TELA Bio, Inc.

Good afternoon, ladies and gentlemen, and welcome to the TeleBio second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. Following the prepared remarks, there'll be a question and answer session. Please be advised that today's conference is being recorded. I will now like to turn the conference over to Louisa Smith.

Thank you, Lisa, and good afternoon, everyone. Earlier today, Tela Bio released financial results for the second quarter and to June 30th, 2026. A copy of the press release is available on the company's website. Joining me on today's call are Joe Capper, Chairman of the Board, Heather Goetz, Chief Executive Officer, Jeff Blizzard, President, Roberto Cuca, Chief Operating Officer and Chief Financial Officer, and Jim Hagen, Senior Vice President of Strategic Operations and Marketing. Before we begin, I'd like to remind you that during this conference call, the company may 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 quarterly reports on Forms 10Q, which identify the specific risk 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, regarding product development, pipeline opportunities, sales and marketing strategies, and the impact of various additional risk factors as identified in our regulatory filings. With that, I'll now turn the call over to Joe.

Thank you, Louisa. Good afternoon, and thank you for joining Telebio's second quarter 2026 earnings call. I will start the call with a few comments about the important leadership change announced last week naming Heather Goetz as the new Chief Executive Officer and Director of Telebio, then turned the call over to the management team for an update on the business. Heather brings a proven track record of driving operational excellence, leading organizations through complex business and financial transformations, and creating long-term value. We are confident that under Heather's leadership, Telebio will build on its strong foundation expand its impact for patients and surgeons and deliver value for our shareholders and employees. On behalf of the board, I also want to extend our sincere gratitude to Tony Koblish for his vision, leadership, and entrepreneurial spirit in founding Telebio and guiding the company through its early growth stage. Tony's commitment to innovation led to the development of Obitex and helped establish Telebio as a leader in soft tissue reconstruction. We are deeply appreciative of his many contributions and wish him continued success in his future endeavors. I will now turn the call over to Heather.

Thank you, Joe, and good afternoon, everyone. Let me start by extending my gratitude, especially to our team, for the warm welcome. I am honored to join TeleBio at such an exciting time in the company's evolution. There are many things that attracted me to the organization, one of which is its differentiated product portfolio that spans the hernia and plastic and reconstructive surgery spaces. These products were designed with patient outcomes in mind, and they work. For example, the efficacy of the hernia products is supported by robust clinical studies, as demonstrated in the Bravo study at a 2.6% recurrence rate, Obatex has one of the lowest needs for repeat surgery while being used successfully in the most complex surgical tissue repair procedures. It is a privilege to be part of an organization that can improve the lives of patients that addresses a 2.8 billion market opportunity. Unfortunately, the results of the business this quarter do not reflect the quality and potential of the portfolio. We believe that this is because of several factors. The markets in which we compete are highly specialized and require substantial onboarding and training for new sales reps. As a result, the time to productivity for the new hires has taken a bit longer than anticipated. In addition, earlier in the year, some adjustments were made to the sales team's focus and incentives, specifically around PRS, that initially appeared positive but that we later determined needed to be adjusted. Finally, the continued practice of anti-competitive contracting and bundling in hospitals, which is the core issue in our lawsuit against Beck and Dickinson, continues to create barriers to Ovatech adoption. While we are not without competitive and market challenges, I am energized by the opportunity to see the company through its next phase of growth by leveraging my experience in leading organizations through complex business and financial transformations. I will now turn the call over to Jeff to discuss the dynamics impacting our business in more detail and how we are addressing each of these challenges. Roberto will review the second quarter financials, and we will then open the call for your questions. Jeff?

Thank you, Heather. As you saw in the release, revenue for the second quarter was at $19.3 million, a decrease of 4% from the second quarter of 2025 and below our expectations. The shortfall was concentrated almost entirely to our Overtax PRS portfolio, I will now walk through what drove the myths and detail out our action plan that we have in place to get back on track. In January, we initiated a pilot where we tested the concept of having a dedicated PRS rep calling on targeted hospitals. The hypothesis was that in focus, we could build a clinical relationship, provide superior surgical support, and create a sustainable business upon clinical outcomes with exclusive presence. After extensive analysis from our sales leadership team and feedback from the field, we concluded that the pilot had unintended consequences causing confusion within the sales organization, which subsequently contributed to the PRS decline. We acted fast and stopped the pilot to move back to our original structure in which every TM represents a full breadth of portfolio across their entire territory. The PRS action plan we are rolling out now will have a full training program for the US field team, combined with how best to resource and leverage the medical office. With these positive changes in place and what we know about the seasonality of PRS, we expect to see recovery in the second half of the year. Stepping back to the broader US field organization, we continue to make progress on the tenure and productivity curve we've talked about over the last several quarters. We've previously discussed the importance of sales reps progressing through their early tenure, as historically we've seen productivity build more meaningfully as reps gain experience and mature in their roles. While progress is happening, it's not the pace we originally anticipated due to changes in focus and competitive challenges as referenced above. We maintain confidence that the investment we've made in this team over the past year is translating into the kind of durable, tenured field organization we need to drive consistent performance. Globally, our core hernia business continues to perform well. Ovitex units volumes grew 12% year-over-year, meaningfully ahead of our 6.6 growth in Ovitex dollar revenue, which indicates we continue to take procedural share even as the U.S. market shifts towards smaller size units with the prevalence of robotic hernia repairs. In the U.S., as Heather mentioned, we continue to battle against the competitive dynamics of bundling from our largest competitors, which has been particularly challenging in the last 18 months. To help combat this, We've upgraded our talent within our market access and contracting team. Ovitec's long-term data has continuously shown recurrence rates in a single load, single digits, whereas other biologic and biosynthetic hernia repair materials have recurrence rates consistently 10 times higher. In programs where we are allowed to compete fairly, the value proposition becomes abundantly clear to both surgeons and hospital administrators. I'm encouraged that LiquiFix had another strong quarter. with revenue up 39% over the prior year period. And our international business continued to be a source of consistent growth with revenue up 26% year over year as we deepen our presence in the UK and other key European markets. As a reminder, our European growth comes entirely from our hernia portfolio since Ovitex PRS is still working through the regulatory process to reach the European market. Europe continues to be one of our more durable parts of our business and we remain focused on deepening our positioning in these markets. While we're behind where we expected to be at the end of the second quarter, our commercial organization has the agility to adjust as needed, and we're doing just that. We've designed the best hernia portfolio in the market, and we're taking decisive action to get the PRS business back on track. We've also upgraded leadership in our market access team, we have a maturing sales force, and we continue to demonstrate sustainable growth in Europe. Our team has stepped up, and I'm truly encouraged by what's ahead. I'll now turn it over to Roberto to walk through the financials in more detail.

Thank you, Jeff. As Jeff described, revenue for the second quarter of 2026 was $19.3 million, a decrease of approximately 4% compared to $20.2 million in the second quarter of 2025. This was primarily driven by a decline in our Obatex PRS unit volume and the continued shift to smaller, lower-priced hernia units in our Obatex mix. are partially offset by continued growth in our international business. International sales revenue of $3.8 million represents a 26% increase over the prior year period. Global Obatex unit volume increased 12% year over year with 5,776 units sold in the second quarter compared to 5,178 units sold in Q2 2025. Ovitek's revenue was $13.3 million, up 6.6% from $12.5 million in the prior year period. Ovitek's PRS revenue was $5.5 million, compared to $7.3 million in the second quarter of 2025, reflecting the 23% decline in PRS unit volume that Jeff discussed. Other revenue, which includes Liquifix, was half a million dollars, representing growth of 39%. Gross profit was $13.9 million in the second quarter of 2026, modestly below $14.1 million from the prior year period. Gross margin was 72% compared to 70% in Q2 2025. The increase was driven by the refund of previously paid tariffs and a lower charge for excess and obsolete inventory as a percentage of revenue. Total operating expense was $23.2 million in Q2 2026 Flat to the $23.2 million of expense in the prior year period. Sales and marketing was $16.4 million, a decrease of approximately $400,000 from the prior year period, with lower commission expense partially offset by higher meeting and training costs. General and administrative cost was $4.1 million in line with the prior year period. Research and Development was $2.7 million, an increase of approximately half a million dollars from Q2 2025, driven by higher compensation and benefits and study costs. Loss from operations was $9.3 million in Q2 2026 compared to $9.1 million in Q2 2025, and a sequential decline of 12% from Q1 2026. Net loss was $11.3 million in Q2 2026, compared to $9.9 million in Q2 2025. The increase was primarily due to higher interest expense of $2.1 million associated with our new upsized credit facility that we put in place in November of 2025 versus $1.2 million in the prior year period under the previous facility. We ended the quarter with $30.4 million in cash and cash equivalents. Before I turn the call back to Heather, let me touch on the remainder of the year. As a result of the lower than expected results in the first half of the year and the longer than expected ramp time for our new sales team, we will be taking steps to meaningfully reduce the overall cost structure to bring it more in line with our top-line performance and expectations. Since Heather just joined the organization, we will need time to finalize the overall plan. As such, we believe it is prudent for us to withdraw our prior full-year revenue guidance. We will provide an update after the plan is finalized. I'll now turn the call back to Heather for some closing remarks.

Thank you, Roberto. I want to reiterate my excitement for the opportunity to lead the TeleBio team. We have a differentiated portfolio, a strong commercial foundation, and a clear commitment to improving outcomes for patients and surgeons. I'm excited to partner with our talented employees, leadership team, customers, and board to build on that momentum, accelerate commercial execution, Strengthen our customer relationships and expand our impact. Together, we have a tremendous opportunity to advance the company's mission and create long-term value for all of our stakeholders. Thank you to the team for your continued focus and effort. Operator, please open the line for questions.

Thank you. If you would like to ask a question, please press star 11 on your telephone. You will hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press star 11 again. We ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question will be coming from the line of Caitlin Roberts of CannaCard Unuity. Please go ahead.

Hi, thanks for taking the questions and welcome, Heather. Just a quick one on the Salesforce. We'd love more of an update there. How many team members did you end the quarter with and You noted it's taking a little bit longer for the reps to hit break-even versus the six months you noted prior. How much longer is it taking for them?

Sure. Hey, Caitlin, it's Jeff Blizzard. We're on pace with our hiring plan. And with the focus shifting on onboarding, training, and productivity, it's making sure that we have the right team in place. Importantly, our growth and headcount reflects our deliberate commercial expansion, not turnover. This is an investment of us building the right team, right people, and right roles. And our newest cohort is already outperforming its predecessors in that same stage of tenure.

Hey, Caitlin, it's Jim. I'll add some color on your second half, around the six-month productivity timeline. I think we're definitely seeing it long in the pipeline before reps come up. We know tenure in our field force is the biggest indication of sustainable success for us. So we're really looking at that 9- to 12-month ramp for reps to get up to a really strong productivity level. The positive sign is a lot of them are getting there in terms of maturity and tenure and role. We've added more resources to our training team, both in-house and in the field, and within our medical office. So I think I'm feeling really good that that group will get up to the productivity levels we need by the end of Q3 and into Q4.

Just on the PRS business, I think you called out last quarter just some issues with the concentration of the customers there. Is that still an issue? Is that confounding with the Salesforce focus in PRS and the shifting of that and maybe a little more color on what's really driving the results there?

Well, the pilot was the one that probably got the most attention in the organization. We thought in those six key markets we would see lift and the rest of the organization would keep PRS as part of their focus in their bag. And a bit of that was starting to fall off when we realized the pilot wasn't growing as fast as we wanted it to in that pilot, so that's why we pivoted quickly and stopped it. PRS, too, is not a systemic issue. And Jim, maybe you can pull this up, but ultimately we've seen in key programs, key surgeons, it's in less than 10 sites that we ultimately have to get back on board. So again, not a systemic issue, isolated based on surgeons leaving programs, one who is a new mother. Some of our key users had the first half of this year has been some changes in life and career patterns.

So to your concentration point, Caitlin, that's still real for us. Smaller cohort of surgeons implanting PRS that make up a larger percentage of our revenue. Disproportionately, there was a number of those surgeons who were out in the first half of the year. Most of them are coming on. As Jeff said, there's been a couple of life changes for some of them. They're out. Part of the PRS pilot, one of the hypotheses was with dedicated focus, we can drive depth at hospitals with more implanters to brought in the concentration, or kind of lessened the concentration on a critical few. That has now shifted to the broader field team. It's still one of our efforts. We know we have to diversify our infrastructure base to protect from these shocks going forward.

Understood. Thanks for taking the questions.

Thanks, Caitlin.

Thanks, Caitlin.

Thank you. One moment for the next question. And our next question is coming from the line of Sam Knapp. of Lake Street Capital Markets. Please go ahead.

Hi, this is Frank Dockman from Lake Street. Thank you for taking the questions. I was hoping to start with one on the competitive landscape. I heard the comment a few times throughout the call, maybe helping to characterize what an account looks like where you are competing fairly, and then what are the priorities related to the barriers you need to hit down in order to have more accounts to replicate what a fair account looks like?

In the southeast, as an example, we've got an organization, a buying group, that has brought us in, and we have a fair share of our contract responsibility. And that's gone to about 13 or 15 sites with full product rollouts, getting surgeons on board, doing patient selection conversations, and then cases to follow. And that's what great looks like. We've actually had that happen over the last six weeks or so. The inverse is true in a medical system out west where we exceeded our percentage of share allotment and the competitor went in and threatened a price increase to the tune of $400,000 and we were asked to leave the program. So we're seeing both sides and it felt a little bit more ramped up in Q2 versus prior quarters.

Okay. That's helpful. And then related to the comment on cost structure in the second half of the year, where should we think about the costs coming out of the model?

So, Frank, we're still working on this. I've spent some time with the team, and it's evident that there's opportunity to take some meaningful costs out, but the specifics of the plan have not been Thank you. One moment for the next question.

Our next question is coming from the line of Matthew O'Brien of Piper Sandler. Please go ahead.

Matthew O' Thanks for taking the questions.

Roberto, did I hear you right that the second half of the year is going to be, as far as revenue goes, better than the first half?

I know we don't want to get into 27 too much, but there's no reason to think you won't grow 27 versus maybe 25 this year being more of an adjustment year and then have a follow-up.

I'm thinking of Jeff, whose voice is almost as deep and resonant as mine. He was the one who was talking about the revenue growth in the second half of the year, so I'll let him answer that.

So we are optimistic that PRS is going to be one of our growth drivers in the back half of this year, given that it's back in as a large percentage of our focus with a training plan for the commercial organization and re-engagement with those key users. And just again, noting the seasonality of PRS and when we see it hit the most is the back half of this year. So that's where you're hearing our optimism.

And Jeff, that's just on PRS or is that for the whole business?

No, the whole business too is we're expanding on our hernia business too with focus on larger pieces. So going after complex ab wall and ultimately, you know, what we see in our trends for our volumes growing up as high as 12% is keeping that now with larger pieces which drives higher ASPs.

Okay. And then this one is for Roberto. Just talk about the cash position of the company at this point, Roberto. I know there's going to be some cost structure adjustments, but, you know, just given where you are from a cash perspective, you know, how do we think about funding the business going forward needs there? Thanks so much.

Sure. So as Heather mentioned, you know, we're at the beginning of the evaluation process for reducing the cost structure. As we mentioned in the prepared remarks, we have $30.4 million as of the end of the second quarter. Our goal in that review of cost structure, in addition to preserving our revenue growth, will be to extend the cash rush runway as much as possible to make any sort of additional fundraising a last resort. So this is all a working process, and as Heather mentioned, as soon as we have final results on it, we'll be reporting out on it. Thank you. Thanks, Matt.

Thank you. One moment for the next question. Our next question will be coming from the line of Michael Sarkone. Jeffrey, please go ahead.

Hey, good afternoon, and thanks for taking the questions, and Heather, welcome aboard. I guess just some clarification questions for me. Just around the PRS unit volume headwinds, it sounded like you cited two sources of pressure. One was the pilot program that kind of changed focus or selling focus among the organization and then some lifestyle or behavioral changes from some of the surgeons. I guess, you know, is that right? You know, which one is the more important factor and are you expecting changes to both of those headwinds as we get through 2H or just kind of a change around the refocus of the sales?

Why don't you take that, Jeff? Yeah, thanks. It's Michael, right?

Yes, that's right.

Oh, hey, Michael. It's Jeff. So a couple things. One is simplifying the message in our Salesforce playbook so that our team stays focused on really two to three key initiatives a quarter. That's evident. There's so many challenges in the role. We have to constantly simplify it so that they stay focused on the things that drive the business. Secondarily, within PR specifically, since we know that it's not systemic and it's on key programs, there's two things I'd like to add. One is one of our key contributors with PRS in the year of 2025 left us in January, and he just came back in July. This was one of our top performers, and our business already in that market is starting to take off with his presence alone. And what I'd like to note, too, without using surgeons' names, given that there's been some competitive challenges with product that's published with high recurrence rates We're starting to see surgeons that are well-published, regarded, and they're on podiums and also in speaking bureaus for our competitor are starting to contact us about using our product. So in the future, we hope to share those names and discuss their positive outcomes, but the good news is we're starting to see a shift in some of those loyal, allegiant programs and doctors to look at our product now as another solution.

Okay, thanks, Jeff. That's helpful. And then, you know, on the hernia side, you guys had mentioned, you know, a focus on some larger pieces that come with higher ASPs. Just trying to understand the messaging there. Do we expect that the shift toward robotic hernias and smaller pieces is still going to kind of outweigh and be a price-mix headwind for the or is the message that, you know, we could start to see some of these larger pieces more than offset that and see, I guess, a stabilization or growth in price?

Hey, Michael, it's Jim. Both things are true. The market itself and procedurally, you are seeing more cases move robotically. As we launched IHR into our portfolio in 2024 and we've improved our LPR, Thank you. Thank you. We have a right to win in that patient population, and we're going to kind of put the foot on the gas there in the second half. I think naturally, we're starting to see some kind of slowdown in the revenue and unit growth gap, so we should start to see that start to normalize into 27, but we can alleviate some of that ASP degradation by getting back to really what's core to us, which is treating the most complex patient out there with overtaxed.

Great, that's really helpful. Thanks a lot. Thanks, Michael.

Thank you. One more moment for the next question. Our next question is coming from the line of David Caracolio for Citizens. Please go ahead.

Hey, good evening. This could be for Heather or Joe, but like the bundling commentary, given that the recurrence rates are 10 times higher for some of the competitors, I guess I'd just like to know, like, How do you combat that if it's that much better? And I know there's a lawsuit involved, but I guess you could just walk us through how you think you can slow that down or stop that given that you have what appears to be a better product.

I'll let Jeff take that one.

Hey, it's Jeff. A couple things. A lot of times surgeons get to that decision on their own, right? So as much as we've put the product in a lot of physicians' hands, use it in cases, and the peer-to-peer network is growing, they're going to these major conferences, reading data, seeing recently published publications, and realizing that a lot of time recurrence isn't necessarily their patient. And what I mean by that is when a surgeon uses a product and has an outcome and maybe it's not favorable, they tend not to always see that patient back. So that recurrence is usually in the hands of another surgeon, as you probably would seek a procedure if you didn't have a great case to begin with. So what we're trying to do ultimately is get the word out. We're at all the key forums. We're headed to the American Hernia Society at the end of this month, which is a big one for us to be present with some of these surgeons and share our data, share our wins over the past year, and then ultimately continue to grow with this device and those key procedures. As Jim said, we have the right to win, and that's some of the product that's out there that has high recurrence rates is where those patients aren't necessarily thriving with their outcomes. So we're doing it the right way, ultimately letting these surgeons arrive at that decision without necessarily pointing the data out to them. They're well-versed in it.

And just to say it, I mean, I think in these more complex cases where physicians may have had poor outcomes before. They're more likely to go to bat for the Obatex product with the administration where some of these competitive dynamics exist. So that's part of how we get in there and get through these contracting challenges we have. Did you want to add to that?

Yeah, David, I'll put a final bow on it. We referenced in the call, we're upgrading talent. We're then a key part of our team that owns our contracting strategy, especially in hernia. We do see the pendulum swing in terms of decision-making authority moving more towards the administration. Having a relationship there and team members who understand what they value, being able to tell an economic value story derived from our clinical outcomes is critical to us. So we believe we have the people on the team now who know how to do that better. That's part of that top-down way we have to attack this. and as Heather and Jeff alluded to, you still need presence and building clinical champions from the bottom up. So all of that competitive pressure that's out there, which is again the basis of our lawsuit that's there, is the friction that's, we referenced the time to productivity for our reps, that's some of the friction that's in our reps' way to getting to productivity because from the bottom up, they have to create Thank you for that. Thanks, Dave.

Thanks, David.

Thank you, and there are no more questions in the queue. I would like to turn the call back over to Heather for closed remarks. Please go ahead.

Okay, thank you. I want to again acknowledge and thank the entire Telebio team for the warm welcome and express my excitement to work alongside you as we position the company for sustainable growth. We are taking decisive action to extend our cash runway by better aligning our cost structure with our top line while preserving high-value customers and critical capabilities to protect revenue and ensure patient safety. I look forward to updating you on our progress in the future. Thank you for joining the call.

This concludes today's program. Thank you so much for joining. You may now disconnect.