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Virco Manufacturing Corp Reports Record Q3 and YTD Financials; Initiates Dividend and Share Buyback

  • Virco Manufacturing Corp (NASDAQ:VIRC) announces a 29% increase in net income and a 9% increase in sales for Q3.

  • Year-to-date sales surge by 17.8%, with operating income more than doubling compared to the previous year.

  • The company declares a quarterly dividend and authorizes a $5 million share repurchase program.

On December 8, 2023, Virco Manufacturing Corp (NASDAQ:VIRC) released its 8-K filing, showcasing a record third quarter and year-to-date (YTD) financial results. The company's strategic initiatives and operational efficiencies have culminated in significant growth, with a notable increase in net income and sales.

Financial Highlights and Management Commentary

For the third quarter ended October 31, 2023, VIRC reported a sales increase to $84,252,000, up from $77,395,000 in the prior year. Gross margin saw a significant improvement to 45.4% from 39.8%, while selling, general and administrative expenses (SG&A) as a percent of sales decreased slightly to 27.9%. This led to a 67.1% growth in operating income, reaching $14,706,000. Net income for the quarter rose by 29% to $10,160,000.

The nine-month period showed even more robust growth, with sales climbing 17.8% to $226,516,000. Year-to-date gross margin improved to 44.1%, and SG&A as a percent of sales declined to 28.8%. Operating income for the first nine months more than doubled to $34,648,000. Interest expense increased, reflecting higher interest rates and slightly higher financing of inventories and accounts receivable.

Virco's CEO and Chairman, Robert Virtue, expressed satisfaction with the ability to restore dividends and launch a share repurchase program, attributing this success to the company's recovery post-pandemic and the appreciation for in-person education. President Doug Virtue highlighted the 76% expansion in business activity since the pandemic's low point, achieved without additional debt or capital, as a testament to the company's efficient business model.

Dividend Declaration and Share Repurchase Program

In light of these strong results, VIRC's Board of Directors has reinstated a quarterly dividend of $0.02 per share, payable on January 10, 2024, to shareholders of record as of December 22, 2023. Additionally, the Board authorized an open-market share repurchase program of up to $5,000,000, aiming to balance shareholder returns through current income and capital appreciation.

Financial Statements Overview

The Unaudited Condensed Consolidated Balance Sheets reveal that total assets increased to $157,039,000 as of October 31, 2023, from $143,720,000 the previous year. The company's cash position improved significantly to $4,887,000. Total stockholders' equity also saw a substantial rise to $93,789,000.

The Unaudited Condensed Consolidated Statements of Income for the three months ended October 31, 2023, show a net income of $10,160,000, with basic and diluted net income per common share at $0.62. For the nine months ended on the same date, net income stood at $24,252,000, translating to $1.49 per basic share and $1.48 per diluted share.

Operational Efficiency and Market Resilience

The company's preferred measure of business momentum, YTD shipments + the unshipped backlog, stood at $268,067,000 on October 31, 2023, a 76% growth since October 31, 2020. This growth is attributed to the company's domestically-based, vertically-integrated business model and the resilience of the markets for public and private school furniture.

Support for in-person education, reflected in robust funding across various domains, has contributed to strong revenue growth, particularly in California and Florida. VIRC's operational efficiencies and coordination between its domestic factories, logistics, and field service teams have been pivotal in achieving these results.

Virco Manufacturing Corp's performance in the third quarter and year-to-date signifies a strong recovery and a positive outlook for the company's future. The reinstatement of dividends and the share repurchase program further underscore the company's commitment to delivering value to its shareholders.

Explore the complete 8-K earnings release (here) from Virco Manufacturing Corp for further details.

This article first appeared on GuruFocus.