TELA Bio (TELA) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, March 24, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Antony Koblish
• President — Jeffrey Blizard
• Chief Financial Officer — Roberto E. Cuca
• Chief Commercial Officer — Jim Hagen

TAKEAWAYS

• Revenue -- $20.9 million for the quarter, up 18% year over year; $80.3 million for the year, up 16%.
• OviTex Revenue Growth -- 12% for the year; OviTex PRS revenue grew 20% in the same period.
• OviTex and PRS Unit Growth -- OviTex units up 20% for the quarter and 22% for the year; PRS units up 12% for both periods.
• LiquiFix Revenue -- More than tripled compared to prior year, indicating expanding adoption.
• European Sales -- Accounted for 15% of total revenue, at $12.1 million, representing 17% annual growth.
• Gross Margin -- 66% for the quarter and 68% for the year, improved from prior periods due to lower excess and obsolete inventory write-offs.
• Sales and Marketing Expenses -- $14.5 million for the quarter and $63.2 million for the year, with year-over-year reduction attributed to lower compensation, severance, consulting, and travel, offset by commission increases.
• General and Administrative Expenses -- $3.8 million for the quarter and $15.7 million for the year, showing a year-over-year increase.
• R&D Expenses -- $2.1 million for the quarter and $9.2 million for the year, up from prior-year periods.
• Loss from Operations -- $6.6 million in the quarter and $33.8 million for the year, both reduced from previous year.
• Net Loss -- $9.0 million in the quarter and $38.8 million for the year, compared to $9.2 million and $37.8 million last year.
• Cash Position -- $50.8 million at period end, improved through debt refinancing and incremental equity raise.
• 2026 Revenue Guidance -- Expected at least 8% annual growth, with Q1 revenue anticipated at approximately $18.5 million.
• Commercial Team Expansion -- 40% of U.S. field reps hired in past six months; 88 U.S. quota-carrying territory managers at call date, versus a previous target of 76.
• Commercial Restructuring -- New U.S. commercial leadership, redefined sales talent profile, and compensation plan optimized for deeper account penetration and efficiency.
• Product Launches and Clinical Trials -- OviTex LTR launched; first patients enrolled in the ECHO hiatal hernia trial.
• New Board and Executive Appointments -- Dr. Howard Lang named Chief Medical Officer effective March 1 to drive clinical engagement.

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RISKS

• CEO Antony Koblish said, "We want to give ourselves the best chance to do a great job this year. And given that our," citing high numbers of newly-hired reps still ramping toward productivity and contracting execution complexity as factors for setting "prudent" low-end guidance.
• Antony Koblish indicated that "Contract implementation varies from hospital to hospital," introducing timing uncertainty for revenue realization from newly signed agreements.
• CFO Roberto E. Cuca said, "expect that operating loss and net loss will continue to decline for both the year and over the quarters of the year, although there is likely to be some step up from the just-past fourth quarter to the first quarter," pointing to Q1 2026 margin and loss pressure due to usual seasonal revenue patterns and transition effects.
• Management acknowledged Q1 revenue will decline sequentially due to territory restructuring, smaller peripheral hospital de-emphasis, seasonality, and January weather disruptions affecting elective case volumes.

SUMMARY

Management emphasized a fully executed commercial rebuild culminating in the largest and most targeted U.S. field team in company history, with a deliberate shift toward dense account focus over geographic breadth. The product mix continued to evolve, with substantial OviTex and PRS unit gains tempered by hernia mix shift toward lower-priced SKUs, increasing market penetration in high-volume robotic and laparoscopic procedures. European operations delivered double-digit revenue growth on stable and established commercial infrastructure, while LiquiFix adoption accelerated, offering meaningful new revenue streams. In parallel, Q4 and annual losses narrowed, and financial flexibility improved through balance sheet restructuring and cash conservation efforts to support commercial and clinical expansion.

• Management issued Q1 and full-year guidance well below prior directional statements, with explicit commentary that guidance is "prudent" in light of heightened organizational change and "a lot of variables" impacting short-term visibility.
• Leadership described the current period as "execution year," shifting focus from contract signings to execution, acknowledging historic lags and complexity converting signed contracts to realized revenue.
• The new compensation plan aims to "incentivizes deeper penetration at target accounts," with metrics now tracking number of users per site, portfolio breadth, and local commercial density rather than solely territory expansion.
• Mix shift dynamics included unit growth in inguinal and hiatal hernia procedures, contributing to a reduction in average selling price but aligning with broader market trends toward robotic and minimally invasive techniques.
• Gross margin improvement resulted from decreased inventory write-offs, while continued investment in sales training shortened new rep productivity ramp-up periods, supporting future operational leverage as hiring slows.
• Recent product innovations, including OviTex LTR and the ECHO clinical trial, provide incremental growth opportunities and reinforce surgeon engagement strategies led by a newly appointed Chief Medical Officer.

INDUSTRY GLOSSARY

• OviTex: A reinforced tissue matrix derived from ovine rumen and polypropylene, used in hernia repair and abdominal reconstruction.
• OviTex PRS: Portfolio line targeting plastic and reconstructive surgery applications, distinct from core hernia products.
• LiquiFix: Surgical fixation product used in hernia repair, complementary to OviTex.
• LTR: Long-term resorbable version of OviTex designed for tissue reinforcement without permanent polymer components.
• IHR: Inguinal Hernia Repair, a minimally invasive surgical procedure segment addressed by specialized OviTex products.
• LPR: Laparoscopic and Robotic Procedures, referencing minimally invasive hernia repair approaches addressed by TELA’s product line.
• ECHO (trial): A clinical study evaluating OviTex use in robotically performed hiatal hernia repairs.
• PRS: Plastic and Reconstructive Surgery, as a segment within TELA Bio's reported results.
• AMS: Advanced Medical Solutions, TELA's partner for LiquiFix distribution and clinical adoption.

Full Conference Call Transcript

Antony Koblish: Thank you, Louisa, and good afternoon. Thank you for joining TELA Bio, Inc.'s fourth quarter and full year 2025 earnings call. For today's call, I will open with a summary of what we accomplished in 2025 and thoughts on our forward-looking strategy. Jeffrey will then walk through the foundational changes implemented in the commercial organization and how we anticipate they will impact our future performance. Roberto will review our financials, and then we will open it up for Q&A. 2025, and the third and fourth quarters in particular, were periods of meaningful strategic change across the entire organization.

Following Jeffrey Blizard's appointment as President in June, we undertook and executed a significant rebuild of TELA Bio, Inc.'s commercial foundation while maintaining commitment to improve our operating discipline and continuing to advance our pipeline strategies. We made meaningful changes to deliver 16% full-year growth and achieved record fourth quarter revenues. The ability to maintain that momentum while executing such fundamental change in the organization is a testament to the caliber of our team and the value proposition of the OviTex product portfolio. We enter 2026 with the largest, most effective field team in the company's history, and the commercial strategy designed to drive durable, predictable growth.

Demand for our products remains strong, and the opportunity in hernia repair and plastic reconstructive surgery has not diminished. The foundational changes we undertook in 2025 were aimed at ensuring we have the commercial infrastructure to consistently and effectively capture that demand. Revenue growth in 2025 was fueled by strong performance in our European business, further adoption of our IHR, LPR, and LiquiFix product lines, and the continued contribution of our tenured reps in the U.S. The strategic investment we have made in high-caliber candidates with the right profile has been an underlying tenet of the commercial rebuild.

A meaningful portion of our approximately 90-person sales force is still early in their tenure, 40% of the reps having joined TELA Bio, Inc. in the last six months. This has not been a function of rep turnover, but rather an investment in commercial expansion and in recruiting talent with the right profile for the sales model we are building. We already see the newest reps meaningfully outperform their predecessors in the early stages of their onboarding, and we are encouraged by their promise to execute our commercial strategy more effectively.

In the fourth quarter, we accelerated efforts to bolster our U.S. commercial team by advancing recruitment to meet our sales headcount target and by putting the infrastructure in place to support those new hires. That included investing in training, rolling out new sales enablement tools, launching a new U.S. sales leadership structure, and redesigning the 2026 compensation plan to align with our growth strategy and expectations. Heading into 2026, we are focused on two strategic growth priorities. First and most importantly, we are committed to sustaining the momentum we achieved in 2025 and achieving further U.S. and European sales growth through improved talent, processes, and commercial leadership.

Jeffrey and his team have made incredible progress so far, and this will continue to improve as the new commercial organization matures and tenured sales reps begin to hit their stride. Again, I will let Jeffrey provide further detail on the specifics, but I am confident in the new commercial foundation we have laid. And second, we have been and will remain hyper-focused on offering the best soft tissue reconstruction product portfolio on the market. Product innovation is at the core of TELA Bio, Inc.'s identity, and we anticipate announcing additional product launches throughout the year to drive greater share gains in the expansive U.S. market.

Demand for our innovative solutions is there; I believe we have built a commercial infrastructure supported by an expanding portfolio that can consistently capture that demand. To that end, we were pleased to announce the promotion of Dr. Howard Lang to Chief Medical Officer effective March 1. Howard joined TELA Bio, Inc. nearly two years ago and has been instrumental in how we engage the surgical community. With over 30 years in plastic and reconstructive surgery, he understands this market from the inside out: the procedures, the unmet needs, and what surgeons are looking for.

As TELA Bio, Inc.'s CMO, he will drive surgeon awareness, support clinical education, and help generate, disseminate, and translate the growing body of data behind OviTex into a broader market understanding and acceptance. On the European side, our teams are stable, tenured, and delivering above plan. The competitive market in Europe differs from the U.S. with pricing and bundling dynamics, and we are encouraged to see rapid adoption of OviTex in the U.K. and the Netherlands. We are winning share based on patient preference and the efficacy of our products in these markets, not because of pricing discounts or volume requirements set by hospital administrators.

Moving forward, we have a purposeful investment plan to expand our presence within continental Europe and see it as a meaningful contributor to growth in the coming years. Overall, Q4 results reflected a commercial organization in transition; we remain proud of all this team has and will continue to accomplish. We executed a major commercial upgrade in the back half of 2025 while simultaneously achieving several other milestones for the company. In that six-month period, we launched OviTex LTR, a new addition to our portfolio that offers durable support during healing and provides surgeons with a tissue-based alternative to synthetic mesh.

We enrolled the first patients in our hiatal hernia trial, ECHO, which will strengthen our clinical evidence base and deepen our access to alternative surgeon call points for a primarily robotically performed procedure. We reinforced and upsized our debt facility to strengthen our balance sheet for the road ahead. And finally, we upgraded our Board of Directors with new expertise. In summary, 2025 was a year of deliberate foundational change that required discipline and conviction; that is behind us, and we enter 2026 with our eyes toward the future. I will now turn the call over to Jeffrey for a more in-depth review of our commercial strategy and restructuring.

Jeffrey Blizard: Thanks, Antony. As Antony laid out, I do not want to lose sight of the fact that amid transformational reorganization, we grew revenue by 16% and delivered our third straight quarter of sequential growth. We exceeded $80 million in total sales for the full year 2025, all while maintaining operating discipline and improving our operating leverage. The changes that we undertook since coming on board last June could create a significant disruption in productivity and growth in any organization. That did not happen here. It speaks volumes to the commitment of the entire TELA Bio, Inc. team and the dedication to the patients and customers we serve.

I would like to take some time to provide a detailed review of the specific changes in our commercial organization that Antony referred to. I will also highlight the progress we made year to date because of these changes and how they set us up for meaningful inflection moving forward. Number one, we upgraded and redesigned the U.S. commercial leadership team. By implementing a new sales general manager structure, we brought decision-making closer to the customer and empowered teams to respond to customer needs in real time. Concurrently, we addressed silos within the commercial organization that had been slowing cross-team collaboration. We strengthened our sales leadership bench by upgrading five key senior roles.

These changes were implemented to increase accountability in the field, improve coordination across our hernia and PRS segments, and drive more consistent execution across our commercial footprint. Three, we have rolled out formal promotion pathways within the commercial organization, creating vertical career mobility that rewards our top performers and incentivizes meaningful contribution within the organization. Four, we redesigned the sales talent profile in the U.S. and accelerated our hiring. We hit our 76 territory manager target back in the third quarter, and as of today, we have 88 quota-carrying territory managers in the U.S. with one additional hire imminent and five open positions that we are actively sourcing.

This means we will not require any further incremental hiring for the remainder of the year. The team that we need to hit our 2026 targets is largely in place. Antony touched on how we evaluate our field teams by distinct cohorts, and how we assess their performance by tenure and productivity ramps. Roughly 40% of the U.S. field team has joined us in the last two quarters. They are in the early phases of their ramp-up, and we expect that they will contribute incrementally each quarter of this year as they build out account relationships and gain clinical familiarity.

An additional cohort, those who have been with us between six and 18 months, have gained meaningful traction, and the vast majority have reached a productivity inflection point. They are actively building account relationships while improving clinical acumen. We expect their contribution to ramp meaningfully each quarter. And finally, we have maintained a very solid base of tenured reps who, on average, deliver over $1 million per year and consistently meet or exceed targets on a monthly, quarterly, and annual basis. This cohort accounts for approximately 35% of our current rep count. Five, as part of the redefinition of our sales talent profile, we have shifted our approach to recruitment.

We have been very successful not only in our ability to retain top performers, but also in our ability to attract and hire strong candidates. We increased our investment and focus on sales training with the goal of reducing time between hiring and commercial effectiveness. The candidates we are bringing in demonstrate stronger performance and higher scores on all evaluation criteria versus any prior cohort. The profile we are recruiting combines high intellect, perseverance, the ability to build deep and lasting relationships, and the ability to develop strong clinical acumen over time. This is a change from our previous recruiting strategy, which placed greater emphasis on years of soft tissue sales experience.

The caliber of our newest reps is beyond anything that TELA Bio, Inc. has ever seen, becoming a destination now for candidates who fit a clear profile for success in the commercial model that we are building. Naturally, as we place less emphasis on prior soft tissue experience, there is a ramp-up period while new hires come up to speed through our clinical education programs. What we are seeing, however, is that with our investment in sales training, this new profile of rep gains clinical proficiency quickly, and once they do, their drive and hustle translate into a higher-level contribution than prior cohorts.

While we are still expecting most new hires to reach full productivity within six to nine months, we believe their impact at maturity will be greater. Six, we have developed and rolled out a new sales enablement program that draws on better market insights to help our sales leaders and reps better prioritize and target their activity. Seven, we have designed and implemented a new 2026 compensation program that incentivizes deeper penetration at target accounts. This represents a change in our geographic coverage, where we are now matching rep density with high-volume institutions to cultivate multiple users per site. Instead of a wide and shallow approach, we are going deeper to generate sustainable recurring revenue opportunities.

Our new comp plan is now explicitly aligned around that strategy. Additionally, this philosophy expands beyond the comp plan itself. It also minimizes the geographical areas that reps need to cover, maximizing efficiency and supporting better operating expense optimization. As part of this renewed approach, we are also ensuring meaningful executive presence in the field. Antony was calling on strategic accounts as recently as last week, and others and I are doing the same. It is a signal in the organization to our customers about where our priorities lie: building deeper, more meaningful physician relationships.

Eight, we have adjusted our sales and marketing focus to center on the mechanism of action of OviTex and the science that fundamentally differentiates our portfolio. Surgeons have embraced our data and the long-term patient outcomes it demonstrates. The source material, OviTex, and the way it integrates within the body differentiate us from any Gen 1 biologics, synthetics, or biosynthetics, and it is foundational to the “why” surgeons adopt OviTex. We also increased our sales and marketing focus on LiquiFix. With great support from our partners at AMS, LiquiFix is not only a better fixation solution, we have seen it open doors with hernia surgeons who may not yet be familiar with OviTex.

And finally, number nine, we have instilled spending discipline within the organization, which has allowed us to fund more customer education and training events. This helps us meet customers where they are in their adoption life cycle while simultaneously improving operating margins. So how does this all come together with respect to driving revenues? For the full year 2026, with each of the three cohorts performing as expected, we are confident that we will grow revenue over 2025 by at least 8%. And for the first quarter, to which much is already completed, we expect that we will deliver revenue of approximately $18.5 million.

The breadth of change that we executed in six months was significant, and we recognize what it takes to sustain this level of momentum going forward. Our goal is to have everything in place by the end of Q1, so that 2026 reflects the full benefit. We are well on pace, and as of today, all significant material changes have been implemented across the entire organization. We set our revenue guidance to account for some of the inherent variability that may arise given the scope, scale, and speed of changes I have just laid out.

We believe that, particularly in the second half of this year, the annualization of our commercial restructuring and the ramp of our newest cohort, combined with the pipeline and clinical investments, position us to be able to deliver achievable, sustainable results moving forward. I will now turn the call over to Roberto for further details on the fourth quarter and full year financial results.

Roberto E. Cuca: Thank you, Jeffrey. Revenue for the fourth quarter of 2025 increased 18% year over year to $20.9 million and grew 16% for the full year to $80.3 million, with revenue from OviTex growing 12% and OviTex PRS growing 20% for the year. The growth was primarily due to the addition of new customers, growth in international sales, and the U.S. launch of larger PRS units. Growth was partially offset by a mix shift in our hernia product line as we saw an increased share of smaller-sized IHR units. OviTex unit sales grew 20% for the quarter and 22% for the year, while PRS unit sales grew 12% for the quarter and for the year.

LiquiFix revenue more than tripled over 2024, reflecting early commercial traction as we expand adoption alongside our core OviTex portfolio. European sales accounted for 15% of total revenue, or $12.1 million in 2025, a 17% increase from $10.3 million in 2024, reflecting the traction we are seeing in key markets and our continued investment in expanding access globally. Gross margin was 66% for the fourth quarter and 68% for the full year, compared with 64% and 67% for the prior-year periods, respectively. The improvement was driven by lower excess and obsolete inventory expense as a percentage of revenue.

Sales and marketing expenses were $14.5 million in the fourth quarter and $63.2 million for the full year, compared to $14.0 million and $64.6 million for the prior-year periods, respectively. This was mainly due to commissions rising with stronger revenue in both periods, offset by lower compensation, severance, consulting, and travel costs for the year. General and administrative expenses were $3.8 million for the fourth quarter and $15.7 million for the full year compared with $3.6 million and $14.7 million for the prior-year periods, respectively. R&D expenses for the fourth quarter were $2.1 million and for the full year were $9.2 million, compared to $2.0 million and $8.8 million for the prior-year periods.

Loss from operations was $6.6 million in the fourth quarter of 2025 and $33.8 million for the full year, compared to $8.4 million and $34.1 million in the prior-year periods. Net loss was $9.0 million in the fourth quarter and $38.8 million for the full year, compared to $9.2 million and $37.8 million in the prior-year periods. We ended 2025 with $50.8 million in cash and cash equivalents, having further strengthened our financial flexibility by refinancing our debt facility and raising incremental equity capital. As Jeffrey described earlier, for 2026, we anticipate revenue growth of at least 8% over 2025 and Q1 2026 revenue of approximately $18.5 million.

We expect that operating loss and net loss will continue to decline for both the year and over the quarters of the year, although there is likely to be some step up from the just-past fourth quarter to the first quarter, particularly in light of the revenue progression that we typically see over this period. With that, I will hand the call back to Antony for closing remarks.

Antony Koblish: Thank you, Roberto. As we have done in prior quarters, I would like to end with a patient story to ground us in the impact of our mission. A 57-year-old patient actively being treated for chemo required treatment for hernia repair in the intercostal region. The surgical team, concerned about where the hernia was located because it was near chest tubes, decided that OviTex Core, with the four layers being thin enough, unlike a traditional biologic, would provide less seroma and was the best choice because of Core's resorption profile and its optimal size. The patient underwent an underlay procedure.

The surgeon said that the patient is doing great and is extremely pleased to have OviTex Core available for this very sick patient. The surgeon commented, “We believe that OviTex is the only product that can be used in conjunction with the use of chemotherapy due to the way it rapidly incorporates, its porous nature, and its functional remodeling of healthy tissue.” This is another great example of how OviTex can be used in the most complex of cases with excellent outcomes. Before we open the line for questions, I want to take a moment to recognize the entire team.

In the back half of 2025, this organization undertook a fundamental rebuild of our commercial structure while continuing to grow revenue, serve customers, and maintain operating discipline. To sustain momentum through a transition of this magnitude reflects the quality of the team and the strength of the products. The changes we made in 2025 were difficult but necessary, and we enter 2026 with the strongest commercial team the company has ever had. I look forward to what is ahead for TELA Bio, Inc. Jonathan, please open the line for questions.

Operator: Certainly. We will now open for questions. Our first question for today comes from the line of Caitlin Roberts from Canaccord Genuity. Your question, please.

Caitlin Roberts: Hi. Thanks so much for taking the questions. I guess starting off with the fiscal year top-line guidance for at least 8%, just a little bit more color on why it was below what you noted on the Q3 call. And if you could provide some cadence to that guidance for the year, that would be great.

Antony Koblish: Yes. I will start it off, and then I will turn it over to Roberto. Our thought here is, given the change that we have implemented—wholesale change across almost every dimension—we thought it would be prudent to set the guidance where we did. There are so many new reps and new moving parts that are in place right now. We want to give ourselves the best chance to do a great job this year.

And given that our territory manager breakeven point remains about six months to nine months, and we have hired so many new reps that are sort of scaling into and cascading into the year, we think there are a lot of variables, and we wanted to make sure that we are giving ourselves plenty of room to allow these reps to mature and drive. We really like the contribution from the 40% new reps so far. It looks like they have stepped up quite a bit as a percent contribution over Q4, but we want to make sure that we are giving ourselves that time and flexibility.

There are some other factors that we have in place that give us confidence to do a good job this year. For the first time in the company's history, we are right on the mark with the number of reps we wanted to hire and at the right time. In the past, we have sort of been stuck between 63 and 68 reps. I feel like that was where we were stuck no matter where our target is. But this new commercial leadership team has done a great job of getting those folks in place. We have a product that we think is powerful that is going to launch April 1 fully. It has been in limited release.

It is our long-term resorbable OviTex product, which should give us a great match-up with the leading biosynthetic out there, Phasix, and I do think that is going to be mostly additive to the portfolio along with some cannibalization from our permanent portfolio. One of the foundational drivers that we can rely on going forward is European performance. This has been very consistent, and I do think that they are going to allow themselves to grow consistently over time, and we very much look forward to adding PRS to their portfolio for sales, hopefully by the end of this year or early next year.

One of the big factors that we have here, Caitlin, in this guidance set is contract conversion. Our Salesforce has been very focused on getting contracts in place, and we have not done as well at executing into those agreements. So we are going to shift that focus towards contract execution, and we do know that there is a high degree of contracting complexity, which does affect timing, which is another factor of safety of why we built the guidance the way we did. Contract implementation varies from hospital to hospital.

Even if you have a GPO contract in place, we are learning that every day, and the way contracts are written in the U.S. further complicates things with market share and cross-product portfolio bundling and rebate structures. There is some complexity there. We want to make sure that we give ourselves the time to execute into the contract footprint that we already have in place. Hopefully that gives you a flavor of what we are trying to do here on a bigger picture. We have a lot of factors of safety built in and a lot of potential upside, but we want to be prudent.

Roberto E. Cuca: Let me just add two things, Caitlin. You asked about cadence for the year. We do expect the cadence for the year to be similar to that in prior undisrupted years, where you see a step up from the first to the second quarter, a smaller step up from the second to the third, and then a bigger step up again from the third to the fourth quarters.

The step up from the second to the third being smaller is driven primarily by the summer holidays, and we expect to see that pattern slightly amplified by the addition of all the sales reps that have come in over the course of the end of the fourth quarter and through the first quarter, who begin becoming productive in about six months. We do still see that the most recent cohorts of sales reps hit breakeven just under six months and then what Jeffrey and Jim call breakout between six and nine months—so becoming more than just breakeven positive.

Antony Koblish: Yes, and all of these factors, Caitlin, also add to the frustrations that everybody has had, including us in the past, about our forecasting accuracy. We want to make sure—again, the word is prudent—that as we are going through all of this, we feel very confident that we will come out the other side with a much more predictable and forecastable business. But until we get there, we think it is best to be prudent.

Caitlin Roberts: Understood. And maybe just one more from me. I think, Antony, you touched on the contracting. How many IDNs or GPOs have you transferred to really recategorize OviTex? You talked about that the last couple of quarters. What are your expectations to continue doing that this year?

Jim Hagen: Hey, Caitlin. It is Jim. I will take that one. I think as Antony just said, our contracting focus, while we continue to drive a focus on the RTM category, is especially into site-level agreements. The team did a really nice job in 2025 of getting many of those agreements signed. 2026 is an execution year. We have to translate that, move it through the hospital processes where we have a lot of surgeon advocacy. We have to work it through the admin process and translate that signature now into patients and revenue.

Antony Koblish: Yes. I think, as new opportunities present themselves, such as Vizient that has been delayed, we are certainly going to go for that, but we have more than enough footprint that we have to start executing on, as Jim said, before we just continue to drive agreements. We will continue to do both, but we have to focus on execution within the agreements we have.

Caitlin Roberts: Understood. Thanks so much.

Operator: Thank you. And as a reminder, ladies and gentlemen, if you do have a question, please press star then one. Our next question comes from the line of Frank Takkinen from Lake Street Capital Markets. Your question, please.

Frank James Takkinen: Great. Thank you for taking the questions. I wanted to follow up on the Q1 guidance a little more. Obviously, I heard all the comments about the changes you have made with the commercial organization and the disruption that has caused, but I was just curious if there was anything else specific to call out with Q1. I know typically the seasonality is kind of up a few percent or down a few percent in some instances depending on the year, but just the double-digit down quarter over quarter. Curious if there is anything beyond the Salesforce comments you have made going on here.

Antony Koblish: I will start, Frank. I think my whole monologue on prudence for the year is transferable to Q1 as well. We have one dynamic that I think has added to the general slow start that you see in hernia and plastic and reconstruction, which is typical in January and February. Part of what Jeffrey and Jim have done is the territories have been restructured to be smaller, to go deeper, which means there has been some splitting of territories. We are encouraging Salesforce efficiency, which will help from time spent selling to T&E expense, and we are going to concentrate density of reps in smaller areas, preferably adjacent to high-population areas that are already successful with us.

That means we may abandon a little bit of the hinterlands and the smaller hospitals that are out in the perimeter—not fully abandon, but de-emphasize a little bit. That is going to cause a little bit of loss as we go through these shifts of splitting territories and creating more efficient density in the network. We wanted to make sure that we gave ourselves some room to work through that, which should mostly be taken care of through the end of the first quarter, and we should start to see some signals that we are coming out of that transition phase in Q2. Does that make sense, Frank? That is in addition, I think.

Jeffrey Blizard: Yes. That is perfect. I appreciate that. And I just want to add one more point onto Antony and the word disruption. It is something we have avoided here, and we did not call this a reorganization. Really, the focus has been on restructuring—right people in right roles—and making sure that we can have a focus on these key customers in key cities and also those academic programs that are hubs in key cities. What we found, in not only the challenges in January that most companies were faced with, was over a thousand square miles of geography in the U.S. was impacted by that blizzard, and we saw a number of elective procedures be impacted by that.

We have heard that from other programs and other companies that have had similar situations.

Frank James Takkinen: That is helpful. And then as we think about exiting this period where we are maybe returning to a steady-state growth rate, how do you view the steady-state growth profile of TELA Bio, Inc. over a longer period of time?

Antony Koblish: Yes. I think the markets that we serve are kind of mid-single digits. We have been above market-rate growth since inception, and I think we anticipate that we will be able to significantly outgrow the market. The other interesting thing, as you look at the data that we are presenting here, is that our units for both PRS and hernia are high. Our growth rate on hernia units I think is 22%. That is a very good sign for the long haul, given that is the bulk of the procedures. Making inroads into those smaller-piece procedures is super important. It does have an impact with mix shift and top-line revenue, but that should straighten out as well.

We certainly believe that once we get to steady state, we should be back into double-digit growth or beyond. This is a way for us to give ourselves the time to clear the decks. We have never done a change that is this comprehensive that affects territory planning and compensation plans to drive that. This is so comprehensive; we are just giving ourselves the room to get back to that double-digit-plus growth. I think we have a great shot at getting there in the second half of this year, hopefully.

Frank James Takkinen: Got it. That is helpful. Then if I could just squeeze one more in. As it relates to your point on unit growth, that has been really solid, obviously, in both product categories. What is your latest thought on how we should think about when ASPs in hernia could start to flatten out and stabilize?

Antony Koblish: That is a good question. I was looking at that before the call to prepare. One of the metrics I look at is what type of hernia procedures we are doing. For the longest time, we were about a 70% ventral company, and that is shifting. We always had about 10% to 15% of inguinal, but right now, I will go by memory, and Jim can correct me if I am wrong. I think we are at about 50% of our business as ventral, and 25% of our business is inguinal. Fourteen percent is hiatal.

We were really a 10% to 14% company on both inguinal and hiatal in the past, before this shift of getting more involved in the fat part of the bell curve of hernia procedures. But now we are already down to 50% from 70% on ventral, and we are up from 10% to 12% inguinal up to 25%. It is hard for me to say where that balance goes. There are almost a million inguinal procedures done a year, so we are going to keep mining that until we hit some kind of a steady state. It is going to have to do with the mix between inguinal and ventrals.

Jim Hagen: The comment I would add on this one, Frank, is not just the type of hernia, but the modality of the procedure. As we see procedures moving away from opens into laparoscopic and robotic procedures, we are well positioned. That is also why you see our LPR portfolio outpacing much of our growth, along with IHR. I do think surgeons are voting with their preferences, using us more where procedures are going, which is laparoscopic and robotic for us. So that ASP shift, to Antony's point, is going to continue.

We are going to continue to see more of our volume moving to those lower pieces with an ASP that is a bit lower than we historically had been with the large open. But as I think Roberto will continue to remind everyone, that does not impact gross margins.

Antony Koblish: Yes. Just to put a little finer point on it, Frank, what we are seeing is the start of robotic surgery making more and more inroads into the open complex cases. We are there, ready to serve those cases beautifully with our LPR product, and certainly, our inguinal product is robot compatible as well. We are well positioned for how the hernia market is evolving. How long that takes, it is hard to say.

But I do think the future is going to be higher unit growth volume—more procedures but smaller pieces—and I think you are going to start to see our 1s, 2s, and Core start to give way to inguinal and LPR, and hopefully in the future, LiquiFix being the main unit drivers going forward. We will certainly get all the opens that we can with our older portfolio. One more thing to add: the long-term resorbable hernia product has zero permanent polymer in it. A lot of these old-time surgeons do have an allergy to putting anything permanent.

Our product works beautifully in these cases, and many, many surgeons do use it, but there is a category of surgeon that wants nothing permanent. Our long-term resorbable product has a shot at opening up some of those more difficult complex trauma, complex abdominal wall cases down the line in the future, but that remains to be seen. I think the global trend is towards robotic for everything and smaller pieces, which favors our LPR product portfolio.

Frank James Takkinen: Got it. Very helpful. I appreciate the color. Thanks, guys.

Antony Koblish: Thanks, Frank.

Operator: Thank you. And our next question comes from the line of Michael Anthony Sarcone from Jefferies. Your question, please.

Michael Anthony Sarcone: Good afternoon, and thanks for taking the question. Just a follow-up on one of the first questions, and not to belabor this, but when you provided that kind of at 15% directional outlook in mid-November, you mentioned there was some built-in cushion in there. I am just trying to get a better sense for what changed—understanding you are trying to be even more prudent and you want to de-risk the guide. But did anything else change over the last three months around expected rep productivity ramp or anything like that? Just trying to get a bridge from the fifteenth to the eighth.

Antony Koblish: Yes.

Jim Hagen: I would say one of the biggest things is really the tenure Jeffrey and I had in role. We started in June. We had that call in the fall. We were in the midst of the change. I think what we have learned since then is it was a sizable change. There were multiple things we put on the field organization at the same time while we concurrently were hiring rapidly into the organization. I would say our assumptions changed from when we had the Q3 call to now, just appreciating the change curve it takes to move an organization through all of that is a bit longer and more complex, I think, than when we originally planned it out.

It is not saying it is not going well. It is actually going very well. But to Antony’s prudence point, we are going to give ourselves some more time to work through that change curve, get new reps up to speed and up to efficiency where we need them, and get our legacy team in the U.S. through that change curve of new leadership, new comp plan, and new territory alignments, so everyone is then hitting full stride in the second half of the year.

Michael Anthony Sarcone: Got it. That is very helpful. Thank you. And then maybe just one on the new kind of account targeting strategy. You talked about deeper penetration in existing accounts. Can you talk to us about some of the methods you plan to use to broaden out that penetration at existing accounts?

Jeffrey Blizard: Sure. It is Jeffrey. The problem statement that we analyzed over the last few months was too many reps were dependent on one surgeon in one location. For us, we talk about terms like stickiness to our business. In order to do that, especially at larger programs that have anywhere from three to seven, sometimes even nine, general surgeons or multiple plastic surgeons per site, we could not rely on just one user.

With the way that the comp program was set up and the goals and objectives in 2025, the need for our territory managers to be spread far and thin was so that we could gain distribution, and they could work their comp program to the best of their ability. We realized that was a limiting factor. That meant product was in hospitals without patients being covered, and that meant users were identified without another person on staff that had bought into the product with a proposal that this was a better device or product than the ones they were using.

Having this as a focus point allows us to do better in servicing, teaching, and training programs how to handle the product, being present and being bedside so that patients can receive optimal outcomes, and then the compensation plan was built around that specifically. Smaller geographies—as opposed to what we had, where reps were driving in the car three to five, sometimes even six hours in the great state of Texas—meant they found themselves racing across the state to deliver product or be present for that one physician and that one program.

We know that this density rule will work, as well as having in many of those large cities, as I mentioned earlier, an academic hub where we can put people in to help support our fellows and our residents that are being trained in this next generation of surgeons.

Jim Hagen: Michael, the only thing I will add to that in terms of how we are doing this is leveraging the full portfolio. As we just talked about on Frank's conversation, we grew historically through large open procedures with 1F and 2F. As we think about building depth within a hospital, we are talking about more users within that specific site. LiquiFix is an example. It gives us a new opportunity to engage a surgeon who may not fully believe in OviTex but wants an alternate fixation technique. That is a new in for us. Driving IHR and LPR lets us go after those surgeons who are more proficient on the robot or focusing on the robot.

Our portfolio allows us to engage with more users within a specific hospital, and that is what we are asking our field team to do—leverage the full bag, drive more users per site, which is one of the key metrics we are going to measure them on this year. That creates stickiness for us. That is what allows us to go after the higher-ceiling accounts and drive a deeper share within those accounts, which for us, to Antony’s point, creates the ability to have a more predictable top-line revenue. That is part of that formula.

Jeffrey Blizard: Yes, and I will just put a fine point on the end of Jim's comment. If you are wide and shallow and you have one surgeon four hours away who is using your product, it is pretty easy to dislodge that surgeon from his usage habits and patterns when you are not fully present and you have competitive reps looking to lever you out with contracting and rebates. We have to get five and six users in a smaller geography. That is really what we are setting ourselves up to do. You become much harder to knock down.

Michael Anthony Sarcone: Great. Thank you.

Operator: Thank you. And our next question comes from the line of Matthew O’Brien from Piper Sandler. Your question, please.

Matthew O’Brien: Good afternoon. Thanks for taking the questions. I do not know, Roberto, or if somebody else can maybe talk a little bit about the impact of weather in Q1, because the number is so low versus what we were kind of expecting. I get it is Q1 and everything, and you are still going through this transition, but it is just so low that it then requires you to start putting up some numbers, especially in the back half of the year, that we have not seen out of the company. It requires a lot of faith that you can be able to do that.

So maybe just talk about those two components there: the weather impact in Q1 and then what you are seeing that gives you confidence and should give confidence that the back-end loaded guide is achievable? And then I do have a follow-up.

Jim Hagen: Matthew, it is Jim. I will take the first half of that. I would say it is two variables external to us in Q1. We are trying not to focus on external variables, but they are real sometimes. One, feedback from our field team is just volumes in January were low. There was a market lull coming out of the holidays with insurance premiums resetting. That was a real impact. And as Jeffrey talked about, the impact of the storms on the East Coast with major population density did shuffle some elective procedures. Some were lost—cases were not happening—some others got deferred out past Q1.

We do not have firm guidance for you on what percentage impact that had to us. What we were trying to focus on is more of what our controllables were in Q1, which is really where we spent that time on hiring, getting new people into the organization, getting them trained up and going, along with what we just talked about: that mix shift from shifting accounts from lower-ceiling accounts and lower-density areas to higher-ceiling accounts in more populous areas. I would say that probably had the more material impact—those are the things we can control—for the performance from Q4 to Q1. That is where our focus is.

Antony Koblish: Yes, and Matt, we snapped back quite well after Q4 in prior years. I think it was 2024 Q4 when we had a little bit of a raid on our Salesforce, and we snapped back very effectively in Q1 of 2025. We have enough factors of safety built in with the new product launches, having a fully staffed sales force at 90 reps or a little over 90 reps in the next couple of weeks here. We have never been at that scale, and we have never been fully to our hiring plan this early in the game. That is by design.

The talent of the reps and getting them through that six-month bed-in period where they get productive—there are a lot of factors that are going to help us and give us tailwinds in the second half of the year.

Jim Hagen: With regard to the back half versus first half and confidence with regard to that, we have always grown quarter to quarter across the year. We have built our quotas and expectations for our existing reps, our tenured reps, and for new reps based on that sort of growth. Even if we had not added the number of reps we did in the first quarter, we would expect to see growth across the year that would have led to that step up from the first half to the second half.

That will be amplified by the addition of these new reps who are going to hit breakeven in about six months and then start breaking through and becoming meaningfully productive in that second half. You have to remember, 40% of our sales force has been onboarded for less than six months.

Antony Koblish: These are high-quality reps that we have hired, and we are going through the process now of getting them embedded in and up and running.

Matthew O’Brien: Okay. I appreciate that. Then a follow-up is on—and I am just trying to square all the different numbers here between the LiquiFix and the OUS growth, and the quarter was actually really good. When I start to carry that forward, I start to get some softer OviTex numbers for the full year versus what you have been doing. I am not sure that makes a lot of sense, just given the sales expansion, and yet I know you want to be conservative. It just leads you to the conclusion that there is something else going on that is not quite squared away yet.

I do not know if there is a way you can kind of walk us through what you are expecting—OviTex versus PRS versus other revenue and OUS—but just help me understand how the different product lines are going to play out here in 2026. Thanks.

Roberto E. Cuca: I will start, and I will let Jeffrey and Jim jump in, and Antony. One thing to remember is that Europe is purely OviTex sales, purely hernia sales. As we get solid growth from Europe, that is all going to be dropping to the hernia bottom line. We do expect to see PRS sales grow over the course of the year in part from the launch of larger pieces and potentially new technologies. It is not that we see either one of those softening up. We expect to see LiquiFix continue to grow strongly, although it is going from a much smaller base, so it will have a smaller revenue line impact.

I will let Jeffrey and Jim add anything to that.

Jeffrey Blizard: Yes. I think we are blessed with AMS’ focus on us as a partner. They have made a huge investment in their clinical team to help us with product evaluations and trials. They have matched us. As fast as we are trying to get our organization set, so have they. I would say that with this focus we have—and we teased a little bit about it in the last quarter earnings—that we are headed towards an academic program that is brand new to us in 2026.

Having the right leader who we have at MRSA Conrad focused on that, having a partner with AMS that drives that product adoption in the general surgery residency and fellowship as well as plastics, that is all, again, new. Considering what the back half of this year looks like for new product launches, as well as not necessarily any more organizational disruption—that came earlier—but more nuanced changes, always adapting and changing with the business so that when they identify needs, we solve for it.

Antony Koblish: Matt, I think what you are saying is you are looking at all the potential growth drivers, and it does not make sense that our OviTex business would grow less. I am just going to sum it up and stick with the word prudent. Give us a chance to metabolize these territory changes, the new reps, the new products—all of it. Prudence.

Matthew O’Brien: Understood. Thank you.

Antony Koblish: I do not see the hernia or PRS business collapsing in any way.

Operator: Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Antony Koblish for any further remarks.

Antony Koblish: Thank you, Jonathan. Thank you. The changes we made were thorough. I hope you got a sense of that. We have never cleared the decks to this level. In the past, the changes have been a little from this place, a little from that piece—incremental—because we were striving to go wide and make numbers. We are taking a step back from that to recast this in absolutely the right way across every dimension, whether it is comp, focus, population density, rep density—everything. I think we have it set up correctly for the long haul. There is going to be much less disruption from this point forward.

We have it locked in the way we want it now, the way Jeffrey and Jim want it, and now we just have to operate the machinery in the right way. We really appreciate your interest. Stay patient, and we look forward to what is ahead.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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