TELA Bio, Inc. Common Stock 2026 Q2 Earnings Call

Thank you, Louisa, and good afternoon, everyone. Earlier today, TELA Bio released financial results for the second quarter ended June 30, 2026. A copy of the press release is available on the company's website. Joining me on today's call are Joseph Capper, Chairman of the Board, Heather Getz, Chief Executive Officer, Jeff Blizard, 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 10-Q, 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, statements 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, 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 TELA Bio 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, OviTex 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 Becton, Dickinson and Company, continues to create barriers to OviTex 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 up 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 OviTex PRS portfolio. I will now walk through what drove the miss 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 U.S. 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 U.S. 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 at the pace we originally anticipated due to the 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 shift 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. OviTex long-term data has continuously shown recurrence rates in the low 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 U.K. 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 on 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.