Financial Analysis

"Debt Outstanding balances for the Companys long-term debt are as follows: January 31, 2026 2025 (In thousands) Revolving credit line $ $ Other 3,878 4,136 Total debt 3,878 4,136 Less current portion 269 258 Non-current portion $ 3,609 $ 3,878 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 Companys 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 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Stock-Based Compensation Stock Incentive Plan Under the Company's 2019 Employee Stock Incentive Plan (the 2019 Plan), the Company may grant an aggregate of 1,000,000 shares to its employees in the form of restricted stock units 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 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 fiscal year 2026, the Company granted 23,003 awards to non-employee directors, vested 16,066 shares according to their terms and forfeited zero shares under the 2019 Plan. As of January 31, 2026, there were 498,856 shares available for future issuance under the 2019 Plan. The following table summarizes the stock-based compensation expense related to restricted stock awards recognized in the Company's statement of operations: January 31, 2026 2025 (In thousands) Cost of goods sold $ $ 37 Selling, general and administrative expenses 208 358 Total stock-based compensation expense $ 208 $ 395 The following table summarizes the Companys restricted stock unit awards activity, and related information: January 31, 2026 2025 Restricted stock units Weighted- Average Exercise Price Restricted stock units Weighted- Average Exercise …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

"Income Taxes Our effective tax rate was 25.8%, and is based on recurring factors, including the forecasted mix of income before taxes in various jurisdictions, estimated permanent differences and the recording of a partial valuation allowance on net deferred tax assets. The One Big Beautiful Bill (""OBBB"") Act did not have a material impact on the Company's effective income tax rate for fiscal 2026, which the Company believes is representative of rates that will affect fiscal 2027. A summary reconciliation of the effective tax rate by amount and percentage is as follows: January 31, 2026 (In thousands, except percentages) U.S. federal statutory rate $ 727 21.0 % State income taxes, net of federal income tax effect (1) 150 4.3 Effect of changes in tax laws or rates enacted in current period: Rate adjustment - state Effect of cross-border tax laws: Foreign-derived intangible income Change in valuation allowance Nontaxable or nondeductible items: Meals and entertainment 39 1.1 Other 4 0.1 Change in unrecognized tax benefits 21 0.6 Other (46) (1.3) Income tax expense $ 895 25.8 % (1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California and Arkansas. A summary reconciliation of the effective tax rate is as follows: January 31, 2025 (In thousands) Statutory $ 6,011 State taxes (net of federal tax) 1,197 Change in valuation allowance (15) State rate adjustment 83 Change in unrecognized tax benefits 65 Stock compensatio …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leases The Company has operating leases on real property, equipment, and automobiles, expiring at various dates through fiscal 2031. The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement. All of the Companys leases are classified as operating leases. Pursuant to Accounting Standards Codification (ASC) 842 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 Companys 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, manufacturing facility and distribution facility located in Torrance, CA, 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 …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"New Accounting Pronouncements Recently Adopted Accounting Standards Update (""ASU"") 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures. In December 2023, the 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. Refer to Note 6 for required disclosures. Recently Issued Accounting Pronouncements The Company evaluates all ASU's issued by the Financial Accounting Standards Board (""FASB"") for consideration of their applicability to our 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. 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 wi …

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"Retirement Plans Pension Plans The Company maintains two defined benefit pension plans, the Virco Employees Retirement Plan (Employee Plan), and the Virco Important Performers Retirement Plan (VIP Plan). The annual measurement date for both plans is January 31. The Company and its subsidiaries cover all employees hired prior to December 31, 2003 under the Employee Plan, which is a qualified noncontributory defined benefit retirement plan. Benefits under the Employee Plan are based on years of service and career average earnings. Benefit accruals under the Employee Plan were frozen effective December 31, 2003. All benefits were fully vested as of January 31, 2026 and 2025. The Company also provides a supplementary retirement plan for certain key employees, the VIP Plan. The VIP Plan provides a benefit up to 50% of average compensation for the last five years in the VIP Plan offset by benefits earned under the Employee Plan. Benefit accruals under the VIP Plan were frozen effective December 31, 2003. 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 fiscal 2027. Pension settlement charges related to the VIP Plan termination, which include the recognition of VIP Plan gains or losses reco …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

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 Companys CODM is its Senior Executives, who review its operating results on a consolidated basis. The Companys 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 Companys measure of segment assets is reported on the consolidated balance sheets as total assets. …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Subsequent Events On March 5, 2026, the Company's Board of Directors declared a cash dividend for the Companys first fiscal quarter of $0.025 per share on each outstanding share of common stock. The dividend is payable on April 10, 2026 to stockholders of record of the common stock as of the close of business on March 20, 2026. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing

"Debt Outstanding balances for the Companys 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 Companys 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, s …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

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. 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. …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

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 Apri …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

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 % 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 $ 8,4 …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"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 custome …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

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 Companys CODM is its Senior Executives, who regularly review the Companys operating results on a consolidated basis. The Companys 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 Companys measure of segment assets is reported on the consolidated balance sheets as total assets. …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Subsequent Events On June 2, 2026, the Companys Board of Directors declared a cash dividend for the Companys 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 Companys lending agreements. There can be no assurance that the Company will declare and pay dividends in future periods. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing