( 7,875 ) ( 8,528 ) Accumulated other comprehensive (loss) income ( 319 ) ( 112 ) 355 Total stockholders’ equity 102,410 105,931 105,600 Total liabilities and stockholders’ equity $ 175,478 $ 174,179 $ 183,782 See accompanying notes to unaudited condensed consolidated financial statements. 3 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Operations Three Months Ended 4/30/2026 4/30/2025 (In thousands, except per share data) Net sales $ 30,692 $ 33,754 Costs of goods sold 17,997 17,734 Gross profit 12,695 16,020 Selling, general and administrative expenses 16,355 16,114 Operating loss ( 3,660 ) ( 94 ) Unrealized loss (gain) on investment in trust account 127 ( 1,175 ) Pension (benefit) expense ( 189 ) 27 Interest expense, net 106 60 (Loss) income before income taxes ( 3,704 ) 994 Income tax (benefit) expense ( 927 ) 262 Net (loss) income $ ( 2,777 ) $ 732 Cash dividends declared per common share: $ 0.025 $ 0.025 Net (loss) income per common share (a): Basic $ ( 0.18 ) $ 0.05 Diluted $ ( 0.18 ) $ 0.05 Weighted average shares of common stock outstanding: Basic 15,732 15,757 Diluted 15,732 15,773 (a) Net loss per share for quarter ended April 30, 2026 was calculated based on basic shares outstanding due to the anti-dilutive effect of the inclusion of common stock equivalent shares. See accompanying notes to unaudited condensed consolidated financial statements. 4 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income Three Months Ended 4/30/2026 4/30/2025 (In thousands) Net (loss) income $ ( 2,777 ) $ 732 Other comprehensive loss: Pension adjustments (net of tax adjustment of $( 69 ) and $( 23 ) for three months ended April 30, 2026 and 2025, respectively) ( 207 ) ( 67 ) Net comprehensive (loss) income $ ( 2,984 ) $ 665 See accompanying notes to unaudited condensed consolidated financial statements. 5 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Cash Flows Three Months Ended 4/30/2026 4/30/2025 (In thousands) Operating activities Net (loss) income $ ( 2,777 ) $ 732 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 1,474 1,534 Non-cash lease (benefit) expense ( 120 ) 720 Provision for credit losses 15 15 Amortization of debt issuance costs 37 34 Deferred income taxes ( 45 ) ( 19 ) Stock-based compensation 47 63 Amortization of net actuarial gain for pension plans ( 276 ) ( 90 ) Non-cash unrealized loss (gain) on investment 127 ( 1,175 ) Surrender of life insurance policies — 300 Changes in operating assets and liabilities: Trade accounts receivable ( 1,453 ) 710 Inventories ( 11,598 ) ( 18,382 ) Income taxes ( 888 ) 291 Prepaid expenses and other assets ( 371 ) ( 638 ) Accounts payable and accrued liabilities 6,474 ( 3,126 ) Net cash used in operating activities ( 9,354 ) ( 19,031 ) Investing activities Purchases of property, plant and equipment ( 699 ) ( 2,444 ) Net cash used in investing activities ( 699 ) ( 2,444 ) Financing activities Repayment of long-term debt ( 66 ) ( 64 ) Common stock repurchased ( 190 ) ( 4,000 ) Cash dividends paid ( 394 ) ( 393 ) Net cash used in financing activities ( 650 ) ( 4,457 ) Net decrease in cash ( 10,703 ) ( 25,932 ) Cash at beginning of period $ 14,437 $ 26,867 Cash at end of period $ 3,734 $ 935 Supplemental disclosures of cash flow information: Property, plant and equipment acquired and not yet paid at end of period $ 140 $ 897 Cash paid during the period for interest, net of interest income $ 60 $ 60 Cash paid during the period for income taxes, net of refunds $ 26 $ 10 Noncash investment in right-of-use assets in exchange for a lease liability $ — $ 237 See accompanying notes to unaudited condensed consolidated financial statements. 6 Virco Mfg. Corporation Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Three-Month Period Ended April 30, 2026 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity Balance at January 31, 2026 15,761,141 $ 157 $ 113,761 $ ( 7,875 ) $ ( 112 ) $ 105,931 Net loss — — — ( 2,777 ) — ( 2,777 ) Cash dividends — — — ( 394 ) — ( 394 ) Pension adjustments — — — — ( 207 ) ( 207 ) Shares vested and others — — — — — — Stock compensation expense — — 47 — — 47 Stock repurchased ( 31,598 ) — ( 190 ) — — ( 190 ) Balance at April 30, 2026 15,729,543 $ 157 $ 113,618 $ ( 11,046 ) $ ( 319 ) $ 102,410 Three-Month Period Ended April 30, 2025 Common Stock In thousands, except share data Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholder's Equity Balance at January 31, 2025 16,087,082 $ 161 $ 117,549 $ ( 8,867 ) $ 422 $ 109,265 Net income — — — 732 — 732 Cash dividends — — — ( 393 ) — ( 393 ) Pension adjustments — — — — ( 67 ) ( 67 ) Shares vested and others — — — — — — Stock compensation expense — — 63 — — 63 Stock repurchased ( 348,944 ) ( 4 ) ( 3,996 ) — — ( 4,000 ) Balance at April 30, 2025 15,738,138 $ 157 $ 113,616 $ ( 8,528 ) $ 355 $ 105,600 See accompanying notes to unaudited condensed consolidated financial statements. 7 VIRCO MFG. CORPORATION Notes to Unaudited Condensed Consolidated Financial Statements April 30, 2026 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, 2026 (“Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended April 30, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2027. The balance sheet at January 31, 2026 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") 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures. In December 2023, the Financial Accounting Standards Board ("FASB") issued this ASU amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. We adopted this ASU for the year ended January 31, 2026 and applied the amendments prospectively. Adoption of the new standard did not impact our consolidated income statements, balance sheets, or statements of cash flows. 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. The Company adopted this ASU for the year ending January 31, 2027. Adoption did not impact our consolidated income statements, balance sheets, or statements of cash flows. Recently Issued Accounting Pronouncements 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 8 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 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. In September 2025, the FASB issued this ASU which eliminates the requirement to evaluate software development stages in determining when capitalization of internal-use software costs should begin. Under the updated guidance, capitalization is required when management authorizes and commits to funding a software project and it is probable that the project will be completed and placed into service for its intended use. The ASU is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. The guidance may be applied either prospectively or retrospectively, and early adoption is permitted. 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 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 selling 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. 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, and the Company has not typically incurred material obsolescence expenses. If market conditions are less favorable than those 9 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: 4/30/2026 1/31/2026 4/30/2025 (In thousands) Finished goods $ 32,509 $ 21,923 $ 31,379 Work in process 22,800 20,084 27,703 Raw materials 13,024 14,728 14,947 Total inventories $ 68,333 $ 56,735 $ 74,029 Note 6. Leases As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2026, the Company has operating leases on real property, equipment, and automobiles, expiring at various dates through fiscal year 2031. 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 quantitative information regarding our leases is as follows: Three Months Ended 4/30/2026 4/30/2025 (In thousands, except lease term and discount rate) Operating lease cost $ 2,312 $ 2,358 Short-term lease cost 118 118 Sublease income ( 10 ) ( 10 ) Variable lease cost 397 273 Total lease cost $ 2,817 $ 2,739 Other operating lease information: Cash paid for amounts included in the measurement of lease liabilities $ 2,432 $ 1,638 Right-of-use assets obtained in exchange for new lease liabilities $ — $ 237 Weighted-average remaining lease term (years) 4.3 5.2 Weighted-average discount rate 9.84 % 9.82 % 10 Minimum future lease payments for operating leases in effect as of April 30, 2026, are as follows: Operating Leases For the year ending January 31, (In thousands) Remainder of 2027 $ 7,346 2028 9,513 2029 9,656 2030 9,979 2031 6,863 Thereafter — Remaining balance of lease payments 43,357 Short-term lease liabilities 6,557 Long-term lease liabilities 28,392 Total lease liabilities 34,949 Difference between undiscounted cash flows and discounted cash flows $ 8,408 On July 23, 2024, the Company entered into a new lease agreement (the “Lease”) with Starboard Distribution Center, LLC which extended the Company’s tenancy at its 560,000 sq. ft. office, manufacturing and warehouse facility in Torrance, California. The Lease extended the tenancy for 65 months, covering the period from May 1, 2025 through September 30, 2030. Under the Lease, the monthly base rent was abated for the initial 5-month period from May 1, 2025 to September 30, 2025, then was 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. As of April 30, 2026, the Company has not drawn on the tenant improvement allowance. The Landlord has the right to terminate the Lease upon customary events of default. Note 7. Debt Outstanding balances for the Company’s long-term debt are as follows: 4/30/2026 1/31/2026 4/30/2025 (In thousands) Revolving credit line $ — $ — $ — Other 3,812 3,878 4,073 Total debt 3,812 3,878 4,073 Less current portion 271 269 261 Non-current portion $ 3,541 $ 3,609 $ 3,812 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. 11 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 was in compliance with its debt covenants as of April 30, 2026. The Company's revolving line of credit with PNC is structured to provide seasonal credit availability during the Company's peak summer season. Approximately $ 36.4 million was available for borrowing as of April 30, 2026. 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 interest rate at April 30, 2026 was 8.75 %. 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 balance under the Credit Agreement as of April 30, 2026. 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) such that the window is now from 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") $ 8.0 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 $ 10.0 million, except for the months of October, December, and January. The maximum Revolving Line of Credit limit during June through August was reduced from $ 70.0 million to $ 60.0 million. iv. Reduce the $ 15.0 million seasonal over-advance to $ 10.0 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 were capitalized as deferred financing costs and are included in prepaid expenses and other current assets on the accompanying unaudited condensed consolidated balance sheets. 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. 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 $ 3.8 million as of April 30, 2026. 12 Management believes that the carrying value of debt approximated fair value at April 30, 2026, 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 $ 230,000 , $ 231,000 and $ 216,000 as of April 30, 2026, January 31, 2026 and April 30, 2025, 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. The net change in the valuation allowance for the three months ended April 30, 2026 and 2025 was a decrease of $ 1,000 and $ 20,000 , respectively. For the three months ended April 30, 2026 and 2025, the effective income tax rates were 25.0 % and 26.4 %, respectively. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes. As of April 30, 2026 and 2025, income taxes payable of $ 242,000 and $ 237,000 , respectively, were included in other long-term liabilities on the accompanying unaudited condensed consolidated balance sheets. The January 31, 2023 and subsequent fiscal years remain open for examination by the IRS and some state jurisdictions. The January 31, 2022 and subsequent fiscal years remain open for the remaining state jurisdictions. The Company is not currently under federal or state examination. Note 9. Net (Loss) Income per Share The following table sets forth the computation of basic and diluted net (loss) income per share: Three Months Ended 4/30/2026 4/30/2025 (In thousands, except per share data) Net (loss) income $ ( 2,777 ) $ 732 Weighted average shares of common stock outstanding - basic 15,732 15,757 Dilutive effect of common stock equivalents from equity incentive plans — 16 Weighted average shares of common stock outstanding - diluted 15,732 15,773 Net (loss) income per share - basic $ ( 0.18 ) $ 0.05 Net (loss) income per share - diluted $ ( 0.18 ) $ 0.05 There were 23,000 anti-dilutive shares excluded from the computation of diluted earnings per share for the three months ended April 30, 2026. 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 awards. Restricted stock awards granted under the 2019 Plan are expensed ratably over the vesting period of the awards. The Company determines the fair value of its restricted stock awards and related compensation expense as the difference between the market value of the awards on the date of grant less the exercise price of the awards granted. During the three months ended April 30, 2026, the Company granted zero awards, vested zero shares according to their terms and forfeited zero shares under the 2019 Plan. As of April 30, 2026, there were approximately 498,856 shares available for future issuance under the 2019 Plan. 13 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 4/30/2026 4/30/2025 (In thousands) Cost of goods sold $ — $ — Selling, general and administrative expenses 47 63 Total stock-based compensation expense $ 47 $ 63 As of April 30, 2026, there was $ 16,000 of unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized in one month. 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 (“Employee Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2026, benefit accruals under the Employee Plan were frozen effective December 31, 2003. There is no service cost incurred under the Employee Plan. The Company also provides a supplementary retirement plan for certain key employees, the Virco Important Performers Retirement Plan (“VIP Plan”). As more fully described in the Annual Report on Form 10-K for the year ended January 31, 2026, benefit accruals under the VIP Plan were frozen effective 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 during the fourth quarter of the fiscal year ending January 31, 2027. Pension settlement charges related to the VIP Plan termination, which include the recognition of VIP Plan gains or losses recorded within accumulated other comprehensive (loss) income on the Company’s unaudited condensed consolidated balance sheets, are currently expected to be recognized during the fourth quarter of the fiscal year ending January 31, 2027. The Company anticipates that the termination will not materially impact the Company's consolidated financial statements. As of April 30, 2026, rabbi trust assets of $ 6.7 million are included in prepaid expenses and other current assets on the accompanying unaudited condensed consolidated balance sheets and are expected to be liquidated to fund the settlement of the VIP Plan pension obligation during the fourth quarter of the fiscal year ending January 31, 2027. Management intends to hold the remaining rabbi trust assets as long-term investments and as such they are included in other non-current assets on the accompanying unaudited condensed consolidated balance sheets. As of April 30, 2025, assets held in the rabbi trust were included in other non-current assets on the accompanying unaudited condensed consolidated balance sheets. As of April 30, 2026, accrued pension liabilities related to the Employee Plan and the VIP Plan totaled $ 7.2 million, of which $ 6.3 million was included in accrued compensation and employee benefits and $ 0.9 million was included in other long-term liabilities on the accompanying unaudited condensed consolidated balance sheets. As of April 30, 2025, accrued pension liabilities related to these plans totaled $ 6.7 million, of which $ 0.4 million was included in accrued compensation and employee benefits and $ 6.3 million was included in other long-term liabilities on the accompanying unaudited condensed consolidated balance sheets. 14 The following table summarizes the net periodic pension cost for the Employee Plan and the VIP Plan: Three Months Ended 4/30/2026 4/30/2025 (In thousands) Service cost $ — $ — Interest cost 272 325 Expected return on plan assets ( 229 ) ( 208 ) Plan settlement — — Amortization of prior service cost 44 — Recognized net actuarial gain ( 276 ) ( 90 ) Pension (benefit) cost $ ( 189 ) $ 27 401(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 April 30, 2026 and 2025, the plan held 1,112,598 shares and 1,063,340 shares of Virco stock, respectively. For the three months ended April 30, 2026 and 2025, the compensation costs incurred for employer match, which are paid in the form of Company stock, were $ 455,000 and $ 545,000 , respectively. Note 12. Warranty 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. As of April 30, 2026 and 2025, the related accrual totaled $ 500,000 , of which $ 150,000 was included in other accrued liabilities and $ 350,000 was included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets. The following is a summary of the Company’s warranty claim activity: Three Months Ended 4/30/2026 4/30/2025 (In thousands) Beginning balance $ 500 $ 500 Provision 34 43 Costs incurred ( 34 ) ( 43 ) Ending balance $ 500 $ 500 Note 13. Commitments and Contingencies The Company has a self-insured retention for product liability losses up to $ 150,000 per occurrence, workers’ compensation liability losses up to $ 250,000 per occurrence, general liability losses up to $ 150,000 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. As of April 30, 2026, the related accrual totaled $ 1.5 million, of which $ 120,000 was included in other accrued liabilities and $ 1.4 million was included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets. As of April 30, 2025, the accrual totaled $ 1.4 million, of which $ 120,000 was included in other accrued liabilities and $ 1.3 million was included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets. 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. 15 In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were unconstitutional. Subsequently, in March 2026, the U.S. Court of International Trade ("CIT") issued orders directing U.S. Customers and Border Protection ("CBP") to process related refunds. In response to these rulings, CBP launched a refund claims process for qualifying importers. Since the IEEPA tariffs were first imposed in February 2025, the Company has paid approximately $ 1.0 million in IEEPA tariffs, and it has now begun the process of requesting refunds of eligible amounts paid. As of April 30, 2026, the Company has not recognized any tariff refunds in its unaudited condensed consolidated financial statements because the Company was unable to assert that the realization of such recovery is probable as of such date, due to uncertainties surrounding the refund process and collectability of claims. As of the date of this Quarterly Report on Form 10-Q, the Company has not received any portion of the requested refunds. Note 14. Delivery Costs For the three months ended April 30, 2026 and 2025, shipping and classroom delivery costs of approximately $ 3.5 million and $ 3.4 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, net consists of the following: 4/30/2026 1/31/2026 4/30/2025 (In thousands) Land $ 3,731 $ 3,731 $ 3,731 Land improvements 706 706 706 Buildings and building improvements 52,059 52,059 52,050 Machinery and equipment 123,821 123,179 121,400 Leasehold improvements 649 649 657 Property, plant and equipment, gross 180,966 180,324 178,544 Less accumulated depreciation and amortization ( 147,220 ) ( 145,746 ) ( 142,062 ) Property, plant and equipment, net $ 33,746 $ 34,578 $ 36,482 Depreciation and amortization expenses related to property, plant and equipment recorded within cost of goods sold were $ 1.2 million for the three months ended April 30, 2026 and 2025. Depreciation and amortization expenses related to property, plant and equipment recorded within selling, general and administrative expenses were $ 0.3 million for the three months ended April 30, 2026 and 2025. 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 its 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 On June 2, 2026, the Company’s Board of Directors declared a cash dividend for the Company’s second fiscal quarter of $ 0.025 on each outstanding share of common stock. The dividend is payable on July 10, 2026 to stockholders of record of the common stock as of the close of business on June 19, 2026. 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. 16