Q3 2022 Dynatronics Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Diana <unk> third quarter fiscal year 2022 earnings call. At this time all participants are in a listen only mode. At the end of todays presentation, there will be an opportunity to ask questions investors can submit their questions within.
The meeting webcast by typing them into the Q&A button on your screen unless to publish research may ask questions on the phone line for analysts to ask a question on the phone line. Please press star one on your handset.
This event is being recorded it is now my pleasure to turn the floor over to your host norm roadmap the company's Chief financial officer, the floor is yours.
Operator.
Schuyler was not in the office today, So I will call your attention to our safe Harbor statement before we begin.
Please note that during this call we will make forward looking statements regarding our current expectations plans projections.
The financial performance relating to our business.
These forward looking statements reflect our views as of today only.
They involve risks and uncertainty that could cause actual results to differ materially from those discussed today.
Important factors that could cause actual results to differ materially from those projected or implied by our forward looking statements.
Included in our most recent 10-K.
And other reports filed with the SEC and.
And include uncertainties and risks related to the impact of the COVID-19 global pandemic on our business results.
We caution you not to place undue reliance on forward looking statements we make this morning.
We undertake no obligation to update or revise forward looking statements.
During our prepared remarks.
We will be referring to slides are available for viewing in the webcast.
<unk> posted in the Investor Relations section of <unk> Dot com.
I will now turn the call over to John <unk>, Our President and Chief Executive Officer.
Thanks, Tom Good morning, everyone and thanks for joining <unk> call today.
On today's call, we will cover the recent highlights and achievements normal provide commentary on the financials and then we will have the operator open the phone lines for questions.
Lied three highlights just a few of our more recent accomplishments all of which drive the company's sales growth to exceed the market growth rates and our baseline sales expectation let.
Let me begin with three headline points.
First and foremost we have a clear line of sight to profitable growth and a well defined strategy to execute against we have been executing an ongoing business transformation and consistently performing each quarter to achieve our goals.
We are confident in our outlook, we increased the midpoint of our fiscal year 'twenty two net sales guidance today.
Our third quarter sales and our sales guidance for the fourth quarter or the fourth and fifth consecutive quarters of exceeding the market and our baseline sales expectation.
Our accelerating transformation continues even with the greater than expected disruption from the impact of COVID-19.
And third our markets generate 5% to 6% organic growth per year.
We plan to continue to take market share and releasing new products, resulting in growth faster than the 5% to 6% organic growth our collective markets generate.
Moving to slide four we will continue to provide guidance on metrics that we are confident with while managing the choppy nature of this business transformation and the impacts of COVID-19.
We updated our guidance range and raised our guidance mid point today, we expect net sales in fiscal year 'twenty two to be in the range of 44 million to $45 million, assuming current conditions on COVID-19 cases and supply chain impacts.
The midpoint of this sales guidance represents a 23% organic growth rate relative to the $37 million annual continued product net sales baseline set in April 2021, our target mid point net sales in the fourth quarter of fiscal year 'twenty. Two is 11 three.
$5 million, a planned increase of 15.8% relative to the $9 8 million continued product sales in the same period last year.
Customer and dealer reaction to dynatron ex transformation strategy continues to be overwhelmingly positive demonstrating our new business model strength and providing us momentum building upon the favorable tailwind in the markets we compete.
The company expects the distribution of net sales across the quarters to align with historical trends.
Just in the first quarter lower in the second and third quarters with a bounce back in the fourth quarter.
This pattern matched our results in Q3, and our updated net sales expectation in Q4.
We have discussed if we only maintain market share we should deliver annual net sales growth of 5% to 6% in fiscal year 'twenty three we target higher annual net sales growth by continuing to take market share and releasing new products.
We have delivered sales growth four consecutive quarters, well above market growth and above our 9.25 million continued product sales baseline set in April 2021.
The double digit sales growth is driven in response to our business transformation volume tiered pricing and our strategic inventory levels that had been built.
We invested in inventory in each of the first three quarters of fiscal year 'twenty two to serve customer demand unexpected double digit higher sales growth.
Our inventory is elevated to meet customer demand and the current market and supply chain conditions.
Expected sequential improvement in gross margin in Q4 assumes current conditions on raw material cost delivery and shipment costs supply chain disruptions and handling times.
To provide more context, our target is utilization of appropriate inventory levels that had been strategically built over the past three quarters.
On the higher expected sales volume I discussed inventory is currently $5 1 million or 78% higher than when we started fiscal year 'twenty. Two these investments were designed specifically to serve customer demand add additional safety stock to help offset continued expected supply chain disruptions and to draw.
<unk> new product introductions.
Importantly, we are getting products to our customers and anticipate that to continue in Q4 that is a strategic competitive advantage in the supply chain challenged environment customers are rewarding that the.
Cash used in operating activities of $3 3 million for the first nine months of fiscal year 'twenty. Two was primarily due to the companys working capital investment and inventory of $5 1 million during those nine months. The challenges we had with inventory over the last three quarters have caused the organization to incur additional.
Cost, we expect to see improved throughput with the inventory levels in place inventory levels will remain elevated until issues across the global supply chain return to pre pandemic levels.
Turning to slide five.
Gross margin expansion remains our short term focus gross margin improved to 22, 4% in Q3 of two 6% sequential increase from the Q2 gross margin of 19, 8%. This improvement came primarily because of the price increases that we implemented.
Our gross margin in Q4 should continue to benefit from price increases for our products, while our cash flow from operations should benefit from our inventory that has been strategically built over the past three quarters.
As a company we focus on higher margin differentiated products that we manufacture our target is to achieve 40% gross margins over the longer term, which is comparable to what we believe our peers achieved for example, our competitors D. J O before they were acquired by Colfax, and recently spun out to the store.
And aloni, Novus and oser when you break out their bracing segment maintained margins for bracing and supports of approximately 50% and for rehabilitation of roughly 30%.
Gross margin in each quarter of fiscal year 'twenty two was muted by the impact of COVID-19, and supply chain challenges, including extraordinarily high freight raw materials and labor costs.
Without the additional freight raw materials and labor costs, we experienced in Q3 as a result of COVID-19, and inflationary pressures our gross margin would've been 31, 7%. Excluding these additional costs. Our gross margin was higher in each quarter of fiscal year 'twenty two relative to the prior.
Your year we.
We are taking multiple actions to offset these costs, including selective price increases exploring alternate sourcing relationships and improving factor yields.
We are fortunate that dynatron X does not rely as heavily on long term agreements as many other companies in our markets. As a result, we can share cost challenges with our dealers and customers through price increases, while giving them the option to buy more products from us to minimize these increases.
We anticipate that price increases will offset some of our inflationary cost pressures overtime.
Slide six provides the fiscal year 'twenty two guidance details.
I discussed our net sales guidance range for fiscal year, 'twenty, two and we target higher net sales and gross margin in fiscal year 'twenty three.
We anticipate selling general and administrative expenses of 30% to 35% of net sales in fiscal year 'twenty to Q.
Q3 was an excellent example of the team managing SG&A appropriately in the face of mounting input cost pressures as we gained revenue scale, we expect to continually leverage and improve our scale on this SG&A cost base.
We're going to do what it takes to keep serving demand from our customers. We have a steady eye on the company's vision to build a scalable platform to grow our customer and sales base to a much larger company and our markets deliver margin expansion and consistently deliver strong cash flow from operations to create value.
<unk> for shareholders there.
There continues to be an opportunity to improve all of our financial metrics.
This guidance is based on our current operations and is subject to the risk factors and other forward looking statements and uncertainties contained in this presentation and in our filings with the SEC.
Turning to slide seven.
Each of these bullets is important to our sustainable growth platform.
I'm proud of our results and the great work of our team over the past several quarters I want to provide context to the strategy driving the momentum we generate.
Our short term focus is on gross margin expansion and our target is to achieve 40% gross margins over the longer term.
Our transformation continues we expect that over time. These changes will deliver the higher annual net sales gross margin operating income and cash flow from operations that enable sustainable long term growth.
Let's move to slide eight.
We have delivered sales growth for four consecutive quarters, well above market growth and above our 9.25 million continued product sales baseline set in April 2021.
These are our levers to drive sales growth at a macro level, capturing market share developing product innovations and acquisitions.
The two markets, we serve exhibit attractive growth profiles, each about 5% to 6%. In addition to this market growth. We plan to continue to take market share from our competitors introduce new products that will enable us to grow faster than this 5% to 6% organic growth rate importantly.
Importantly, our annual net sales for fiscal year 'twenty. Two is approximately 44 to 45 million in the $5 billion domestic total available market within the rehabilitation embracing and supports markets.
That is the macro level I will now discuss our initiatives to build sales.
Please turn to slide nine on winning market share.
We win market share through one superior commercial execution.
Make the dealers and customers life as easy as possible and make it easier to do business with us and to favorable mix shift to product innovations by delivering on these goals. We have delivered double digit revenue growth in four consecutive quarters, we remain focused on driving improvements in our dealer and <unk>.
And customer experience offering volume tiered pricing that rewards customer loyalty and delivering product innovations that give dealers reasons to continue moving their end customers to dynatron X.
Moving to slide 10.
The three takeaways about our recent new products are number one ramped up cadence and expanded pipeline of product innovations.
Two at the end of January 22 under the umbrella of returned in mobility, we launched an exclusive suite of products and Additionally, three new metal tables, and three dealer and customer feedback drove the product releases.
The new metal tables were launched on January 31st 2022, due to the typical timeline for orders product build and then shipments there was a small immaterial revenue impact from these new products in our third quarter of fiscal year 'twenty two.
While the corporate wide impact was immaterial in Q3 booked orders on these new products were almost 200% higher than our baseline expectations in the third quarter exceeding every metric in the plan. We believe this demonstrates market acceptance of the Mammoth line and expect it to become a more important contributor to our revenue.
News overtime.
To use a baseball term the mammoth launch was a single that drives our net sales growth over time.
Looking at slide 11.
Brian Baker rejoined dynatron ex fulltime as Chief operating officer in January 2022.
Brian served as our Chief operating officer from May 2019 until his promotion to Chief Executive Officer in August 2019, Brian held that position until July 2020, when he resigned due to health issues relating to COVID-19.
Thankfully he has recovered from the COVID-19 virus and I was delighted when he accepted the opportunity to rejoin our management team full time.
As you can see new leadership hires have been a major focus area at Dynatron X. We also implemented a culture of accountability at the company and focused our employees on overall organic sales growth and consistent profitability.
On slide 12.
The markets that we serve are large growing and highly fragmented the industry research continues to indicate that the rehabilitation embracing and support markets exhibit attractive growth profiles each of about 5% to 6%.
Opportunities exist across dynatron ex primary brands to expand market share within existing customers as well as to introduce additional product offerings within the segments in which we compete.
As we are all likely experiencing were reading about the statistics of facility activity orthopedic procedures and other peripheral activities like team sports that create demand for our products are volatile based on COVID-19 activity and staffing shortages.
Building on the foundation in the markets, we serve let's move to slide 13.
Our M&A strategy as detailed here to give you an idea of what we look for.
We continue to have conversations and pursue acquisitions innovation partnerships and other business ventures, we have the leadership team to execute on any of that meet our well defined criteria.
Our focus criteria include greater than 40% gross margin and cash flow contribution within the first year. Our focus is on our current markets. Our near term targets are at the lower end of the five to 30 million revenue range, we prefer to make a smaller acquisition using our balance sheet or bank debt rather than equity.
We believe our share price is undervalued and want to unlock some of that value.
I will now turn the call over to norm.
Thanks, John .
Please turn to slide 14, which contains our quarterly financial and business highlights.
As a reminder.
Full income statement and management's discussion and analysis can be found in the 10-Q I.
I will summarize some of the key financials here.
Net sales were $10 3 million for the third quarter of the fiscal year.
That compares to net sales of $11 5 billion in the same quarter of the prior fiscal year.
$10 3 million net sales in the third quarter exceeds the $9 million to $5 million quarterly continued product net sales baseline set in April 2021.
Our net sales across the quarters of fiscal year 2020 to align with historical trends lower in the second and third quarters and higher in the first and fourth quarters.
We continue to see an increase in overall activity compared to the prior year, which was impacted by COVID-19 shutdowns and other related disruptions.
Gross profit for the third quarter of fiscal year, 2022 was $2 3 million or 22, 4% of net sales compared to $3 3 million or 28, 8% of net sales in the same quarter of the prior year.
As John mentioned earlier, we saw COVID-19, and supply chain challenges, including extraordinarily high freight raw materials and labor costs in the third quarter specifically.
Specifically gross margin would have been 31, 7% or nine three points higher without the impact from COVID-19 in the third quarter.
About 60% of the nine three points of the inflationary cost impacts are related to freight.
With the remainder primarily related to raw materials.
Overall, we have seen a slowing of inflationary costs over the last quarter in both freight and raw materials.
We expect cost pressures to continue for the remainder of calendar year 2022.
With the adverse impacts to be more pronounced in the first half of this year.
With freight and raw material costs are probably here for at least a while.
We are raising prices to offset these cost at least partially as John discussed.
Selling general and administrative expenses were $3 7 million in the third quarter.
Compared to $3 9 million in the prior year period.
We delivered year over year SG&A cost savings as we continue to improve operational performance and leverage our resources on a companywide basis.
The decrease was due primarily to lower direct selling expenses and reduction in general business fees and administrative personnel costs.
Net loss for the third quarter of this fiscal year was $1 5 million.
That compares to a net income of 0.1 million in the third quarter of fiscal year 2021.
Which benefited from $963000 of employee retention credit.
Outstanding shares will increase approximately 280000 per quarter, depending on our share price.
As of May six 2022, the number of common shares outstanding was approximately $18 2 million.
We expect sequential improvement in gross margin in Q4 in response to our price increases and favorable mix shift to our new product innovations.
The net cash balance was $2 5 million on March 31, 2022.
We invested in inventory due to double digit.
Higher sales in each quarter of fiscal year 2022. In addition supply chain volatility continues to cause longer lead times.
As a result, the organization made a strategic decision to place additional orders on key raw materials and other supplies.
Cash used in operating activities was $3 3 million for the nine months ended March 31, 2022, due to the company's working capital investment on the DUC the double digit growth.
Specifically, $5 1 million or 78% increase due to the build in inventory to serve customer demand additional safety stock to help offset continued expected supply chain disruptions and new product introductions.
Before I turn the call back over to John I will note, we continue to navigate a volatile landscape due to the continuing challenges from COVID-19, including higher raw material prices delivery and shipment costs.
Light chain disruption.
Extended handling times and delays or disruptions in procedure volume.
At the same time dying tracks also expect some continued volatility from the company's business transformation.
This concludes our summary of the financial and operating results I will now turn the call back to John .
Thank you norm Slide 15 is the investment highlights for dynatron ex the markets. We serve rehabilitation embracing have attractive growth profiles. Our sales growth has been driven by customer and dealer reaction to the business transformation, we are winning market share or sales.
Have exceeded the market in four consecutive quarters, our target is 15.8% sales growth in the fourth quarter relative to the $9 8 million continued product sales in the same period in the prior year, we target sequential improvement in gross margin in the fourth quarter of fiscal year 'twenty two we have approximately.
$2.5 million of cash and $11 6 million of inventory on the balance sheet at the end of March with no debt.
We are excited to be moving dynatron X in a direction that will reward our shareholders and provide a consistently differentiated experience to our customers. We are actively sharing our story with the investment community, we will be presenting and hosting one on one meetings at upcoming investor events, which will be detailed in upcoming press releases and on our.
Our Investor Relations website, we hope to meet with you I will now turn it over for questions.
Thank you at this time, we are conducting a question and answer session investors can submit their questions in the meeting webcast by typing them into the Q&A button on your viewing screen analysts to publish research may ask questions on the phone line.
Just to ask a question on the phone line. Please press star one on your keypad.
Thank you. Your first question is coming from Jeffrey Cohen of Ladenburg Thalmann Jeffrey.
Yeah.
Ohio, John Brian and norm how are you.
Great Jeff good to hear voice.
Great to have you back.
Back to your work, Brian Hope you're doing well.
Few questions for longer and so Joe.
Joe could you talk about.
A number of SK use I know you've gone through some rationalization there over the past year could you walk us through perhaps aggregate numbers as they stand and any net change from Q3 and anticipated.
Changes going forward in the short and medium term.
Thanks, Jeff Arden, our Skus run around 5000 today across all of our brands no material change across them.
We certainly reduced a significant number of skus over a year ago, when we reset our baseline and this is now driven by our manufactured products going forward.
Okay.
Got it.
Could you talk about margins and pricing a little bit it sounds like you took some pricing and remind us what.
I think you said, 9% was from.
Well I'm not sure.
Prairie State gaming.
I guess, keeping up or net neutral to us.
Christians, thus far in <unk>.
For Q3 and Q4.
I'll talk first about pricing that I can let norm elaborate on gross margin. So when we look at our Q3 results and the growth that we experienced continued roughly 97% of that is driven by volume and only 3% of that driven by price and so we're not to the point, where the price increases are keeping up with the percentage decline in the inflationary costs.
Norm alluded to the other point about price, though is that we talked about in our last call that most of those price increases went into effect. The first of the year and due to the rolling nature of how they're implemented it takes one two and three quarters for them to fully make it into our results and so we're just seeing the beginning of that with that 2.6 percentage sequential increase.
That we saw in the quarter.
But to that.
I do think that in terms of the inflationary costs that we talked about nine three points.
Added back when you look at the inflationary impact of Pixar adjusted margin to 31, 7%.
Is better year over year, obviously, so we're excited about that unfortunately, we got the inflationary impacts that we've got to deal with now and we are making some of it back as John just spoke to on the price increases.
And we will continue to watch that we haven't seen overall those inflationary costs start to slow a little bit in the third quarter, which is nice and hopefully that trend continues.
Okay. That's helpful normally and lastly for us on the.
Margin front again I suppose.
I appreciate your longer term number 40% I'm, just trying to get a better handle on for modeling purposes for.
Fiscal 'twenty, three and 'twenty four.
How that May look as far as increases do you expect kind of.
A modest linear increase throughout the.
The next day quarters call it a three.
3% to 5%.
On an annual basis for the next couple of years at least and when you talk about longer term, 40% I'd imagine you're referring to.
Three or three of shares going forward.
I think starting with just the fourth quarter.
We saw 260 basis point improvement sequentially over the second quarter and we'd like to see that trend continue and we think it will in the fourth quarter of this year and then going forward yes.
Get to that 40% margin, we arent going to be able to do that overnight.
But if we consistently move it.
Study pattern forward with 260 basis points over improvements, we'll get there in the next two plus years.
Okay.
So cross protection.
Jeff I would add to norms comment, though just to share what I share internally with the team.
I'm proud of the team and our efforts to get to that 31, 7% gross margin when you remove those inflationary costs and we're improving it year over year, that's not an excuse for us to be able to get to our long term target. So we need to be effective at launching new products that are greater than 40% improving our initiatives internally. So that we can get to that point, we won't be satisfied until we get to our peers.
Got it thanks, Sean.
Thank you there appear to be no more questions in the time line.
I will now turn this call over to Jeff Christensen to retreat submitted questions through the webcast.
Okay, Yes.
Thanks, Operator, and our first question is for John .
What are.
You talked about the market growth.
Just wanted to make sure you know this question was submitted in the.
Webcast chat was.
What what's driving that.
Thinking about going forward, what's going to drive that above market growth.
Yes. The first part of it is just we have a clear strategy and the customer reaction to that strategy is very strong and so that's being demonstrated by the fact that if our markets are growing 5% to 6% and we're demonstrating 20% year over year with our midpoint and even 16% in Q4 that is three times the market. So that reaction is there with how we're driving our dealers.
And our customers to work with US as we've continued to launch new products. So with the new Mammoth line being launched on January 31st just beginning to take hold that's not even really in our results yet will be another reaction to that so we can continue this commercial execution and launch new products that will help generate margin. That's how we'll be able to maintain that above market growth rate.
Okay. Thanks, and our next question on the.
The web chat is.
Just to make the credit clarified what how do we think about what's going to drive what's going to be the most important factors to drive.
Gross margins higher.
Well I think when we look at how are we performing in the market and then how are we driving gross margins higher the first step for US was to generate net sales growth organic growth at greater than the market. We've now done that for what will be our fourth and fifth consecutive quarters. We've managed SG&A to that midpoint to be able to say at least in our cost base today, what we've done is improved our gross.
Margin absent the Covid factors of the year, but now we need to improve them regardless of the inflationary pressures. So we're working on sourcing relationships. We're working on our factory yields were switching to higher mix products were accelerating the cadence of new product innovations I can't point to any one of them and say that's going to be X percent or y percent, but the culmination of all of those is what's <unk>.
To allow us to get to our gross margin target.
Okay. Thanks.
What are what are the most important <unk> mess metrics that we should follow and the milestones that we should look for in the next three six and 18 months.
There's three metrics that we're looking at Johnson and first as we talked about is that consistent net sales growth and we've seen it over the last four quarters, we want to continue to see that and we're watching that because it shows that one we're making inroads with our customers and our sales strategy is working and two.
It's gonna be a measure of our success.
And our new product launches the second metric that we're highly focused on and is a key metric courses at gross margin and specifically the expansion expansion of that.
Our goal remains to get to 40% gross margin and while that's not going to happen overnight, we do want to see a steady improvement each quarter going forward. So that we can get to that.
To that overall target and a third metric. We're always looking at is is focused on is operating excuse me as EBITDA and operating cash flows a positive operating cash flow. So those are the metrics, we're watching and we're.
Consistently talking about and focused on.
Okay. Thanks.
Question in the chat is.
What new products will you be offering.
Yeah, I think if you look at the last few quarters. That's now seven new product releases since January of 2021, six new table lines of new software application will be launching those new products in both of our segments. The mammoth is a series of products that as we continue to test the market and receive dealer reaction.
And we'll cadence them out at the right time and manage the reaction. So we've got a.
Strong pipeline of new products coming we need to make sure that we vet those use disciplined product execution management led by our team was there a mailman and others and bring those to market over time.
Okay. Thanks.
It has the next question that Chad is the gross margin on new products launched in Q3 and going forward are those going to be higher about the same or lower than the rest of the business.
Our target for all of our activities is to get our gross margin over 40% long term a key tenet of that is that anything we launch or changes we make today must all achieve that target so new products must be able to achieve greater than 40% gross margin. So that we're consistently.
Pulling up our overall portfolio and as new products released continued to be a greater percentage of our overall revenue that will raise our margins along with operational improvements led by the return of Brian Baker and the rest of the organization.
Okay. Thanks.
Later I got a note from Scott Henry that he was trying to ask a question on the phone line is that are you.
Do you see that or he is not able to get in.
It hasn't come up at all.
As I said to Jeff's question come up no problem.
One I don't know if he.
Right.
Okay.
Okay.
And he can ask the question now if you like.
Yes, you can you're on mute his line.
Hundred percent.
Yeah.
Okay. Scott you can ask your question.
Can you hear me.
Hi.
Yes, we can hear you got a little fuzzy, but we can try to make it out good to hear your voice.
I hope that with Brexit.
Yes.
Yeah.
Hi.
The gross margin.
Thanks for that.
Act.
The back half.
Okay.
Thank you.
Alright.
26% gross margin.
Tony.
At 40% gross margin estimates.
Our top priority.
A representative of that.
On our numbers.
Okay.
So Scott I'll jump in here. This is John I would say that what norm talked about earlier is that if we were able to see sequential two six percentage point improvement like we saw in Q3 and Q4 that would be a good outcome in the event of these inflationary pressures, we've not provided going forward gross.
Guidance in that Bar chart is simply to represent that we expect that to continue the wildcard will be how fast can we see some of the inflationary pressures continue to slow down and then also as our price increases come in so I wouldn't imply a direct percentage there, but we would be happy with the debt similar to 6% increase that we saw in Q3.
Okay.
Cash burn in the quarter.
For the Rockies.
How should we think about cash.
Okay.
Sure.
Excellent.
Tony.
We expect the APAC.
Yes.
Yes, I think if you look at this Scott in the in the nine month period. So we utilize cash flow from operations of 3.3 million. We spent $5 1 million building inventory, we're heading into our two largest growth quarters of the year. Our fourth quarter is our second highest our first quarter is our highest.
So you Shouldnt expect to we also discussed at our inventories at elevated levels and it'll be around this level going forward, we're going to continue to meet that demand. That's there, especially as we head into our peak season, but as you look ahead. So given the fact that we'll have our strongest revenue quarter, but we're still dealing with the choppy nature. When we go into fiscal year 'twenty three.
We're getting positive cash flow from operations is absolutely going to be a goal and we're going to set the business on a path to achieve that.
Okay.
Thank you.
Okay.
Last question.
Part of it.
Yes.
Good morning.
Okay.
Okay.
So with that David.
Okay.
But we're still active.
Yes.
Okay.
Thanks Bye.
Okay.
Okay.
Okay.
The question is.
So that activity.
Let's talk about growth.
So.
Right.
23.
The growth we're talking about.
What I would point to Scott is we've said all along that we want to generate stability and be confident in the metrics that we put out so that we achieve them, we understand that having confidence in the management team and in our performance is not about the words, it's about the performance that we put up and so this.
Is the fourth and fifth consecutive quarter of being not only the net sales baseline, but our market and in this quarter, specifically that we provided guidance for Q4 that is an apples to apples comparison of 16% organic growth against the prior year. So our focus is on being able to maintain that the market's giving us let's call. It six.
Percent, we've proven now that for four and five quarters. We can deliver that we have to continue to launch new products. We have no intention of not being able to do that we need to simply execute.
I guess I wanted to talk a little bit.
Okay.
Yes.
Gross profit.
Sure.
Sorry.
From 2021.
My question.
In 2020.
20.
Okay.
So that 44 to 45 million in revenue.
Backlog to be apples to apples.
Okay.
Pushing.
I just wanted to know what's driving that.
Eric.
We are on that right now Scott the number we're projecting for Q4 against that 9.8 from Q4 of last year is down that baseline and the 44 to 45 million that we project for this fiscal year is the baseline going into the new fiscal year.
Perfect. Thank you for that client.
Final question.
The market.
For acquisition.
Okay.
Good morning.
Economic backdrop.
<unk>.
Yes.
Sellers are perhaps.
Okay.
Turning to financing.
Got it.
Okay.
Okay.
Okay.
Okay.
And the market for acquisitions is still very challenged out there in terms of expectations and then the macro environment uncertainty that's out there that is still the case. So what we have to continue to have these conversations we will continue to have these conversations but it hasnt gotten in.
Easier on being able to find that willing partner that advances us going forward. So that clearest near term strategy. We can do is launch these new products drive this organic growth and keep those conversations coming and.
Ideally one of those breakthrough in the coming one to two years.
Great. Thank.
Thank you for taking the question.
Youre welcome Scott Great to hear voice.
So we're all at all at a time and I would like to now turn the call back over to John for any closing comments.
Thank you.
You all for your interest in <unk>, we are actively sharing our story with the investment community as we move forward. So we hope to meet you at upcoming Investor events, and so all of those employees are dynatron mix across all of our great sites I want to say thank you for driving this organic growth and continuing this transformation together, we continue to exceed the market and have great opportunities in front of us.
You have any further questions. Please direct them to skyler black or Jeff Christiansen their contact information in this presentation and our press release have a great day.
Thank you. This concludes today's conference all parties may disconnect and have a great day.
Okay.