Prepared remarks
Good afternoon, ladies and gentlemen, and welcome to the TELA Bio Second Quarter 26 Earnings Conference Call. At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would 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 ended 06/30/2026. A copy of the press release is available on the company's website. Joining me on today's call are Heather Goetz, Chief Executive Officer; Jeffrey Blizard, President; Roberto E. Cuca, Chief Financial Officer; and Jim Hagen, Senior Vice President of Strategic Operations and Marketing. Before we begin, I would like to remind you that during the 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 Form 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 will now turn the call over to Joe Capper.
Thank you, Louisa. Good afternoon, and thank you for joining TELA Bio's second quarter 26 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 TELA Bio. 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, TELA Bio 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 Antony Koblish for his vision, leadership, and entrepreneurial spirit in founding TELA Bio and guiding the company through its early growth stage. Antony's commitment to innovation led to the development of OviTex and helped establish TELA Bio 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. 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 and 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, 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 Blizard to discuss the dynamics impacting our business in more detail and how we are addressing each of these challenges. Roberto will cover the second quarter financials and we will then open the call up for your questions. Jeff Blizard?
Thank you, Heather. You saw in the release, revenue for the second quarter was $19.3 million, a decrease of 4 percent from the second quarter of 2025 and below our expectations. The shortfall was concentrated almost entirely in our OviTex PRS portfolio. I will now walk through what drove the miss and detail our 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 with 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 territory manager has a full breadth of the 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 guidance on how best to resource and leverage the medical office. With these changes in place, and given 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 have talked about over the last several quarters. We have previously discussed the importance of sales reps progressing through their early tenure, as historically we have seen productivity build more meaningfully as reps gain experience and mature in their roles. While progress is happening, it is not at the pace we originally anticipated due to changes in focus and competitive challenges referenced above. We maintain confidence that the investment we have 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 unit volumes grew 12 percent year over year, meaningfully ahead of our 6.6 percent growth in OviTex dollar revenue, which indicates we continue to take procedural share even as the U.S. market shifts towards smaller sized units with a 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 have upgraded our talent within our market access and contracting team. OviTex's 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 10x higher. In programs where we are allowed to compete fairly, the value proposition becomes abundantly clear to both surgeons and hospital administrators. I am encouraged that LIQUIFIX had another strong quarter, with revenue up 39 percent over the prior year period, and our international business continued to be a source of consistent growth, with revenue up 26 percent 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 are behind where we expected to be at the end of the second quarter, the commercial organization has the agility to adjust as needed and we are doing just that. We have designed the best hernia portfolio in the market, and we are taking decisive action to get the PRS business back on track. We have 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. I am truly encouraged by what is ahead. I will now turn it over to Roberto to walk through the financials in more detail.
Thank you, Jeffrey. As Jeff described, revenue for the second quarter of 26 was $19.3 million, a decrease of approximately 4 percent compared to $20.2 million in the second quarter of 2025. This was primarily driven by a decline in our OviTex PRS unit volume and the continued shift to smaller, lower-priced hernia units in our OviTex mix, partially offset by continued growth in our international business. International sales revenue of $3.8 million represents a 26 percent increase over the prior year period. Global OviTex unit volume increased 12 percent year over year, with 5.78 thousand units sold in the second quarter compared to 5.18 thousand units sold in Q2 25. OviTex revenue was $13.3 million, up 0.6 percent from $12.5 million in the prior year period. OviTex PRS revenue was $5.5 million compared to $7.3 million in the second quarter of 2025, reflecting the 23 percent decline in PRS unit volume that Jeffrey discussed. Other revenue, which includes LIQUIFIX, was $500 thousand representing growth of 39 percent. Gross profit was $13.9 million in the second quarter of 26, modestly below $14.1 million from the prior year period. Gross margin was 72 percent compared to 70 percent in Q2 25. 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 26, 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 thousand 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 $500 thousand from Q2 25 driven by higher compensation and benefits and study costs. Loss from operations was $9.3 million in Q2 26 compared to $9.1 million in Q2 25, and a sequential improvement of 12 percent from Q1 26. Net loss was $11.3 million in Q2 26, compared to $9.9 million in Q2 25. The increase was primarily due to higher interest expense of $2.1 million associated with our new upsized credit facility we put in place in November 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 will 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 TELA Bio team. We have a differentiated portfolio, a strong commercial foundation, and a clear commitment to improving outcomes for patients and surgeons. I am 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.
Questions and answers
Thank you. You will hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press 1 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 Canaccord Genuity. Please go ahead.
Hi. Thanks for taking the questions, and welcome, Heather. Just a quick one on the sales force. I would love more of an update there. How many team members did you end the quarter with? And you noted it is taking a little bit longer for the reps to hit breakeven versus the six months you noted prior — how much longer is it taking for them?
Sure. Hey, Caitlin. It is Jeff Blizard. We are on pace with our hiring plan. With the focus shifting to onboarding, training, and productivity, it is making sure that we have the right team in place. Importantly, our growth in headcount reflects our deliberate commercial expansion, not turnover. This is an investment in building the right team, with the right people, and the right roles. Our newest cohort is already outperforming its predecessors at the same stage of tenure.
Hey, Caitlin. It is Jim. I will add some color on the second half around the six-month productivity timeline. I think we are definitely seeing it take longer for reps to come up. We know tenure in our field force is the biggest driver of sustainable success for us. So we are really looking at that nine- to twelve-month ramp for reps to get up to a really strong productivity level. The positive sign is that a lot of them are getting there in terms of maturity and tenure in role. We have added more resources to our training team, both in-house and in the field, and within our medical office. So I am feeling really good that group will get up to the productivity levels we need by the end of the third quarter and into the fourth quarter.
Mhmm. And just on the PRS business, I think you called out last quarter some issues with concentration of customers there. Is that still an issue? Is that confounded with the Salesforce focus in PRS and the shifting of that? Maybe a little bit more color on what is 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 a lift and the rest of the organization would keep PRS as part of their focus in their bag. A bit of PRS was starting to fall off when we realized the pilot was not growing as fast as we wanted in that pilot, so that is why we pivoted quickly and stopped it. PRS is not a systemic issue. Ultimately, we have seen in key programs and with key surgeons, it is fewer than ten 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 affected by changes in life and career patterns. To your concentration point, Caitlin, that is still real for us. We have a small cohort of surgeons implanting PRS that make up a larger percentage of our revenue. Disproportionately, a number of those surgeons were out in the first half of the year. Some of them are coming back on. Part of the PRS pilot's hypothesis was that with dedicated focus we could drive depth at hospitals with more implanters to broaden or lessen the concentration on a critical few. That has now shifted back to the broader field team. It is still one of our efforts — we know we have to diversify our enterprise base to protect from these shocks going forward.
Understood. Thanks for taking the questions.
Thanks, Caitlin.
Thanks, Caitlin.
One moment for the next question. Our next question is coming from the line of Frank Takkinen of Lake Street Capital Markets. Please go ahead.
Hi. This is Frank Takkinen from Lake Street. Thank you for taking the questions. Was hoping to start with one on the competitive landscape. You mentioned competing fairly — maybe help characterize what an account looks like where you are competing fairly, and what are the priorities related to the barriers you need to knock down in order to have more accounts replicate what a fair account looks like.
In the Southeast, as an example, we got a buying group that has brought us in, and we have a fair share of our contract responsibility. That has rolled out to about 13 to 15 sites with full product rollouts, getting surgeons on board, doing patient selection conversations, and then cases to follow. That is what great looks like; we have 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 are seeing both sides, and it felt a little bit more ramped up in the second quarter versus prior quarters.
Okay. That is 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 are still working on this. I have spent some time with the team, and it is evident that there is an opportunity to take some meaningful cost out. But the specifics of the plan have not yet been finalized. What we will do is protect our top line and our critical functions within the organization that protect patient safety.
Okay. That makes sense. Thank you.
I will update you as soon as we have a finalized plan.
Makes sense. Thanks.
Thanks, Frank.
One moment for the next question. Our next question is coming from the line of Matthew O'Brien of Piper Sandler. Please go ahead.
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? And then, I know we do not want to get into 2027 too much, but is there any reason to think you will not grow in 2027 versus 2026, this year being more of an adjustment year? And then I have a follow-up.
Okay. We are probably thinking of Jeffrey 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 will let him answer that.
We are optimistic that PRS is going to be one of our growth drivers in the back half of this year given that it is back in as a larger percentage of our focus with a training plan for the commercial organization and reengagement with those key users. And noting the seasonality of PRS, when we typically see it hit is the back half of the year.
So that is where you are hearing your optimism? And, Jeffrey, is that just on PRS, or is that for the whole business?
No, the whole business too. We are expanding our hernia business with a focus on larger pieces — going after complex abdominal wall procedures. Ultimately, what we see in our trends is our volumes growing as high as 12 percent, and maintaining that with larger pieces drives higher ASPs.
Okay. Then this one is for Roberto. Just talk about the cash position of the company at this point, Roberto. I know there is going to be some cost structure adjustments, but given where you are from a cash perspective, how do we think about funding the business going forward needs there? Thanks so much.
Sure. As Heather mentioned, we are 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 runway as much as possible to make any sort of additional fundraising a last resort. So this is all a work in process. As soon as we have final results on it, we will be reporting out on it.
Thanks, Matthew.
One moment for the next question. Our next question will be coming from the line of Michael Sarcone of Jefferies. Please go ahead.
Hey. Good afternoon, and thanks for taking the questions. Heather, welcome aboard. A couple of clarification questions. Around the PRS unit volume headwinds, it sounded like you cited two sources of pressure: one was the pilot program that changed focus among the organization, and then some lifestyle or behavioral changes from some of the surgeons. Which one is the more important factor? Are you expecting both of those headwinds to change as we work through the second half, or is it mainly a change around the refocus of the sales force?
Yeah. Thanks, Michael. A couple things. One is simplifying the message in our Salesforce playbook so our team stays focused on two to three key initiatives a quarter. There are many challenges in the role, and we have to constantly simplify it so they stay focused on the things that drive the business. Specifically for PRS, since it is not systemic and is concentrated in key programs, there are two things I would add. One of our key contributors for PRS in 2025 left in January and just came back in July. This was one of our top performers, and our business in that market is already starting to take off with his presence alone. Also, without naming surgeons, given some competitive challenges with products published with high recurrence rates, we are starting to see well-published, highly regarded surgeons who speak in the field reach out about using our product. In the future, we hope to share those names and discuss their positive outcomes. The good news is we are starting to see a shift in some of those loyal programs and doctors, with more interest in our solution.
Okay. Thanks, Jeffrey. That is helpful. On the hernia side, you mentioned a focus on some larger pieces that come with higher ASPs. Given the shift toward robotic hernias and smaller pieces, do you expect the robotic trend to continue to be a price mix headwind for the foreseeable future, or could the focus on larger pieces more than offset that and see stabilization or growth in price?
Hey, Michael. Both things are true. The market is seeing more cases move robotically. As we launched IHR into our portfolio in 2024 and improved our lower-profile products, those are the fastest unit growth within our hernia portfolio because we are capturing more of those procedures. What is also true is that the OviTex hernia portfolio has the best matchup for the most complex patients, who are naturally performed in open procedures, not robotically. We have a right to win in that patient population, and we are going to put the foot on the gas there in the second half. I think we are starting to see some slowdown in the price or revenue and unit growth gap. We should start to see that normalize in 2027, and we can alleviate some of the ASP degradation by getting back to treating the most complex patients with OviTex.
Great. That is really helpful. Thanks a lot.
Thanks, Michael.
One more moment for the next question. Our next question is coming from the line of David Turkaly of JMP Citizens. Please go ahead.
Hey. Good evening. This could be for Heather or Jeff, but on the bundling commentary — given that the recurrence rates are 10x higher for some of the competitors — how do you combat that if your product is that much better? I know there's a lawsuit involved, but could you walk us through how you think you can slow that down or stop that, given you have what appears to be a better product?
Yeah. I was going to say I will let Jeffrey take that one.
Hey, David. A couple of things. A lot of times surgeons get to that decision on their own. We have put the product in many physicians' hands using cases, and the peer-to-peer network is growing. Surgeons attend major conferences, read data, and see recently published publications, and realize that recurrence is not necessarily their patient; when a surgeon uses a product and has an unfavorable outcome, they do not always see that patient back. So recurrence can be in the hands of another surgeon. What we are trying to do is get the word out — we are present at key forums, and we are headed to the American Hernia Society at the end of this month to be present with surgeons and share our data and wins over the past year. Ultimately, we plan to grow with this device in key procedures. As Jim said, we have the right to win. Some of the competitor products with high recurrence rates leave patients not thriving with outcomes. We are doing it the right way and letting surgeons arrive at the decision themselves based on evidence and experience.
And just to add, in these more complex cases where physicians may have had poor outcomes before, they are more likely to go to bat for the OviTex product with the hospital, where some of these competitive dynamics exist. That is part of how we get in there and get through these contracting challenges.
You want to answer this? I will put a funnel on it, but I wanted to make that point about the surgeon-driven adoption.
We are upgrading talent within the part of our team that owns contract strategy, especially in hernia. We do see the pendulum swing in terms of decision-making authority moving more towards administration. Having relationships there and team members who understand what they value and can tell an economic value story derived from our clinical outcomes is critical to us. That is part of the top-down approach we have to attack this. As Heather and Jeffrey alluded to, you still need presence to build clinical champions from the bottom-up. All of that competitive pressure, which is the basis of our lawsuit, is the friction we reference as adding to the time to productivity for our reps. Some of the friction is in our reps' way to getting to productivity because, from the bottom-up, they have to create networks and relationships across the hospital system to advocate for the clinical and economic value of OviTex. We are aware of those structural barriers and are making internal moves and market efforts to overcome that friction.
Thank you for that.
Thanks, David.
There are no more questions in the queue. I would like to turn the call back over to Heather for closing remarks. Please go ahead.
Thank you. I want to again acknowledge and thank the entire TELA Bio 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.