TELA Bio (TELA) Q2 2026 Earnings Call Transcript

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DATE

Monday, Aug. 10, 2026, at 4:30 p.m. ET

CALL PARTICIPANTS

• Chairman-Joe Capper
• Chief Executive Officer-Heather Getz
• President-Jeffrey Blizard
• Chief Operating Officer and Chief Financial Officer-Roberto E. Cuca
• Senior Vice President of Strategic Operations and Marketing-Jim Hagen
• Investor Relations-Louisa Smith

TAKEAWAYS

• Revenue -- $19.3 million, representing a 4% decline primarily due to a reduction in OviTex PRS unit volumes and price-mix headwinds in hernia procedures.
• OviTex PRS Revenue -- $5.5 million, a decrease from $7.3 million in the prior year period reflecting a 23% decline in unit volume.
• International Revenue -- $3.8 million, up 26% year over year as the company deepened its presence in the United Kingdom and other European markets.
• OviTex Unit Volume -- 5,780 units sold, representing 12% growth and partially driven by market share gains in the hernia segment.
• OviTex Revenue -- $13.3 million, an increase of 0.6% compared to $12.5 million in the second quarter of 2025.
• Gross Margin -- 72%, an improvement from 70% in the prior year driven by a tariff refund and a lower charge for excess and obsolete inventory.
• Cash and Cash Equivalents -- $30.4 million at the end of the second quarter, following a decrease from $50.8 million at the end of 2025.
• Sales and Marketing Expense -- $16.4 million, a decrease of $400,000 from the prior year due to lower commission expenses.
• Research and Development Expense -- $2.7 million, an increase of approximately $500,000 reflecting higher compensation and study costs.
• Net Loss -- $11.3 million, compared to a net loss of $9.9 million in the second quarter of 2025.
• Net Loss Per Share -- $0.20, compared to a net loss of $0.22 per share in the same period last year.
• Interest Expense -- $2.1 million, an increase from $1.2 million due to a new upsized credit facility initiated in Nov. 2025.
• LiquiFix Revenue -- $500,000, representing growth of 39% over the prior year period.
• Recurrence Rate -- 2.6%, according to the BRAVO study for OviTex hernia products, which management noted is significantly lower than some competitor materials.
• Sales Rep Productivity Ramp -- nine to 12 months, a longer timeframe than the six months previously anticipated by management.
• Operating Expense -- $23.2 million, which remained flat compared to the second quarter of 2025.
• Market Opportunity -- $2.8 billion, representing the total addressable market for the company's current hernia and plastic surgery portfolio.
• General and Administrative Expense -- $4.1 million, which was consistent with spending in the prior year period.
• Loss from Operations -- $9.3 million, compared to $9.1 million in the second quarter of 2025.
• Total Assets -- $59.7 million, down from $81.4 million at the end of fiscal 2025.

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RISKS

• Getz stated, "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," highlighting systemic market challenges.
• Blizard warned that the time to productivity for new sales hires "has taken a bit longer than anticipated," extending the expected ramp-up period for recent commercial investments.
• Hagen indicated that revenue concentration is a risk, as a "smaller cohort of surgeons implanting PRS that make up larger percentage of our revenue" can lead to volatility if those surgeons take leave or change career patterns.

SUMMARY

TELA Bio, Inc. (NASDAQ:TELA) reported a quarterly revenue decline and withdrew its full-year guidance following the appointment of Heather Getz as Chief Executive Officer. Management attributed the performance shortfall to a discontinued pilot program in the plastic and reconstructive surgery segment, slower-than-expected sales representative productivity, and competitive bundling practices in hospitals. The company is responding by returning to its original sales structure and planning a meaningful reduction in its cost structure to align with current top-line expectations. Despite the total revenue decline, management highlighted double-digit growth in international revenue and hernia unit volumes as evidence of continued market share gains.

• CEO Getz noted that the company is taking decisive action to "extend our cash runway and better align our cost structure with our top line" through a comprehensive plan to be finalized in the second half of the year.
• The company ended a specialized sales pilot program after Blizard reported it caused "unintended consequences causing confusion within the sales organization" and negatively impacted reconstructive surgery revenue.
• Management observed a shift in the U.S. market toward smaller, lower-priced units due to the increasing prevalence of robotic hernia repairs, which impacted average selling prices.
• SVP Hagen stated that for complex abdominal wall reconstructions, the company has a "right to win in that patient population" and will increase focus on these higher-value open procedures.
• The international business continues to grow exclusively from the hernia portfolio as OviTex PRS remains in the regulatory process for European markets.
• CFO Cuca noted the company's goal is to "extend the cash runway as much as possible to make any sort of additional fundraising a last resort."
• The company has upgraded talent within its market access and contracting team to counter competitive dynamics and improve positioning with hospital administrators.

INDUSTRY GLOSSARY

• OviTex: A reinforced tissue matrix product derived from ovine rumen combined with polymer fibers for hernia repair.
• PRS: Plastic and Reconstructive Surgery, a segment of the company's product portfolio.
• BRAVO Study: A clinical trial demonstrating the long-term efficacy and low recurrence rates of OviTex products.
• LiquiFix: A liquid adhesive product used in hernia mesh fixation and other surgical applications.
• ASP: Average Selling Price, the mean price at which a product is sold across various sizes and configurations.
• RPO: Remaining Performance Obligations, representing the value of contracted work that has not yet been performed.

Full Conference Call Transcript

Operator: 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.

Louisa Smith: Thank you, Lisa, and good afternoon, everyone. Earlier today, TELA Bio released financial results for the second quarter ended 06/30/2026. Copy of the press release is available on the company's website. Joining me on today's call are Heather, Chief Executive Officer Jeffrey Blizard, president Roberto E. Cuca, chief operating officer and 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 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 will now turn the call over to Joe Capper.

Antony Koblish: 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. Then I will turn 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, 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, 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. Tony'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.

Jeffrey Blizard: Thank you, Joe. Good afternoon, everyone.

Louisa Smith: 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. 1 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 1 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 incentive specifically around PRF, 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 about how we are addressing each of these challenges. Roberto E. Cucaw the second quarter financials and we will then open the call up for your questions. Jeff Blizard?

Jeffrey 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. 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, 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 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 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 U. S. Field organization, we continue to make progress on the tenure, 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 mature in their roles. While progress is happening, but not at the pace we originally anticipated due to changes in focus and competitive challenges as 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 point 6 percent growth in OviTex dollar revenue. Which indicates we continue to take procedural share even as The U.S. market shift toward 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 1 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, 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.

Roberto E. Cuca: 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% 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. 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 decline 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.

Jeffrey Blizard: 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.

Operator: 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. 1 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.

Caitlin Roberts: Hi. Thanks for taking the questions, and welcome, Heather. Just a quick 1 on the sales force. 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 6 months you noted, prior? How much longer is it taking for them?

Jeffrey Blizard: Sure. Hey, Caitlin. it is Jeff Blizard. We are on pace with our hiring plan. And with the focus shifting on 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 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.

Jim Hagen: Hey, Caitlin. it is Jim. I will add some color on your second half. Around the 6 month productivity time line. I think we are definitely seeing it longer. In the reps 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 9- to 12-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. 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 think 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.

Caitlin Roberts: Mhmm. And just on the PRS business, I think you called out last quarter, you know, just some issues with the concentration of, the customers there. I mean, is that is that still an issue? Is that confounding with the Salesforce focus in PRS and the shifting of that? And maybe a little bit more color on what is really driving the results there.

Jeffrey Blizard: Well, the pilot was the 1 that probably got the most attention in the organization. We thought in those 6 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 that was starting to fall off when we realized the pilot was not growing as fast as we wanted it to in that pilot, so that is why we pivoted quickly and stopped it. PRS is not a systemic issue. And Jim, maybe you can pull this up.

But ultimately, we have seen in key programs, key surgeons, it is in less than 10 sites that we ultimately have to get back on board.

Jim Hagen: So, again, not a systemic issue, isolated based on surgeons leaving programs, 1 who is a new mother, Some of our key users, had, the first half of this year as, been some changes in life and career patterns. So to your concentration point, Caitlin, that is still real? For us. We have smaller cohort of surgeons implanting PRS that make up larger percentage of our revenue. Disproportionately, there was a number of those surgeons who were out in the first half of the year. Of them are coming on. As Jeff said, there is been a couple of life changes for some of them. That they are out.

Part of the PRS pilot, 1 of the hypotheses was with dedicated focus, we can drive depth at hospitals with more implanters to broaden the or lessen the concentration on a critical few. That has now shifted to the broader field team. it is still 1 of our efforts We know we have to diversify our enterprise base. To protect from these shocks going forward.

Caitlin Roberts: Understood. Thanks for taking the questions.

Jim Hagen: Thanks, Caitlin.

Jeffrey Blizard: Thanks, Caitlin.

Operator: Thank you. 1 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.

Frank Takkinen: Hi. This is Frank Takkinen from Lake Street. Thank you for taking the questions. Was hoping to start with 1 on the competitive landscape. 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 knock down in order to have more accounts replicate, what a fair account looks like.

Jeffrey Blizard: In the Southeast, as an example, we got a, got an organization a buying group, that has brought us in, and we have a fair share of our contract responsibility. And that is 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 is what great looks like. We have actually had that happen over the last 6 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 4 hundred thousand dollars, 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.

Frank Takkinen: 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?

Louisa Smith: So, Frank, we are still working on this. I have spent some time with the team, and it is evident that there is opportunity to take some meaningful cost out. But the specifics of the plan have not been yet finalized. What we will do is protect our top line and our critical functions within the organization, that protect patient safety.

Frank Takkinen: Okay. That makes sense. Thank you.

Louisa Smith: I will update you as soon as we have a finalized plan.

Frank Takkinen: Makes sense. Thanks.

Jim Hagen: Thanks, Frank.

Operator: Thank you. 1 moment for the next question. Our next question is coming from the line of Matthew O'Brien of Piper Sandler.

Matthew O'Brien: 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 for-- I know we do not wanna get into 2027 too much, but there is no reason to think you will not grow 2027 versus maybe 2025 this year being more of an adjustment year? And then I have a follow-up.

Roberto E. Cuca: Okay. We are probably thinking of Jeffrey whose voice is almost as deep and resonant as mine. He was the 1 who was talking about the revenue growth in the second half of the year, so I will let him answer that.

Jeffrey Blizard: So we are optimistic that PRS is going to be 1 of our growth drivers in the back half of this year given that it is back in as a large percentage of our focus with a training plan for the commercial organization and reengagement 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.

Analyst: So that is where you are hearing our optimism.

Matthew O'Brien: And, Jeffrey, that is just on PRS, or is that for the whole business?

Jeffrey Blizard: No. The whole business too is we are 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 is our volumes growing as high as 12 percent, is keeping that now with larger pieces, which drives higher ASPs.

Matthew O'Brien: Okay. Then this 1 is for Roberto. Just talk about the cash position of the company at this point, Roberto. I know there is gonna 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.

Roberto E. Cuca: Sure. So as Heather mentioned, you know, 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 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. And as Heather mentioned, as soon as we have final results on it, we will be reporting out on it.

Jeffrey Blizard: Thanks, Matthew.

Operator: Thank you. 1 moment for the next question. Our next question will be coming from the line of Michael Sarcone of Jefferies. Please go ahead.

Michael Sarcone: Hey. Good afternoon, and thanks for taking the questions. And, Heather, welcome aboard. I guess just some-- yeah. So just some clarification questions for me. Just around the PRS unit volume headwinds, it sounded like you cited 2 sources of pressure. 1 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 1 is the more important factor? And are you expecting changes to both of those headwinds? as we work our way through the second half? Or just kind of a change around the refocus of the sales force?

Why do not you take that, Jeffrey?

Jeffrey Blizard: Yeah. Thanks. Thanks. it is Michael Sarcone, right? Yes. that is right. Oh, hey, Michael, it is Jeff Blizard. So a couple things. 1 is simplifying the message in our Salesforce playbook. So that our team stays focused on really 2 to 3 key initiatives a quarter. that is evident. it is there is 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 PRS, specifically, since we noted it is not systemic and it is on key programs, there is 2 things I would like to add.

1 is 1 of our key contributors with PRS in the year of 25 left us in January. And he just came back in July. This was 1 of our top performers, and our business already in that market is starting to take off with his presence alone. And what I would like to note too without using surgeons' names given that there is been some competitive challenges with product that is published with high recurrence rates, we are starting to see surgeons that are well published, regarded, and, they are on podiums and also in speaking bureaus. For a 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 are starting to see a shift in some of those loyal allegiant programs and doctors, to look at our product now as another solution.

Michael Sarcone: Okay. Thanks, Jeffrey. that is helpful. And then on the hernia side, you guys had mentioned 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 foreseeable future. Or is the message that we could start to see some of these larger pieces more than offset that and see, I guess, a stabilization or growth in price.

Jim Hagen: Hey, Michael. it is Jim. So 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 have improved our LPR products within our portfolio, you do see those as the fastest unit growth within our hernia portfolio because we are capturing more of those procedures. what is also true, and we referenced our data points throughout the call, the OviTex hernia portfolio has the best matchup for the most complex patient that is out there. Those are naturally performed open procedures. You are not really gonna do those 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 naturally, we are starting to see some slowdown in the price or to the kind of the revenue and unit growth gap. We should start to see that start to normalize. 2027. But we can alleviate some of that ASP degradation by getting back to really what is core to us, which is treating the most complex patient out there with OviTex.

Michael Sarcone: Great. that is really helpful. Thanks a lot.

Jim Hagen: Thanks, Michael.

Operator: Thank you. 1 more moment for the next question. Our next question is coming from the line of David Turkaly of JMP Citizens. Please go ahead.

David: Hey. Good evening. This could be for Heather or Joe, but, the bundling commentary given that the recurrence rates are 10x higher for some of the competitors. I guess I would just like to know, like, how do you combat that if it is that much better? And I know there is a lawsuit involved, but I guess could you 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.

Louisa Smith: Yeah. I was gonna say I will let Jeffrey take that 1.

Jeffrey Blizard: Hey, David. it is Jeffrey. A couple of things. 1 is, a lot of times, surgeons get to that decision, on their own. Right? So as much as we have put the product in a lot of physicians' hands using cases, and the peer to peer network is growing. They are going to these major conferences, reading data, seeing recently published publications, and realizing that a lot of time recurrence is not necessarily their patient. And what I mean by that is, when a surgeon uses a product and has an outcome and maybe it is 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, you know, seek, a procedure if you did not have a great case to begin with. So what we are trying to do ultimately is get the word out. We are at all the key forums. We are headed to the American Hernia Society at the end of this month, which is a big 1 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 is, you know, some of the product that is out there that has high has high recurrence rates. Is where those patients are not necessarily thriving with their outcomes. So we are doing it the right way. You know, ultimately, letting these surgeons arrive at that decision without necessarily, pointing the data out to them.

Analyst: it is their well versed in it.

Louisa Smith: And just to say it, I mean, I think 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. So that is part of how we get in there and get through these contracting, challenges we have.

Jeffrey Blizard: You want to answer this? I will put a funnel, but I want to-- maybe we referenced the call.

Jim Hagen: We have-- we are upgrading talent Within part of a key part of our team that owns our contract and strategy. Especially in hernia. We do see the pendulum swing in terms of decision making authority moving more toward the administration. Having a relationship there and having 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 is part of that top down we have to attack this. And as Heather and Jeffrey alluded to, you still need presence in building clinical champions from the bottom up.

So all of that competitive pressure that is out there, which is, again, the basis of our lawsuit that is there, is the friction that we reference the time to productivity for our reps. Some of the friction that is in our reps' way to getting to productivity. Because from the bottom up, they have to create all of those networks and relationships across the hospital system just to be able to advocate for the clinical and economic value of Overtex But we are aware of some of those structural barriers. We are making the moves internally. In the market we compete in now and how it is structured, we are not going to give up.

We are just going to put different effort to it and overcome that friction.

David: Thank you for that.

Jeffrey Blizard: Thanks, David.

Operator: Thank you. And 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.

Louisa Smith: Hey. 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.

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

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