TELA Bio, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Telebio fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Greg Huntercheck from the Gilmartin Group. Please go ahead.

Thank you, Lateef, and good afternoon, everyone. Earlier today, Televio released financial results for the fourth quarter and full year 2024. A copy of the press release is available on the company's website. Joining me on today's call are Tony Koblich, President and Chief Executive Officer, and Roberta Kuka, Chief Operating Officer and Chief Financial Officer. Before we begin, I'd like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. we encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's annual report on Form 10-K and quarterly reports on Forms 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development and pipeline opportunities product potential, the impact of various macroeconomic conditions identified in our filings, like changes in surgical procedure volumes, the regulatory environment, sales and marketing strategies, capital resources, or operating performance. With that, I will now turn the call over to Tony.

Thank you, Greg, and good afternoon, everyone. Thank you for joining Telebio's fourth quarter 2024 earnings call. I'll begin by reviewing the quarter and factors that affected performance, then I'll turn to The meeting over to Roberto for review of the financials and in our outlook before opening it up for your questions. We generated 17.6 million in revenue in the fourth quarter, growing 3.8% versus the fourth quarter of 23. This was lower than our expectations and marks the first instance of single-digit revenue growth at Tela since the start of the COVID-19 pandemic. Despite, as we noted in our Q3 call, October, marking the strongest first month of any quarter in TELUS history and trending towards a strong finish in 2024. So what happened? There were several minor or hard to quantify external factors impacting performance, but ultimately the primary driver of this underperformance was lower than planned headcount in our U.S. sales force in the fourth quarter, exacerbated further by a number of departures including unplanned productive losses in late November and into December. In August 24, we made some fundamental but necessary changes in our commercial organization to realign our sales force around a new strategic commercial direction. This realignment included a focus reduction in headcount related to managerial, administrative, and support roles, but also included the departure of approximately 10 to 15 underperforming sales reps to address gaps in productivity and efficiency, partially offset by the conversion of certain support personnel into quota carrying roles. Although our top reps continue to drive performance in line with expectations throughout Q4, we also, for the first time in our history, experienced a number of departures from the sales force of productive reps. These additional losses included some key reps who were lured away by large financial incentives from companies in the wound care space, as well as a few newer entrants building out their sales force within the plastic and reconstructive space. When combined with the prior realignment, these losses created a situation where we simply didn't have the headcount to make up the difference so late in the quarter. Turning to some of the external headwinds that contributed to fourth quarter results. First, in late September, Hurricane Helene made landfall on the Gulf Coast of Florida and continued north through Georgia, South Carolina, and most notably North Carolina, where the storm caused significant damage to a plant responsible for manufacturing 60% of the IV fluids used in the U.S. Elected surgeries in our two strongest sales regions slowed down as a direct result of the storm, while the ensuing shortage of IV fluids appears to have affected surgical volumes throughout the U.S., As we had anticipated, feedback from the field indicates that these shortages manifested more in November and December as hospitals depleted their existing stocks earlier in the quarter. And finally, although it's difficult to measure, Christmas and New Year's Day fell on the Wednesdays of their respective weeks, potentially reducing the number of days in those weeks that surgeons operated or that patients scheduled procedures. While there is no clear signal of an impact in our sales, it's possible it had an effect and was cited by at least one other market participant as a cause for softness in Q4 elective procedure volumes. Despite this disappointing fourth quarter performance, we have already implemented necessary measures to address the challenges we experienced in the quarter. We believe these actions, when coupled with a few substantial tailwinds, will position TELA for strong performance in 2025. The primary adjustment comes from the full implementation of our revised commercial strategy, including those short-term adjustments we made as part of our August or Q3 realignment. This is led by an evolution of our field-based sales organization strategy, where we have redefined our approach to the division of responsibilities between our territory managers, or TMs, and our account specialists, or ASs. The AS position represents a vital direct field level auxiliary sales role with each AS brought on board to provide procedural case coverage within the territory of one or more of our top TMs. This team-based sales strategy allows our TMs to pursue new customer accounts or drive deeper penetration into existing customer accounts while simultaneously helping newer ASs more rapidly integrate into our organization receiving significant on-the-ground experience under the tutelage of our top TMs, with the potential to transition into a TM role more quickly and efficiently. Where successful, this should set up the promoted AS for long-term success in their new territory. We have seen success with this program so far through 2024, prompting us to allocate additional resources toward recruiting and retaining more ASs. This strategy aims to enhance the reach and productivity of our TMs, strengthen our relationship with customer accounts, and establish greater stability with existing customers, irrespective of future changes with the TMs or other ASs serving on these selling teams. At the end of Q3, we had 76 field-based representatives, 69 territory managers, TMs, and seven account specialists, ASs. However, if we look at the end of Q4, we had 71 total representatives with 63 TMs and 8 ASs. The intra-quarter turn and unexpected departures of several TMs ultimately drove volatility in top-line performance. As we look ahead this year, we expect by the end of this month, we will have 88 total reps with nearly 70 TMs and close to 20 ASs, well on our way to reaching our year-end target of 97 reps consisting of approximately 76 TMs and 21 ASs. We believe this model positions us well for the future as it allows us to identify and foster top talent while providing a roadmap for developing additional high-performing TMs. The value of a high-performing TM cannot be overstated as seen even in our Q4 results where our top reps continue to perform well with the top 44 reps achieving over 90% of their quotas in the quarter or virtually 100% of their allocated budget targets, even despite some of the external tailwinds we discussed earlier. Although we won't have full data to report until after the quarter, revenues year to date have been strong and are signaling that the crucial Q4 rebuild decisions inherent in this strategy will be important drivers for growth moving forward. Our commercial leadership team, including our CCO, have now completed a full six months in their respective roles. This period was marked by a strong third quarter and was followed by a more difficult period that included strategic shifts, implementation of a new market approach, and the recalibrated sales structure. With continued stability, we believe this should return TELA to sustained and normalized growth rates for 2025 and beyond. In addition to these meaningful sales force adjustments, Several other factors drive our optimism in our 2025 outlook. An expanding product portfolio, our broadening reach to surgeon customers, and our continued development of clinical data in support of our products. From a broader perspective, there is a substantial portion of the market share that remains available for us to capture in both hernia and PRS. In hernia repair, 80% of all procedures still utilize permanent synthetics, And as at least one major competitor is publicly announcing shifts toward their costlier, resorbable product lines, Tela has the opportunity to highlight Ovitex's consistent clinical performance and value proposition to drive adoption. In the PRS market, where we launched our first products in 2019, we are only beginning to address the $800 million U.S. opportunity, and we have significant runway to generate substantial growth with our expanding portfolio of PRS solutions. In 2024, we launched, among other products, the Liquifix and Ovitex IHR product families. Both quickly gained traction after launch, with Liquifix obtaining contract access with two GPOs as an innovative breakthrough technology, and both have afforded us access to customer groups with whom we may previously have had less interaction. Because Liquifix is indicated for use only with synthetic mesh, we've been able to discuss that product and introduce Telebio to surgeons who may not have been active Ovitex users. The IHR product line was also quickly adopted by surgeons using minimally invasive techniques to repair inguinal hernias, leading to more than $1 million in sales since its April 2024 launch. Total LiquiFix sales are also nearing $1 million. We expect both product lines to continue to grow robustly in 2025, further expanding Telebio's profile in the hernia repair space and increasing awareness of all of our products. In 2025, we expect to launch larger size versions of our existing Ovitex PRS products and a new long-term resorbable alternative for our hernia products. The PRS offerings in particular are highly anticipated by surgeons since certain techniques within that space require or benefit from access to larger units. We expect both sets of innovations to represent incremental revenues as they are not merely replacing smaller pieces that were already being used. In support of our expanded product offerings, we also continue to invest in medical education and broader surgeon outreach. Several initiatives are already thriving and helping us set the stage for the year, including a live robotic hernia symposium featuring foregut specialists, faculty, doctors, Philip Woodworth and Reginald Bell, both highly respected leaders in this space. A national webinar with renowned surgeon Mr. Alistair Windsor from London, a leading advocate for shared decision-making, Mr. Windsor's participation elevates our commitment to furthering U.S. adoption of this current best practice in Europe. our third annual Plastic Reconstructive Summit, an invitation-only event spotlighting emerging technologies designed to enhance outcomes in soft tissue reconstruction and attended by more than 30 surgeon specialists in this space. Beyond education, we've already made significant strides in regional and national society meetings in 25, with planned sponsorship of 16 key industry events, providing exposure to nearly 5,000 surgeons. In addition, we hosted a standing room-only lunch symposium at SAGES, where experts Dr. Reg Bell, Dr. Tripp Buckley III, and Dr. Stephen Demeester led an engaging discussion on Paris esophageal hernia repairs. Our long-term ventral and inguinal data were also presented at this meeting, showcasing their low recurrence rates across hundreds of patients with five years of follow-up, further validating the clinical benefits of OVETEX. We remain committed to the collection of clinical data showcasing the value of our products. And in the fourth quarter of 2024, we achieved the significant regulatory milestone of obtaining IDE approval for a PRS long-term resorbable breast reconstruction investigational study. This approval underscores our continuous investment in clinical research and to the future of our PRS business. In addition, we continue to enroll our OPERA study a retrospective prospective trial evaluating the safety profile of Ovitex PRS in previous pre-pectoral and sub-pectoral implant-based breast reconstructions. We are aware of two newer surgeon publications based on surgeon-derived studies involving the use of PRS in these applications, with the understanding that several similar publications may be in progress. By the end of 2025, we expect to have 300 to 400 patients under study using our various PRS offerings. Since TELA's inception, we have sold over 65,000 Ovitex and nearly 15,000 Ovitex PRS units. Our next goal is to reach 100 million in revenue and shortly thereafter to achieve profitability. We foresee reaching these milestones in the not too distant future and in continuing to establish our products as the gold standard for soft tissue preservation and restoration. With that, I'll turn the call over to Roberto to provide more specifics on our financial results.