Good morning, ladies and gentlemen, and welcome to the Dynatronics third quarter fiscal year 2022 earnings call. At this time, all participants are in a listen-only mode. At the end of today's 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 viewing screen. Analysts who 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. As a reminder, this event is being recorded. It is now my pleasure to turn the floor over to your host, Norm Roegner, the company's Chief Financial Officer. The floor is yours.
Thank you, operator. Skyler is 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, and the financial performance relating to our business. These forward-looking statements reflect our view as of today only, and 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 are included in our most recent 10-K and other reports filed with the SEC, 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 that are available for viewing in the webcast and posted in the investor relations section of dynatronics.com. I will now turn the call over to John Krier, our President and Chief Executive Officer.
Thanks, Norm. Good morning, everyone, and thanks for joining Dynatronics' call today. On today's call, we will cover the recent highlights and achievements. Norm will provide commentary on the financials, and then we will have the operator open the phone lines for questions. Slide 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 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. Second, we are confident in our outlook. We increased the midpoint of our fiscal year 2022 net sales guidance today.
Our third quarter sales and our sales guidance for the fourth quarter are 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. Third, our markets generate 5%-6% organic growth per year. We plan to continue to take market share and releasing new products, resulting in growth faster than the 5%-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 midpoint today.
We expect net sales in fiscal year 2022 to be in the range of $44 million-$45 million, assuming current conditions on COVID-19 cases and supply chain impacts. The midpoint of this sales guidance represents a 20.3% organic growth rate relative to the $37 million annual continued product net sales baseline set in April 2021. Our target midpoint net sales in the fourth quarter of fiscal year 2022 is $11.35 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 Dynatronics' transformation strategy continues to be overwhelmingly positive, demonstrating our new business model strength and providing us momentum, building upon the favorable tailwinds in the markets we compete.
The company expects the distribution of net sales across the quarters to align with historical trends. Highest 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%-6% in fiscal year 2023. 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 have been built.
We invested in inventory in each of the first three quarters of fiscal year 2022 to serve customer demand on expected double-digit higher sales growth. Our inventory is elevated to meet customer demand and the current market and supply chain conditions. The expected sequential improvement in gross margin in Q4 assumes current conditions on raw material costs, delivery and shipment costs, supply chain disruptions, and handling times. To provide more context, our target is utilization of appropriate inventory levels that have 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 2022. These investments were designed specifically to serve customer demand, add additional safety stock to help offset continued expected supply chain disruptions, and to drive 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 2022 was primarily due to the company's working capital investment in 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 costs. 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, a 2.6% 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 achieve.
For example, our competitors, DJO, before they were acquired by Colfax and recently spun out to the standalone Enovis, and Össur, when you break out their bracing segment, maintain margins for bracing and supports of approximately 50% and for rehabilitation of roughly 30%. Gross margin in each quarter of fiscal year 2022 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 have been 31.7%. Excluding these additional costs, our gross margin was higher in each quarter of fiscal year 2022 relative to the prior year. We are taking multiple actions to offset these costs, including selective price increases, exploring alternate sourcing relationships, and improving factory yields.
We are fortunate that Dynatronics 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 over time. Slide six provides the fiscal year 2022 guidance details. I discussed our net sales guidance range for fiscal year 2022, and we target higher net sales and gross margin in fiscal year 2023. We anticipate selling, general, and administrative expenses of 30%-35% of net sales in fiscal year 2022. Q3 was an excellent example of the team managing SG&A appropriately in the face of mounting input cost pressures.
As we gain 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 in our markets, deliver margin expansion, and consistently deliver strong cash flow from operations to create value for shareholders. 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 8. 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%-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%-6% organic growth rate. Importantly, our annual net sales for fiscal year 2022 is approximately $44 million-$45 million in the $5 billion domestic total available market within the rehabilitation and bracing 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. Two, 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 end 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 Dynatronics. 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 2022, under the umbrella of Return to Mobility, we launched an exclusive suite of products and additionally three new metal tables. 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 2022. 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 revenues over time. 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 Dynatronics full-time 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 Dynatronics. 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 and bracing and support markets exhibit attractive growth profiles, each of about 5%-6%. Opportunities exist across Dynatronics' 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 or 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 is 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 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 $5 million-$30 million revenue range.
We prefer to make a smaller acquisition using our balance sheet or bank debt rather than equity because 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, the full income statement and management discussion and analysis can be found in the 10-Q. 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 million in the same quarter of the prior fiscal year. $10.3 million net sales in the third quarter exceeds the $9.25 million quarterly continued product net sales baseline set in April 2021. Our net sales across the quarters of fiscal year 2022 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, gross margin would have been 31.7% or 9.3 points higher without the impacts from COVID-19 in the third quarter. About 60% of the 9.3 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. The freight and raw material costs are probably here for at least a while. We are raising prices to offset these costs 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 company-wide 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 $963,000 of employee retention credit. Outstanding shares will increase approximately 280,000 per quarter, depending on our share price. As of May 6, 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 31st, 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 31st, 2022 due to the company's working capital investment on the expected 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, supply chain disruption, extended handling times, and delays or disruptions in procedure volume.
At the same time, Dynatronics also expects 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 Dynatronics. The markets we serve, rehabilitation and bracing, have attractive growth profiles. Our sales growth has been driven by customer and dealer reaction to the business transformation. We are winning market share. Our 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 2022. 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 Dynatronics 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 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 within the meeting webcast by typing them into the Q&A button on your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask 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, over to you.
Oh, hi, John, Brian, and Norm. How are you?
Great, Jeff. Good to hear your voice.
Pleased to have you back at work, Brian. Hope you're doing well. Few questions from our end. John, can you talk about the number of SKUs? 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. Our SKUs run around 5,000 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, you know, driven by our manufactured products going forward.
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 freight and raw material increases? Is your price taking, I guess, keeping up or net neutral to those increases thus far and through Q3 and Q4?
I'll talk first about price, and then I can let Norm elaborate on gross margin. When we look at our Q3 results, and the growth that we experienced continued, roughly 97% of that's driven by volume and only 3% of that driven by price. We're not to the point where the price increases are keeping up with the percentage decline in the inflationary cost that, 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.
We're just seeing the beginning of that with that 2.6% sequential increase that we saw in the quarter.
Okay, got it.
I can add a little bit to that. I mean, I do think that in terms of the inflationary costs, yeah, we talked about 9.3, you know, added back when you look at the inflationary impact. It takes our adjusted margin to 31.7%, which is better year-over-year, obviously. 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. We'll continue to watch that. We have 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 all for Norm. Then lastly for us on the margin front, again, I suppose I appreciate your longer-term number of that 40%. I'm just trying to get a better handle on, for modeling purposes for fiscal 2023 and 2024, how that may look as far as increases? Do you expect kind of a modest linear increase throughout the next eight quarters, call it, 3%-5% on an annual basis for the next couple of years at least? When you talk about longer term, 40%, I imagine you're referring to three or three-ish years going forward.
You know, I think starting with just the fourth quarter, you know, we saw 260 basis points 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. Then going forward, yeah, I think to get to that 40% margin, we aren't gonna be able to do that overnight. If we consistently move it a steady pattern forward with 260 basis points type improvements, we'll get there in the next 2+ years.
Okay. That does it for us. Thanks for taking-
Yeah. Jeff, I would add to Norm's comment, though, just to share what I share internally with the team. While 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. 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, John.
Thank you. There appears to be no more questions in the phone line. I will now turn this call over to Jeff Christensen to read through submitted questions through the webcast. Thank you.
Okay. Yeah. Thanks, operator. Our first question is for John, and what you talked about, the market growth, and just wanna make sure, you know, this question was submitted in the webcast chat, was you know what's driving that, you know, thinking about going forward, what's gonna drive that above market growth?
Yeah. The first part of it is just we have a clear strategy, and the customer reaction to that strategy is very strong. That's being demonstrated by the fact that if our markets are growing 5%-6% and we're demonstrating 20% year-over-year with our midpoint and even 16% in Q4, that's three times the market. That reaction is there with how we're driving our dealers and our customers to work with us. As we continue to launch new products, 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. If we can continue this commercial execution, launch new products, that'll help generate margin. That's how we'll be able to maintain that above-market growth rate.
Okay, thanks. Our next question on the web chat is, you know, just to be clear about it, how do we think about what's gonna drive, what's gonna be the most important factors to drive gross margins higher?
Well, I think, you know, 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. Now we need to improve them regardless of the inflationary pressure. We're working on sourcing relationships, we're working on our factory yields, we're switching to higher mixed products, we're accelerating the cadence of new product innovations.
I can't point to any one of them and say that's gonna be X% or Y%, but the culmination of all of those is what's gonna allow us to get to our gross margin target.
Okay, thanks. What are the most important Dynatronics 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, Jeff. First is what we talked about is that consistent net sales growth. We've seen it over the last four quarters. We wanna continue to see that, and we're watching that 'cause it shows that, one, we're making inroads with our customers and our sales strategy is working. Two, it's gonna be a measure of our success around our new product launches. The second metric that we're highly focused on and is a key metric for us is that gross margin, and it's specifically the expansion of that. Our goal remains to get to 40% gross margin. While that's not gonna happen overnight, we do wanna see a steady improvement each quarter going forward so that we can get to that overall target.
The third metric we're always looking at is focused on EBITDA and operating cash flows or positive operating cash flows. Those are the metrics we're watching, and we're consistently talking about and focused on.
Okay, thanks. The next 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 2021. Six new table lines, a new software application. We'll 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, we'll cadence them out at the right time, and manage the reaction. We've got this strong pipeline of new products coming. We need to make sure that we vet those, use disciplined product execution management led by our team with Sarah Milman and others, and bring those to market over time.
Okay, thanks. It is the next question in the chat 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. New products must be able to achieve greater than 40% gross margin so that we're consistently pulling up our overall portfolio. As new products released continue 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. Operator, I got a note from Scott Henry that he was trying to ask a question on the phone line. Do you see that or is he not able to get in?
It hasn't come up at all. As I said, Jeff's question came up no problem. It's star one. I don't know if he's-
Right.
Can try that again.
Okay.
I can unmute his line and he can ask the question, though, if you like.
Yeah. Can you unmute his line?
100%. Just two seconds. Okay, Scott, you can ask your question.
Okay. Guys, can you hear me all right?
Yes, we can hear you, Scott. It's a little fuzzy, but we can try to make it out. Great to hear your voice.
As well. It's a lot of pressure. Hopefully, I have a good question. For starters, you know, when I look at slide five on the gross margin, I can't help but ask, you know, you have the bar chart and, you know, if I just look at Q4, it would imply like 26% gross margin. If I look at fiscal year 2023, it would imply 30% gross margin. My question is, you know, are those bar charts just put there to show growth or are they representative of actual expectations? I know they don't have numbers, but, you know, you can eyeball it.
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 a sequential 2.6 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 margin guidance, and that bar chart is simply to represent that we expect that to continue. The wild card 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. I wouldn't imply a direct percentage there, but we would be happy with a that similar 2.6% increase that we saw in Q3.
Okay. Then the revenue quarter. More importantly, in 2023, do you expect to be cash flow neutral-ish? How should we think about it?
Yeah. I think if you look at this, Scott, in the nine-month period, we utilized 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. You shouldn't expect to. We also discussed that our inventory is at elevated levels, and it'll be around this level going forward. You know, we're gonna continue to meet that demand that's there, especially as we head into our peak season.
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 2023, targeting positive cash flow from operations is absolutely going to be a goal, and we're gonna set the business on a path to achieve that.
Okay. That's helpful. Thank you. You know, the last question is, you know, somewhat of a tougher question, and you may have not wanted me to ask it, but I think it's relevant. You know, you're talking about growth, you're talking about gaining market share, but you know, we're still down sequentially and down year over year. I know you reset the base by eliminating SKUs, so it's not apples to apples anymore. The question is, I mean, you can do that once, but after doing that, you know, to talk about growth, you have to show growth. The question is, for 2023, will the growth we're talking about show up in the revenue statement?
What I would point to, Scott, is we've said all along that we wanna 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. This is the fourth and fifth consecutive quarter of beating not only the net sales baseline but our market. 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. Our focus is on being able to maintain that. You know, the market's giving us, let's call it 6%. 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.
Yeah. I guess I just wanna put it a different way because, you know, your Q4, yes, you're telling me it's gonna grow, but it's off a changed base from Q4 in 2021. It's not gonna grow from 2021's Q4 number. My question is, when is 2022 going to be a firm base? Meaning, say that $44 million-$45 million revenue, is that going to be apples to apples when we go to 2023 or are we gonna be pulling and pushing things in and out of the 2022 number? I just wanna know when we're on that kind of organic baseline that we should be thinking about?
We are on that right now, Scott. The number we're projecting for Q4 against that $9.8 million from Q4 of last year is on that baseline, and the $44 million-$45 million that we project for this fiscal year is the baseline going into the new fiscal year.
Okay. Perfect. Well, thank you for that clarity. Then I guess final question, just the market for acquisitions, do you find it improving, given the, you know, the challenging economic backdrop? Do you find that if sellers are perhaps more willing to consider alternative financing such as earn-outs? Is it working? Is the market coming to you, basically when you think about acquiring? Just trying to get a sense of that and how we should think about that aspect of the business.
Yeah. 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. We will continue to have these conversations, but it hasn't gotten any easier on being able to, you know, find that willing partner that advances us going forward. The 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 breaks through in the coming 1-2 years.
Okay, great. Thank you for taking the questions.
You're welcome, Scott. Great to hear your voice.
We're all out of time, and I would like to now turn the call back over to John for any closing comments.
Thank you. Thank you all for your interest in Dynatronics. We are actively sharing our story with the investment community as we move forward, so we hope to meet you at upcoming investor events. For all those employees of Dynatronics across all of our great sites, I wanna 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. If you have any further questions, please direct them to Skyler Black or Jeff Christensen. Their contact information is 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.