Q2 2024 TELA Bio Inc Earnings Call

August 12, 2024

Operator: Good afternoon, ladies and gentlemen, and welcome to the TELA Bio Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Louisa Smith from Gilmore & Coop.

Operator: Good afternoon, ladies and gentlemen, and welcome to the TELA Bio Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode.

Louisa Smith: Good afternoon, ladies and gentlemen, and welcome to the TELA Bio 2nd quarter to the 24 earnings conference call. At this time, all participants are in listening-only mode. A question and session will follow the prepared remarks. As a reminder, this conference call is being recorded.

Good afternoon, ladies and gentlemen, and welcome to the Tela Bio second quarter 2024 earnings Conference call. At this time, all participants are in listen only mode.

Operator: A question-and-answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Louisa Smith from Gilmore & Co. Thank you, Marvin, and good afternoon, everyone.

Speaker Change: Question and answer session will follow the prepared remarks as a reminder, this conference call is being recorded I'll now turn the conference call over to Louise just Medicine Gilmartin group.

Louisa Smith: Earlier today, TELA Bio released financial results for the second quarter of 2024. A copy of the press release is available on the company's website. Joining me on today's call are Tony Koblish, President and Chief Executive Officer, and Roberto Cuca, Chief Operating Officer and Chief Financial Officer. Before we begin, I'd like to remind you that during this conference call, the company may make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's annual report on Form 10-K and quarterly reports on Form 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

Louisa Smith: Thank you, Marvin. And good afternoon, everyone.

Speaker Change: Thank you Marvin and good afternoon, everyone earlier today Tela bio released financial results for the second quarter of 'twenty 'twenty four a copy of the press release is available on the company's website.

Louisa Smith: A copy of the press release is available on the company's website.

Louisa Smith: Joining me on today's call are Tony Koblish, President and Chief Executive Officer, and Roberto Cuca, Chief Operating Officer and Chief Financial Officer.

Speaker Change: Joining me on today's call are Tony Cobalt, <unk>, President and Chief Executive Officer, and Roberto Cougar, Chief operating Officer, and Chief Financial Officer.

Louisa Smith: Before we begin, I'd like to remind you that during this conference call, the company may make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's annual report on Form 10-K and quarterly reports on Form 10-Qs, which identify the specific 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 and pipeline opportunities, product potential, the impact of various macroeconomic conditions identified in our filing, changes in surgical procedure volumes, the regulatory environment, sales and marketing strategies, capital resources, or operating performance.

Speaker Change: Before we begin I'd like to remind you that during this conference call. The company may make projections and forward looking statements regarding future events.

Speaker Change: Heard you to review the company's past and future filings with the SEC, including without limitation. The company's annual report on Form 10-K, and quarterly reports on Form 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these.

Louisa Smith: These factors may include, without limitation, statements regarding product development and pipeline opportunities, product potential, the impact of various macroeconomic conditions identified in our filing, changes in surgical procedure volumes, the regulatory environment, sales and marketing strategy, capital resources, or operating performance.

Speaker Change: Forward looking statements.

Speaker Change: These factors may include without limitation statements regarding product development and pipeline opportunities product potential impact of various macroeconomic conditions identified in our filings changes in surgical procedure volumes, the regulatory environment sales and marketing strategy is.

Speaker Change: Capital resources or operating performance with that I'd now like to turn the call over to Tony.

Louisa Smith: With that, I'd now like to turn the call over to Tony.

Louisa Smith: These factors may include, without limitation, statements regarding product development and pipeline opportunities, product potential, the impact of various macroeconomic conditions identified in our filing, changes in surgical procedure volume, the regulatory environment, sales and marketing strategies, capital resources, or operating performance. With that said, I'd now like to turn the call over to Tony. Thanks, Louisa. And good afternoon, everyone.

Tony Koblish: With that said, I'd now like to turn the call over to Tony.

Tony Koblish: Thank you, Louisa, and good afternoon, everyone. Thank you for joining the televised second quarter 2024 earnings call. During the call, I'll provide updates on our business and strategic initiatives, after which Roberto will elaborate further on Q2 results before we open the call up for questions. During the quarter, Teleface faced some transient challenges that we were able to manage through and still grow revenue 11% to 16.1 million. Demand for our products remain strong in the second quarter, and we do not expect these adverse issues to persist into the second half of 2024.

Tony Cobalt: Thanks, Louisa and good afternoon, everyone. Thank you for joining <unk> second quarter 2024 earnings call during the call I'll provide updates on our business and strategic initiatives after which Roberto will elaborate further on Q2 results before we open the call up for questions.

Tony Koblish: Thanks, Louisa, and good afternoon, everyone. Thank you for joining TELA Bio's second quarter 2024 earnings call. During the call, I'll provide updates on our business and strategic initiatives, after which Roberto will elaborate further on Q2 results before we open the call up for questions. During the quarter, TELA faced some transient challenges that we were able to manage through and still grow revenue 11% to $16.1 million. Demand for our products remained strong in the second quarter, and we do not expect these adverse issues to persist into the second half of 2024.

Antony Koblish: Thank you for joining TELA Bio's second quarter 2024 earnings call. During the call, I'll provide updates on our business and strategic initiatives, after which Roberto will elaborate further on Q2 results before we open the call up for questions. During the quarter, TELA faced some transient challenges that we were able to manage through and still grow revenue 11% to $16.1 million. Demand for our products remained strong in the second quarter, and we do not expect these adverse issues to persist into the second half of 2024.

Speaker Change: During the quarter <unk> faced some transient challenges that we were able to manage through and still grow revenue, 11% to $16 1 million demand for our products remained strong in the second quarter and we do not expect these adverse issues to persist persist into the second half of 2024, the biggest challenge in the quarter with a ransomware attack it.

Tony Koblish: The biggest challenge in the quarter was a ransomware attack at our most recently added and consequently fastest growing GPO customer that consists of approximately 150 separate hospitals. The customer detected the attack in the second week of May and resolved it two weeks later, but it appears that the return to normal operations may have taken a couple of additional weeks. As a result, this customer had substantially reduced surgeries for about a month of the quarter, affecting usage of both our hernia and PRS products. We estimate that this negatively affected our revenues by 1.25 million to 1.75 million during the quarter.

Tony Koblish: The biggest challenge in the quarter was a ransomware attack at our most recently added and consequently fastest growing GPO customer, which consists of approximately 150 separate hospitals. The customer detected the attack in the second week of May and resolved it two weeks later, but it appears that the return to normal operations may have taken a couple of additional weeks. As a result, this customer had substantially reduced surgeries for about a month of the quarter, affecting usage of both our hernia and PRS products. We estimate that this negatively affected our revenues by $1.25 million to $1.75 million during the quarter.

Antony Koblish: The biggest challenge in the quarter was a ransomware attack at our most recently added and, consequently, fastest-growing GPO customer that consists of approximately 150 separate hospitals. The customer detected the attack in the second week of May and resolved it two weeks later, but it appears that the return to normal operations may have taken a couple of additional weeks.

Tony Koblish: Separately, one of our largest single-hospital customers in our most successful territory also experienced a similar but independent cybersecurity event during the quarter, which we believe reduced surgical volumes and adversely affected our sales by at least $250,000. Finally, like some other market participants, we saw some lightness in procedure volumes in the second quarter, which was exacerbated, in our case, by the departure via retirement, or, in one case, the death, of several surgeons who were reliable users of our PRS product.

Speaker Change: Most recently added and consequently fastest growing GPO customer that consist of approximately 150 separate hospitals.

Speaker Change: Customer detected the attack in the second week of May and resolve it two weeks later, but it appears that the return to normal operations may have taken a couple of additional weeks as a result, this customer had substantially reduced surgeries for about a month of the quarter affecting usage of both our hernia and Prs products.

Antony Koblish: As a result, this customer had substantially reduced surgeries for about a month of the quarter, affecting usage of both our hernia and PRS products. We estimate that this negatively affected our revenues by $1.25 million to $1.75 million during the quarter. Separately, one of our largest single hospital customers in our most successful territory also experienced a similar but independent cybersecurity event during the quarter, which we believe reduced surgical volumes and adversely affected our sales by at least $250,000.

Speaker Change: We estimate that this negatively affected our revenues by $1 5 million to $1 $75 million during the quarter.

Tony Koblish: Separately, one of our largest single hospital customers in our most successful territory also experienced a similar but independent cybersecurity event during the quarter, which we believe reduced surgical volumes. And adversely affected our sales by at least 250,000.

Speaker Change: Separately, one of our largest single hospital customers and our most successful territory also experienced a similar but independent cyber security events during the quarter, which we believe reduce surgical volumes and adversely affected our sales by at least 250000.

Tony Koblish: Finally, like some other market participants, we saw some likeness and procedure volumes in the second quarter, which was exacerbated in our case by the departure of our retirement, or in one case, the death of several surgeons who were reliable users of our PRS products. We believe that these challenges were confined to the second quarter, and sales in July bolster this conclusion. We have a number of initiatives ongoing that I'll describe shortly, and based on current Q3 revenue trends and the implementation of those initiatives within our sales organizations. We continue to expect to deliver sales of $74.5 million to $76.4 million for the year.

Antony Koblish: Finally, like some other market participants, we saw some lightness in procedure volumes in the second quarter, which was exacerbated, in our case, by the departure via retirement, or, in one case, the death, of several surgeons who were reliable users of our BRS product. However, we believe that these challenges were confined to the second quarter, and sales in July bolstered this conclusion.

Speaker Change: Finally, like some other market participants we've talked some lightness in procedure volumes in the second quarter, which was exacerbated in our case by the departure via a retirement or in one case, a dearth of several surgeons surgeons, who are reliable users of our Prs product.

Tony Koblish: We believe that these challenges were confined to the second quarter, and sales in July bolstered this conclusion. We have a number of initiatives ongoing that I'll describe shortly, and based on current Q3 revenue trends and the implementation of those initiatives within our sales organizations, we continue to expect to deliver sales of $74.5 million to $76.4 million for the year, reflecting growth of 27.5% over 2023 at the bottom end of the range. Essentially, we expect the second quarter headwinds to affect the timing but not the overall delivery of revenues in 2024.

Speaker Change: We believe that these challenges were confined to the second quarter and sales in July bolster this conclusion.

Antony Koblish: We have a number of initiatives ongoing that I'll describe shortly, and based on current Q3 revenue trends and the implementation of those initiatives within our sales organizations, we continue to expect to deliver sales of $74.5 million to $76.4 million for the year, reflecting growth of 27.5% over 2023 at the bottom end of the range. Essentially, we expect the second quarter headwinds to affect the timing but not the overall delivery of revenues in 2024.

Speaker Change: We have a number of initiatives ongoing that I'll describe shortly and based on current Q3 revenue trends and the implementation of those initiatives within our sales organizations. We continue to expect to deliver sales of $74 5 million to $76 4 million for the year, reflecting growth of $27 five over 2027.

Tony Koblish: Reflecting growth of $27.5 over $27.5% over $20.3 million and the end of the range. Essentially, we expect a second quarter headwind to affect the timing but not overall delivery of revenues in 2024.

Speaker Change: 5% over 2023 at the bottom end of the range essentially we expect the second quarter headwinds to affect the timing, but not overall delivery of revenues in 2024.

Tony Koblish: As it relates to our product portfolio, we continue to receive positive feedback from surgeons who have utilized the two products we launched in March and April, Liquefix. The only FDA approved liquid adhesive for internal use and hernia surgery and over text IHR, a trocar compatible next generation soft tissue repair platform designed for England areas, specifically for use in laparoscopic and robotic assisted procedures. IHR is available in three configurations and compliments our existing product portfolio and allows for further penetration into the England market, which has historically been dominated by permanent synthetic meshes. Across the market, we're seeing a deliberate shift away from permanent synthetic mesh, and our Englandal product is poised to capture share as part of that underlying market trend.

Tony Koblish: As it relates to our product portfolio, we continue to receive positive feedback from surgeons who have utilized the two products we launched in March and April, LiquiFix, the only FDA-approved liquid adhesive for internal use in hernia surgery, and Ovatex IHR, a Trocar-compatible next-generation soft tissue repair platform designed for inguinal hernias, specifically for use in laparoscopic and robotic-assisted procedures. IHR is available in three configurations and complements our existing product portfolio and allows for further penetration into the inguinal market, which has historically been dominated by permanent synthetic meshes.

Antony Koblish: As it relates to our product portfolio, we continue to receive positive feedback from surgeons who have utilized the two products we launched in March and April, LiquiFix, the only FDA-approved liquid adhesive for internal use in hernia surgery, and Ovatex IHR, a Trocar-compatible next-generation soft tissue repair platform designed for inguinal hernias, specifically for use in laparoscopic and robotic-assisted procedures. IHR is available in three configurations and complements our existing product portfolio and allows for further penetration into the inguinal market, which has historically been dominated by permanent synthetic meshes.

Speaker Change: As it relates to our product portfolio, we continue to receive positive feedback from surgeons, who have utilized the two products. We launched in March and April liquid mix. The only FDA approved liquid adhesive for internal use and hernia surgery and overcast IH are a trocar compatible next generation soft tissue repair.

Speaker Change: Repair platform designed for England areas, specifically for use in laparoscopic and robotic assisted procedures IHI is available on three configurations and complement our existing product portfolio and allows for further penetration into the England market, which has historically been dominated by permanent synthetic messages.

Tony Koblish: Across the market, we're seeing a deliberate shift away from permanent synthetic mesh, and our inguinal product is poised to capture share as part of that underlying market trend. Very few players in the space are as well positioned as TELA to be an alternative to the plastics predominantly used in inguinal repairs.

Antony Koblish: Across the market, we're seeing a deliberate shift away from permanent synthetic mesh, and our inguinal product is poised to capture share as part of that underlying market trend. Very few players in the space are as well positioned as TELA to be an alternative to the plastics predominantly used in inguinal repairs.

Speaker Change: Across the market, we're seeing a deliberate shift away from permanent synthetic mesh and our England on product is poised to capture share as part of that underlying market trend very few players in this space are as well positioned as <unk> to be an alternative to the plastics predominantly used in England, England repairs.

Tony Koblish: Very few players in the space are as well positioned as Kella to be an alternative to the plastics predominantly used in Englandal repairs. In the second quarter, over text units grew 29% year over year with a greater share of growth among the smaller units that are employed for Englandal hernia repairs, including in robotic and laparoscopic procedures. We expect to see continued adoption of over text IFR, IHR as we educate surgeons on the benefits of this product and create greater product awareness in the market, particularly around its ease of use within robotic cases.

Tony Koblish: In the second quarter, Ovatex units grew 29% year-over-year, with a greater share of growth among the smaller units that are employed for inguinal hernia repairs, including in robotic and laparoscopic procedures. We expect to see continued adoption of Ovatex IHR as we educate surgeons on the benefits of this product and create greater product awareness in the market, particularly around its ease of use within robotic cases. Outside the U.S., we are experiencing significant momentum in Europe, where OVITEX PRS has not yet received CE certification. The Hernian portfolio is now sold in seven countries, Great Britain, Austria, Germany, the Netherlands, Switzerland, Spain, and Italy.

Antony Koblish: In the second quarter, Ovatex units grew 29% year-over-year, with a greater share of growth among the smaller units that are employed for inguinal hernia repairs, including in robotic and laparoscopic procedures. We expect to see continued adoption of Ovatex IHR as we educate surgeons on the benefits of this product and create greater product awareness in the market, particularly around its ease of use within robotic cases. Outside the U.S., we are experiencing significant momentum in Europe, where OVITEX PRS has not yet received CE certification. The Hernia portfolio is now sold in seven countries, Great Britain, Austria, Germany, the Netherlands, Switzerland, Spain, and Italy.

Speaker Change: In the second quarter <unk> units grew 29% year over year with a greater share of growth. Among the smaller units that are employed for inguinal hernia repairs, including in robotic and laparoscopic procedures. We expect to see continued adoption of robotics Ifr IHS as we educate surgeons on the bench.

Speaker Change: This product and create greater greater product awareness in the market, particularly around its ease of use within robotic cases.

Tony Koblish: Outside the US, we are experiencing significant momentum in Europe where over text was launched in 2019. As a reminder, over text, PRS has not yet received CE certification. The hernia portfolio is now sold in seven countries: Great Britain, Austria, Germany, the Netherlands, Switzerland, Spain, and Italy. In June, we secured a long-term agreement with the group purchasing organization Santa and a cough, Logistic GMBH of Ismaning, Germany. Santa is the largest GPO in Germany, and this contract provides that over text access to Santa's 350 corporate partners in the country. We achieved 2.4 million in sales in Europe in Q2 versus 1.5 million in 2023, with year-to-date unit growth of 87%.

Speaker Change: Outside the U S. We are experienced significant momentum in Europe, where <unk> was launched in 2019 as a reminder, <unk> Prs has not yet received CE certification.

Speaker Change: The hernia portfolio is now sold in seven countries, Great Britain, Austria, Germany, the Netherlands, Switzerland, Spain, and Italy in June we secured a long term agreement with the group purchasing organization, Santa Ana cough logistic.

Tony Koblish: In June, we secured a long-term agreement with the group purchasing organization, SANA, Enekoff Logistik GmbH of Ismaning, Germany. SANA is the largest GPO in Germany, and this contract provides OVETEX access to its 350 corporate partners in the country. We achieved 2.4 million in sales in Europe in Q2 versus 1.5 million in 2023, with year-to-date unit growth of 87%. In the second quarter, EU revenues were 15% of our total revenue with the same gross margin as in the U.S. given the structure of our agreement with our manufacturer.

Antony Koblish: In June, we secured a long-term agreement with the group purchasing organization, SANA, Enekoff Logistik GmbH of Ismaning, Germany. SANA is the largest GPO in Germany, and this contract provides Ovatex access to its 350 corporate partners in the country. We achieved 2.4 million in sales in Europe in Q2 versus 1.5 million in 2023, with year-to-date unit growth of 87%. In the second quarter, EU revenues were 15% of our total revenue with the same gross margin as in the U.S. given the structure of our agreement with our manufacturer.

Speaker Change: <unk> of <unk>, Germany, Santa is the largest GPO in Germany and this contract provides <unk> access to stand at 350 corporate partners in the country, we achieved $2 4 million in sales in Europe in Q2 versus $1 5 million in 2023 year to date.

Speaker Change: Unit growth of 87%.

Tony Koblish: In the second quarter, EU revenues were 15% of our total revenue, with the same gross margin as in the US, given the structure of our agreement with our manufacturer. As a more recently launched product market, we expect continued strong growth from our EU colleagues.

Speaker Change: In the second quarter EU revenues were 15% of our total revenue with the same gross margin as in the U S. Given the structure of our agreement with our manufacturer.

Antony Koblish: As a more recently launched product market, we expect continued strong growth from our EU colleagues. We look forward to updating you soon on a collaboration with the National Health Service in England regarding Ovatex, so stay tuned for that.

Tony Koblish: As a more recently launched product market, we expect continued strong growth from our EU colleagues. We look forward to updating you soon on a collaboration with the National Health Service in England regarding Ovatex, so stay tuned for that.

Speaker Change: As a more recently launched product market. We expect continued strong growth from our EU colleagues. We look forward to updating you soon on our collaboration with the National Health service in England regarding Overtax, so stay tuned for that.

Tony Koblish: We look forward to updating you soon on a collaboration with the National Health Service in England regarding over text, so stay tuned for that.

Tony Koblish: We have continued to make significant strides with our education efforts. In Q2, we educated over 300 surgeons globally through TELA Bio Labs and various peer-to-peer training programs with a strong focus on using over-text and minimally invasive and robotic procedures. These programs include comprehensive VIP visits to our Malvern headquarters, cadaver labs in both the US and EU, and various other educational sessions. One standout event was the abdominal wall reconstruction symposium in Las Vegas in May, which saw our largest attendance to date with 68 healthcare professionals engaging with our products. Additionally, we participated in several national and regional conferences with exposure to thousands of surgeons and attended two exclusive meetings hosted by Intuitive Surgical.

Tony Koblish: We have continued to make significant strides with our education efforts. In Q2, we educated over 300 surgeons globally through TELA Bio labs and various peer-to-peer training programs with a strong focus on using Ovatex in minimally invasive and robotic procedures. These programs include comprehensive VIP visits to our Malvern headquarters, cadaver labs in both the U.S. and EU, and various other educational sessions.

Antony Koblish: We have continued to make significant strides with our education efforts. In Q2, we educated over 300 surgeons globally through TELA Bio labs and various peer-to-peer training programs with a strong focus on using Ovatex in minimally invasive and robotic procedures. These programs include comprehensive VIP visits to our Malvern headquarters, cadaver labs in both the U.S. and EU, and various other educational sessions.

Speaker Change: We have continued to make significant strides with our education efforts in Q2, we educated over 300 surgeons globally through tela bio labs, and various peer to peer training programs with a strong focus on using overtaxed in minimally invasive and robotic procedures. These programs include comprehensive VIP visits to our <unk>.

Speaker Change: Albern headquarters Cadaver labs in both the U S and EU and various other educational sessions. One standout event was the abdominal wall reconstruction symposium in Las Vegas in May which saw our largest attendance to date with 68 health care professionals engaging with our products.

Antony Koblish: One standout event was the Abdominal Wall Reconstruction Symposium in Las Vegas in May, which saw our largest attendance to date, with 68 healthcare professionals engaging with our product. Additionally, we participated in several national and regional conferences with exposure to thousands of surgeons and attended two exclusive meetings hosted by Intuitive Surgical. Intuitive Connect, which hosted more than 1,000 general surgeons who used the da Vinci robot, and Women in da Vinci Surgery, a smaller but equally impactful opportunity for TELA.

Tony Koblish: One standout event was the Abdominal Wall Reconstruction Symposium in Las Vegas in May, which saw our largest attendance to date, with 68 healthcare professionals engaging with our product. Additionally, we participated in several national and regional conferences with exposure to thousands of surgeons and attended two exclusive meetings hosted by Intuitive Surgical, Intuitive Connect, which hosted more than 1,000 general surgeons who used the da Vinci robot, and Women in da Vinci Surgery, a smaller but equally impactful opportunity for TELA.

Speaker Change: Additionally, we participated in several national and regional conferences with exposure to thousands of surgeons and attended two exclusive meetings hosted by intuitive surgical intuitive connect which hosted more than 1000 general surgeons, who use the da Vinci robot and women and da Vinci surgery, a smaller but equally impactful.

Tony Koblish: Intuitive Connect, which hosted more than 1,000 general surgeons who used the Da Vinci robot and women in Da Vinci surgery, a smaller but equally impactful opportunity for TELA. Given over-texts, unique compatibility for robotic hernia repair, we are excited to deepen this relationship and look forward to attending Intuitive 360 in September.

Tony Koblish: Given Ovatex's unique compatibility for robotic hernia repair, we are excited to deepen this relationship and look forward to attending Intuitive 360 in September. We are also gaining momentum on the podium of key industry meetings globally and in medical journals. TELA is now up to 43 published or presented works on Ovatex.

Antony Koblish: Given Ovatex's unique compatibility for robotic hernia repair, we are excited to deepen this relationship and look forward to attending Intuitive 360 in September. We are also gaining momentum on the podium of key industry meetings globally and in medical journals. TELA is now up to 43 published or presented works on Ovatex.

Taylor: Opportunity for Taylor.

Taylor: Even though the Texas unique compatibility for robotic hernia repair we are excited to deepen this relationship and look forward to attending intuitive $3 60 in September.

Tony Koblish: We are also gaining momentum on the podium of key industry meetings globally and in medical journals. TELA is now up to 43 published or presented works on over-texts. We see these events and publications as the key driver behind surgeon education and adoption within the context of the transition away from permanent synthetic mesh. As we continue to gather evidence about the clinical efficacy and low recurrence rates associated with over-text, the market feedback remains positive, even among surgeons who tend to be slower or more conservative adopters.

Speaker Change: We are also gaining momentum on the podium of key industry meetings globally and in medical journals. Taylor is now up to 43 published or presented works on over tax we see these events and publications as a key driver behind surgeon education and adoption within the context of the transition away from permanent synthetic mesh.

Tony Koblish: We see these events and publications as the key driver behind the surge in education and adoption within the context of the transition away from permanent synthetic mesh. As we continue to gather evidence about the clinical efficacy and low recurrence rates associated with Ovatex, market feedback remains positive, even among surgeons who tend to be slower or more conservative adopters. We are driving awareness and expanding market share with the breadth of our portfolio and are committed to offering premier products for hernia repair and plastic reconstructive surgery, both of which are serving preference-driven markets.

Antony Koblish: We see these events and publications as the key driver behind the surge in education and adoption within the context of the transition away from permanent synthetic mesh. As we continue to gather evidence about the clinical efficacy and low recurrence rates associated with Ovatex, market feedback remains positive, even among surgeons who tend to be slower or more conservative adopters. We are driving awareness and expanding market share with the breadth of our portfolio and are committed to offering premier products for hernia repair and plastic reconstructive surgery, both of which are serving preference-driven markets.

Speaker Change: As we continue to gather evidence about the clinical efficacy and low recurrence rates associated with Overtax. The market feedback remains positive even amongst surgeons, who tend to be slower or more conservative adapters, we are driving awareness and expanding market share with the breadth of our portfolio and are committed to offering premier products for.

Tony Koblish: We are driving awareness and expanding market share with the breadth of our portfolio and are committed to offering premier products for hernia repair and plastic reconstructed surgery, both of which are servant preference-driven markets.

Speaker Change: Hernia repair and plastic reconstructive surgery, both of which are serving preference driven markets.

Tony Koblish: On the commercial side, we have a maturing sales organization now led by Greg Firestone. In May, we appointed Greg as chief commercial officer to drive our backstage of growth by refocusing the U.S. sales force on balanced, data driven selling. Greg has been pivotal to the TELA story since 2017, supporting our commercial strategy and securing contracts with key GPOs and IDNs. He has experienced navigating GPO and IDN contracting and will be instrumental as we secure further access to new organizations. Greg is already enhancing sales rep training, increasing operational efficiency, and refining productivity metrics across the organization.

Tony Koblish: On the commercial side, we have a maturing sales organization now led by Greg Firestone. In May, we appointed Greg as Chief Commercial Officer to drive our next phase of growth by refocusing the U.S. sales force on balanced, data-driven selling. Greg has been pivotal to the TELA story since 2017, supporting our commercial strategy and securing contracts with key GPOs and IDNs. He has experience navigating GPO and IDN contracting and will be instrumental as we secure further access to new organizations. Greg is already enhancing sales rep training, increasing operational efficiency, and refining productivity metrics across the organization. He and we are committed to having one of the best trained sales forces in the marketplace.

Antony Koblish: On the commercial side, we have a maturing sales organization now led by Greg Firestone. In May, we appointed Greg as Chief Commercial Officer to drive our next phase of growth by refocusing the U.S. sales force on balanced, data-driven selling. Greg has been pivotal to the TELA story since 2017, supporting our commercial strategy and securing contracts with key GPOs and IDNs. He has experience navigating GPO and IDN contracting and will be instrumental as we secure further access to new organizations. Greg is already enhancing sales rep training, increasing operational efficiency, and refining productivity metrics across the organization. He and we are committed to having one of the best-trained sales forces in the marketplace.

Greg Firestone: The commercial side, we have a maturing sales organization now led by Greg Firestone in May we appointed Greg as Chief Commercial officer to drive our next phase of growth by refocusing. The U S sales force on balanced data driven selling Gregg has been pivotal to the teller story since 2017 supporting our commercial.

Greg Firestone: <unk> strategy in securing contracts with key GPO and idms. He has experienced navigating GPO and IBM contracting and will be instrumental as we secure further access to new organizations. Greg is already enhancing sales rep training, increasing operational efficiency and refining productivity metrics across the organization.

Tony Koblish: He and we are committed to having one of the best trained sales forces in the marketplace.

Speaker Change: <unk> he and we are committed to having one of the best trained sales forces in the marketplace.

Tony Koblish: I am pleased with the progress we made in the second quarter. We have a mature sales team in place. We are driving operational leverage. We have our high on profitability in the near future, and our guidance points to our expectation of another year of very strong growth for TELA.

Antony Koblish: I am pleased with the progress we made in the second quarter. We have a mature sales team in place, we are driving operational leverage, we have our eye on profitability in the near future, and our guidance points to our expectation of another year of very strong growth for TELA. With that, I'll turn the call over to Roberto to provide more specifics on our financial results. Thanks, Tony.

Roberto Cuca: I am pleased with the progress we made in the second quarter. We have a mature sales team in place, we are driving operational leverage, we have our eye on profitability in the near future, and our guidance points to our expectation of another year of very strong growth for TELA. With that, I'll turn the call over to Roberto to provide more specifics on our financial results. Thanks, Tony.

Speaker Change: I am pleased with the progress we made in the second quarter, we have a mature sales team in place we are driving operational leverage we have our eye on profitability in the near future and our guidance points to our expect expectation of another year of very strong growth for <unk> with that I'll turn the call over to Roberto to provide more specifics on our final.

Roberto Cuca: With that, I'll turn the call over to Roberto to provide more specifics on our financial results.

Roberto Cuca: Thanks, Tom. Revenue for the second quarter of 2024 will 11% year-of-a-year to $16.1 million, with revenue from overtext growing 11% and overtext PRS growing 9% in the period. The double-digit close was primarily driven by increasing unit sales of products due to the addition of new customers, increased penetration within existing customer accounts, and growing international sales under our expanded commercial organization. This is partially offset by a decrease in that average selling crisis caused by a shift in product mix as our strategy to more broadly penetrate the inguinal and minimally invasive, pernier repair markets showed success. As Tony mentioned, there was one larger and a couple of smaller adverse dynamics effect in the quarter, so we do not expect to meaningfully affect revenue in the second half of 2024.

Roberto Cuca: Revenue for the second quarter of 2024 grew 11% year-over-year to $16.1 million, with revenue from Ovatex growing 11% and Ovatex PRS growing 9% in the period. The double-digit growth was primarily driven by an increase in unit sales of products due to the addition of new customers, increased penetration within existing customer accounts, and growing international sales under our expanded commercial organization. This was partially offset by a decrease in the average selling prices caused by a shift in product mix, as our strategy to more broadly penetrate the inguinal and minimally invasive hernia repair markets showed success.

Roberto Cougar: Actual results.

Roberto Cougar: Thanks, Tom.

Roberto Cougar: For the second quarter of 2024 grew 11% year over year to $16 1 million.

Revenue from <unk>, growing, 11% and <unk> Prs growing 9% in the period the double digit growth was primarily driven by an increase in unit sales of products due to the addition of new customers increased penetration within existing customer accounts and growing international sales under our expanded commercial organization. This.

Roberto Cougar: This was partially offset by a decrease in the average selling prices caused by a shift in product mix as our strategy to more broadly penetrate the inguinal and minimally invasive hernia repair markets showed success.

Roberto Cuca: As Tony mentioned, there was one larger and a couple of smaller adverse dynamics affecting the quarter, but we do not expect them to meaningfully affect revenue in the second half of 2024. Growth for the first half of 2024 was up 24% over the first half of 2023, reflecting more general commercial performance before the customer-focused instructions in the second quarter. Gross margin was 69% for the second quarter, compared to 70% in the prior year period. The decrease was primarily due to higher charges for excess and obsolete inventories of a percentage of revenue as a result of inventory purchases during the quarter.

Roberto Cougar: As Tony mentioned, there was one larger than a couple of smaller adverse dynamics effects in the quarter, we do not expect to meaningfully affect revenue in the second half of 2024.

Roberto Cuca: Growth for the first half of 2024 was up 24% over the first half of 2023, reflecting more general commercial performance before the customer focused in the second quarter. Growth margin was 69% for the second quarter, compared to 70% in the prior year period. The decrease was primarily due to higher charges for excess and obsolete inventories of percentage of revenue as a result of inventory purchases during the quarter. Sales and marketing expense was $16.7 million in the second quarter of 2024, compared to $14.6 million in the same period in 2023. This increase was mainly due to higher compensation costs as a result of our expanded commercial organization, increased travel expenses, and a marketing distribution fee which offset lower marketing expense.

Tony Cobalt: Growth for the first half of 2024 was up 24% over the first half of 2023, reflecting more general commercial performance before the customer focused approach in the second quarter.

Tony Cobalt: Gross margin was 69% for the second quarter.

Tony Cobalt: Compared to 70% in the prior year period. The decrease was primarily due to higher charges for excess and obsolete inventory as a percentage of revenue as a result of inventory purchases during the quarter sales and marketing expense was $16 7 million in the second quarter of 2024 compared to $14 6 million in the same period in 2023.

Roberto Cuca: The decrease was primarily due to higher charges for excess and obsolete inventories of a percentage of revenue as a result of inventory purchases during the quarter. Sales and marketing expense was $16.7 million in the second quarter of 2024 compared to $14.6 million in the same period in 2023. This increase was mainly due to higher compensation costs as a result of our expanded commercial organization, increased travel expenses, and a marketing distribution fee which offset lower marketing expenses.

Roberto Cuca: Sales and marketing expense was $16.7 million in the second quarter of 2024 compared to $14.6 million in the same period of 2023. This increase was mainly due to higher compensation costs as a result of our expanded commercial organization, increased travel expenses, and a marketing distribution fee which offset lower marketing expenses. General and administrative expenses $3.6 million compared to $3.5 million in the same period of 2023. R&D expenses $2.3 million in the second quarter compared to $2.5 million in the prior year.

Tony Cobalt: This increase was mainly due to higher compensation costs as a result of our expanded commercial organization increased travel expenses, and our marketing distribution fee, which offset lower marketing expense.

Roberto Cuca: General and administrative expense was $3.6 million compared to $3.5 million in the same period of 2023. R&D expenses $2.3 million in the second quarter compared to $2.5 million in the prior year. The decrease was primarily due to lower study and development costs, which offset higher compensation and benefits. Loss from operations was $11.6 million in the second quarter of 2024, compared to $10.4 million in the prior year period. Net loss was $12.6 million in the second quarter of 24, compared to $10.8 million in the same period in 2023. We ended the first quarter with $26.5 million in cash and cash equivalency, turning to the outlook for 2024.

Roberto Cuca: General and administrative expense was $3.6 million compared to $3.5 million in the same period of 2023. R&D expense was $2.3 million in the second quarter compared to $2.5 million in the prior year. The decrease is primarily due to lower study and development costs, which offset higher compensation and benefits.

Tony Cobalt: General and administrative expense was $3 6 million compared to $3 5 million in the same period of 2023, R&D expenses $2 3 million in the second quarter compared to $2 5 million in the prior year. The decrease was primarily due to lower study and development costs, which offset higher compensation and benefits.

Roberto Cuca: The decrease is primarily due to lower study and development costs, which offset higher compensation and benefits. Loss from operations was $11.6 million in the second quarter of 2024, compared to $10.4 million in the prior year period. Net loss was $12.6 million in the second quarter of 2004, compared to $10.8 million in the same period in 2023. We ended the first quarter with $26.5 million in cash and cash equivalents.

Roberto Cuca: Loss from operations was $11.6 million in the second quarter of 2024, compared to $10.4 million in the prior year period. Net loss was $12.6 million in the second quarter of 2024, compared to $10.8 million in the same period in 2023. We ended the first quarter with $26.5 million in cash and cash equivalents. Turning to The Outlook for 2024, we continue to project revenue for the full year to be in the range of $74.5M to $76.5M, representing growth of 27% to 31% from the prior year.

Tony Cobalt: Loss from operations was $11 6 million in the second quarter of 2024 compared to $10 4 million in the prior year period.

Tony Cobalt: Net loss was $12 6 million in the second quarter of <unk> compared to $10 8 million in the same period in 2023.

Tony Cobalt: We ended the first quarter with $26 $5 million in cash and cash equivalents.

Roberto Cuca: Let us turn to the Outlook for 2024. We continue to project revenue for the full year to be in the range of $74.5 million to $76.5 million, representing growth of 27% to 31% from the prior year. Additionally, we continue to expect operating loss and net loss to be less in 2024 than in 2023, even excluding the contribution from the divestiture of net loss. Operating expenses will remain steady or slightly lower sequentially over the course of the year so that both operating loss and net loss should decline from quarter to quarter over the course of 2024, again even excluding the contribution from the divestiture of net loss. Relatedly, cash consumption should be meaningfully lower in the second half of the year.

Tony Cobalt: Turning to the outlook for 2024.

Roberto Cuca: We continue to project revenue for the full year to be in the range of $74.5 million to $76.5 million, representing growth of 27% to 31% from the prior year. Additionally, we continue to expect operating loss and net loss to be less than 2020-24 than in 2023, even excluding the contribution from the best attire of NIVIS. Operating expenses will remain steady or slightly lower sequentially over the course of the year, so that both operating loss and net loss declined from quarter to quarter over the course of 2024, again, even excluding the contribution from the best attire of NIVIS.

Tony Cobalt: We continue to project revenue for the full year to be in the range of $74 5 million to $76 5 million reps.

Tony Cobalt: Representing representing growth of 27% to 31% from the prior year.

Roberto Cuca: Additionally, we continue to expect operating loss and net loss to be less in 2024 than in 2023, even excluding the contribution from the divestiture of MIPA. Operating expenses will remain steady or slightly lower sequentially over the course of the year so that both operating loss and net loss should decline from quarter to quarter over the course of 2024, again even excluding the contribution from the divestiture of MIPA. Relatedly, cash consumption should be meaningfully lower in the second half of the year.

Tony Cobalt: Additionally, we continue to expect operating loss and net loss to be less in 2024, then 2023, even excluding the contribution from the divestiture of Nimbus.

Speaker Change: Operating expenses will remain steady or slightly lower sequentially over the course of the year. So that both operating loss and net loss declined from quarter to quarter over the course of 2024 again, even excluding the contribution from the divestiture of Memphis, Relatedly cash consumption should be meaningfully lower in the second half of the year.

Roberto Cuca: Relatedly, cash consumption should be significantly lower in the second half of the year. Added to this, in the third quarter, we will begin to receive revenue share payments related to the best attire of NIVIS. Over the course of the next eight quarters, these payments will sum to at least $3 million and could be as much as $7 million. With this combination of growing revenue, improving operating leverage, and incremental NIVIS payments, we continue to expect that our cash and cash equivalence will be sufficient from this to profitability.

Roberto Cuca: Added to this, in the third quarter, we will begin to receive revenue share payments related to the divestiture of NVIDIA. Over the course of the next eight quarters, these payments will sum to at least $3 million and could be as much as $7 million.

Roberto Cuca: Added to this, in the third quarter, we will begin to receive revenue share payments related to the divestiture of NIFA. Over the course of the next eight quarters, these payments will sum to at least $3 million and could be as much as $7 million. With this combination of growing revenue, improving operating leverage, and incremental LIBIS payments, we continue to expect that our cash and cash equivalents will be sufficient to fund us to profitability. With that, I'll hand the call back to Tony for closing remarks. Thanks, Roberto.

Speaker Change: Added to this in the third quarter, we will begin to receive revenue share payments related to the divestiture and divestiture of notice over the course of the next eight quarters. These payments with some to at least $3 million and could be as much as $7 million with this combination of growing revenue improving operating leverage and incremental <unk> payments, we continue to.

Tony Koblish: With this combination of growing revenue, improving operating leverage, and incremental LIBIS payments, we continue to expect that our cash and cash equivalents will be sufficient to fund us to profitability. With that, I'll hand the call back to Tony for closing remarks. Thanks, Roberto.

Tony Cobalt: Expect that our cash and cash equivalents will be sufficient to fund us to profitability with that I'll hand, the call back to Tony for closing remarks, Thanks, Robert I'm pleased by the Companys progress and resilience in the second quarter and I'm excited by the enormous opportunity in front of US I believe that tela bio has never been better positioned for success for several reasons.

Tony Koblish: With that, I'll hand the call back to Tony for closing remarks.

Tony Koblish: Thanks, Roberto.

Tony Koblish: I'm pleased by the company's progress and resilience in the second quarter, and I'm excited by the enormous opportunity in front of us. I believe that TELA Bio has never been better positioned for success for several reasons. First, I have been very impressed by Greg's leadership of our seasoned commercial team so far, and I'm confident that he will do an excellent job driving adoption of our portfolio of products. Second, we possess broad GPO coverage and have products that position us well for the ongoing shift to robotic hernia repair.

Antony Koblish: I'm pleased by the company's progress and resilience in the second quarter, and I'm excited by the enormous opportunity in front of us. I believe that TELA Bio has never been better positioned for success for several reasons. First, I have been very impressed by Greg's leadership of our seasoned commercial team so far, and I'm confident that he will do an excellent job driving adoption of our portfolio of products. Second, we possess broad GPO coverage and have products that position us well for the ongoing shift to robotic hernia repair.

Tony Koblish: Please buy the company's progress and resilience in the second quarter, and I'm excited by the enormous opportunity in front of us. I believe the telebio has never been better positioned for success for several reasons. First, I have been very impressed by the great leadership of our season commercial team so far, and I'm confident that he will do an excellent job in driving adoption of our portfolio of products. Box. Second, we possess broad GPO coverage and have products that position us well for the ongoing shift to robotic hernia repair. Finally, and most importantly, our products offer patients, insurgents, unparalleled clinical outcomes at a competitive price.

I've been very impressed by Greg's leadership of our seasoned commercial team so far and I'm confident that he will do an excellent job in driving adoption of our portfolio of products.

Operator: Good afternoon ladies and gentlemen and welcome to the TELA Bio 2nd quarter to the 24 earnings conference call. At this time, all participants are listening only mode. A question and session will follow the prepared remarks.

Tony Cobalt: We possess broad GPO coverage and have products that position us well for the ongoing shift to robotic hernia repair finally, and most importantly, our products offer patients and surgeons unparalleled clinical outcomes at a competitive price. We are confident that this combination of essential factors for success can drive solid growth for talent for years to come.

Operator: As reminder, this conference call is being recorded. A copy of the press release is available on the company's website.

Tony Koblish: Finally, and most importantly, our products offer patients and surgeons unparalleled clinical outcomes at a competitive price. We are confident that this combination of essential factors for success can drive solid growth for TELA for years to come. So with that, I'll now ask Marvin to open the line for your questions. Please go ahead.

Tony Koblish: We are confident that this combination of essential factors for success can drive solid road for talent for years to come.

Antony Koblish: Finally, and most importantly, our products offer patients and surgeons unparalleled clinical outcomes at a competitive price. We are confident that this combination of essential factors for success can drive solid growth for TELA for years to come. So with that, I'll now ask Marvin to open the line for your questions. Please go ahead.

Louisa Smith: So, with that, I'll now ask Marvin to open the line for your questions. Please go ahead. Thank you.

Marvin: With that I'll now ask Marvin to open the line for your questions. Please go ahead.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Frank Takkinen of Lake Street Capital. Your line is now open.

Louisa Smith: At this time, we will conduct a question-and-answer session. As a reminder to ask a question, you will need to press star 111 on your telephone and wait for your name to be announced. To withdraw your question, please press star 111 again. Please stand by while we compile the Q&A roster.

Tony Cobalt: <unk>.

Marvin: Thank you at this time, we will conduct a question and answer session.

Louisa Smith: Joining me on today's call are Tony Koblish, President and Chief Executive Officer and Roberto Cuca, Chief Operating Officer and Chief Financial Officer. Before we begin, I'd like to remind you that during this conference call the company may make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including without limitation, the company's annual report on form 10K and quarterly reports on form 10Qs, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

Speaker Change: Reminder, to ask a question you will need to press star one on your telephone and wait for your name to be announced to.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Frank Takkinen of Lake Street Capital. Your line is now open.

Speaker Change: To withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Speaker Change: Yes.

Frank Takkinen: Our first question comes from a line of Frank Takkinen of Lake Street Capital. The line is now open. Great. Thanks for taking the questions. I was hoping to start with a follow-up on some of the cyber attack commentary.

Speaker Change: Our first question comes from the line of Frank Kennon of Lake Street Capital. Your line is now open.

Frank Takkinen: Great, thanks for taking the questions. I was hoping to start with a follow-up on some of the cyber attack commentary. Can you just help us understand a little bit better what was really occurring at the account level when these cyber attacks occurred? And really, what I'm trying to understand is when this occurred, were these procedures in backlog? Were the physicians able to use a different mesh? Were they using no mesh?

Frank Kennon: Great. Thanks for taking the questions I was hoping to start with a follow up on some of the cyber attack commentary can you just help us understand a little bit better what's really occurring at the account level. When these cyber attacks occurred and really what I'm trying to understand is when this occurred are these procedures in backlog, where the physician is able to use a different mash.

Frank Takkinen: Can you help us understand a little bit better of what's really occurring at the account level when these cyber attacks occurred and really what I'm trying to understand is when this occurred are these procedures in backlog where the physician is able to use a different mesh where they're using no mesh and kind of how does that lead into the confidence behind the guide and backlog and those types of things to think about the second half of the year.

Frank Takkinen: And really, what I'm trying to understand is when this occurred, were these procedures in backlog? Were the physicians able to use a different mesh? Were they using no mesh? And kind of how does that lead into the confidence behind the guide and backlog and those types of things to think about for the second half of the year?

Louisa Smith: These factors may include without limitation, statements regarding product development and pipeline opportunities, product potential, the impact of various macroeconomic conditions identified in our filing, changes in surgical procedure volumes, the regulatory environment, sales and marketing strategies, capital resources or operating performance.

Speaker Change: They are using <unk> and kind of how does that.

Speaker Change: Lead into the confidence behind the guide in backlog and those types of things to think about the second half of the year yes.

Tony Koblish: Yeah, Frank.

Tony Koblish: Frank, I'll start that off. To the best of our understanding, what was happening is the patient records are basically getting held hostage. What that does is it creates a situation where, to treat the patient, a lot of things that are done on the EMR are done by hand now. So prescriptions, note dictation, I mean, you name it, every aspect of a surgical procedure is impacted. So it makes the hospitals think deeply about which procedures they have to do and which procedures they don't have to do. So, from what we've heard, they've shipped patients off to other facilities.

Tony Koblish: Yeah, Frank, I'll start that off. So, to the best of our understanding, what was happening is that patient records are basically getting held hostage. So what that does is it creates a situation where to treat the patient, a lot of things that are done in the EMR are done by hand now. So prescriptions, note dictation, I mean, you name it, every aspect of a surgical procedure is impacted. So it makes hospitals think deeply about which procedures they have to do and which they don't have to do.

Antony Koblish: And kind of how does that lead into the confidence behind the guide and the backlog and those types of things to think about for the second half of the year? Yeah, Frank, I'll start that off. So, you know, to the best of our understanding... What was happening is the patient records were basically getting held hostage. So what that does is it creates a situation where to treat the patient, a lot of things that are done on the EMR are done by hand now.

Speaker Change: Yes, Frank I'll start that off so to the best of our understanding what was happening.

Speaker Change: The patient records are basically getting held hostage.

Tony Koblish: With that, I'd now like to turn the call over to Tony. Thank you, Louisa, and good afternoon, everyone. Thank you for joining televised second quarter, 2024 earnings call. During the call, I'll provide updates on our business and strategic initiatives after which Roberto will elaborate further on Q2 results before we open the call up for questions. During the quarter, teleface some transient challenges that we were able to manage through and still grow revenue 11% to 16.1 million.

Speaker Change: So what that does is it creep.

Speaker Change: Create a situation where they treat the patients a lot of things that are done on the EMR.

Antony Koblish: So prescriptions, note dictation, I mean, you name it, every aspect of a surgical procedure is impacted. So it makes hospitals think deeply about which procedures they have to do and which they don't have to do. From what we've heard, they've shipped patients off to other facilities.

Speaker Change: <unk> are done by hand, now so prescription.

Speaker Change: No dictation I mean, you name. It every aspect of a surgical procedure is in package. So it make the hospitals think deeply about which procedures they have to do and which procedures. They don't have to do from what we've heard they've shift patients off to other facilities.

Tony Koblish: From what we've heard, they've shipped patients off to other facilities. You know, that's not great for us if we don't have those other facilities up and running yet, right, as part of our implementation. So, to the best of our knowledge, the attacks, even the secondary attack outside of the GPO system that, you know, there may have been others, but those are the ones that affected us the most, were primarily tied to patient medical records and sort of just locking up the hospital and their ability to function day in and day out.

Tony Koblish: Demand for our products remain strong in the second quarter, and we do not expect these adverse issues to persist into the second half of 2024. The biggest challenge in the quarter was a ransomware attack at our most recently added and consequently fastest growing GPO customer that consists of approximately 150 separate hospitals. The customer detected the attack in the second week of May and resolved it two weeks later, but it appears that the return to normal operations may have taken a couple of additional weeks.

Antony Koblish: You know, that's not great for us if we don't have those other facilities up and running yet, right, as part of our implementation. So, to the best of our knowledge, the attacks, even the secondary attack outside of the GPO system that, you know, there may have been others, but those are the ones that affected us the most, were primarily tied to patient medical records and sort of just locking up the hospital and their ability to function day in and day out.

Tony Koblish: You know, that's not great for us if we don't have those other facilities up and running yet, right as part of our implementation. So, to the best of our knowledge, the attacks, even the secondary attack outside of the GPO system, that, you know, there may have been others, but that's the ones, those are the ones that affected us the most. We'll primarily tied to the patient medical records and sort of just locking up the hospital and their ability to function day in and day out.

Speaker Change: Not great for us if we don't have those other facilities up and running yet right as part of our implementation.

Speaker Change: So to the best of our knowledge the attack even the secondary attack outside of the GPO system that.

Speaker Change: Yes, there may have been others, but thats the ones those are the ones that affected us. The most were primarily tied to the patient medical records and sort of just locking up the hospital and their ability to function day in and day out.

Tony Koblish: As a result, this customer had substantially reduced surgeries for about a month of the quarter affecting usage of both our hernia and PRS products. We estimate that this negatively affected our revenues by 1.25 million to 1.75 million during the quarter. Separately, one of our largest single hospital customers in our most successful territory also experienced a similar but independent cybersecurity event during the quarter which we believe reduced surgical volumes. And adversely affected our sales by at least 250,000.

Antony Koblish: Yeah, and so, Frank, what I'd add is, you know, if you do some research, you'll see some accounts where the affected hospital system was redirecting ambulances to alternative hospitals so as not to have them arrive at their emergency departments. So for at least two weeks, they were doing very, very few procedures, if any.

Tony Koblish: Yeah, and so, Frank, what I'd add is, you know, if you do some research, you'll see some accounts where the affected hospital system was redirecting ambulances to alternative hospitals so as not to have them arrive at their emergency departments. So, for at least two weeks, they were doing very, very few procedures, if any. When they were able to lift the ransomware attack and regain access to their systems, they began getting up to speed somewhat slowly.

Tony Koblish: Yeah, and so Frank, what I'd add is, you know, if you do some research, you'll see some accounts where the affected hospital system was redirecting ambulances to alternative hospitals, so it's not to have them arrive at their emergency departments. So, for at least two weeks, they were doing very, very few procedures, if any. When they were able to lift the ransomware attack and regain access to their systems, they began getting up to speed somewhat slowly. It sounds like it took another couple of weeks before they were back where they were before. And so, you know, the procedures that we are involved in were either delayed or redirected to other locations.

Yes, so Frank what I would add is.

Frank Kennon: If you do some research you will see some accounts, where the effective hospital system was redirecting ambulances to alternative hospitals, so as not to have them arrive at their emergency departments. So for at least two weeks. They were doing very very few procedures if any.

Antony Koblish: When they were able to lift the ransomware attack and regain access to their systems, they began getting up to speed somewhat slowly. Some of it took another couple of weeks before they were back where they were before. And so, you know, the procedures that we are involved in were either delayed or redirected to other locations. As in the COVID-19 experience, we expect that probably the PRS-type procedures were sent to other hospitals and were difficult to reschedule, but that the hernia surgeries were simply delayed. We don't think there's going to be a big backlog. It's about a month's worth of surgery. And hernia repairs in particular are... reschedulable. One approach other than to the biggest ventral hernia repairs is watchful waiting.

Speaker Change: When they.

Speaker Change: We're able to lift the ransomware attack and regain access to their systems.

Speaker Change: Again getting up to speed somewhat slowly and it sounds like it took another couple of weeks before that are back where they were before.

Tony Koblish: Some of it took another couple of weeks before they were back where they were before. And so, you know, the procedures that we are involved in were either delayed or redirected to other locations. As in the COVID-19 experience, we expect that probably the PRS-type procedures were sent to other hospitals and were difficult to reschedule, but that the hernia surgeries were simply delayed. We don't think there's going to be a big backlog.

Speaker Change: And so.

Tony Koblish: Finally, like some other market participants, we saw some likeness and procedure volumes in the second quarter which was exacerbated in our case by the departure of our retirement or in one case of death of several surgeons who were reliable users of our PRS products. We believe that these challenges were confined to the second quarter and sales in July bolster this conclusion. We have a number of initiatives ongoing that I'll describe shortly and based on current Q3 revenue trends and the implementation of those initiatives within our sales organizations.

Speaker Change: The procedures that we are involved in that were either delayed or redirected to other locations.

Tony Koblish: As in the COVID-19 experience, we expect that probably the PRS type procedures were sent to other hospitals, yeah, more difficult to reschedule, but that the hernia surgeries were simply delayed. We don't think there's going to be a big backlog. It's about a month's worth of surgery, and hernia repairs in particular are. Reschedulable? You know, one approach other than to the biggest ventral hurting repairs is washable weighting, so you can delay those for a month. Our expectation, though, is that as the hospital system gets up to speed, as the hospitals in COVID-19, they're going to prioritize more remunerative surgeries before the last remunerative ones, which means pretty many take a little bit longer to get up to speed at those hospitals.

Speaker Change: As in the COVID-19 experience, we expect that probably the Prs type procedures were sent to other hospitals are more difficult to reschedule, but that the hernia surgeries were simply delayed.

Speaker Change: We don't think thats going to be a big backlog, it's about one month worth of surgery in hernia repairs in particular are.

Tony Koblish: It's about a month's worth of surgery, and hernia repairs in particular are... reschedulable. One approach other than to the biggest ventral hernia repairs is watchful waiting. So you can't delay those for a month. Our expectation, though, is that as the hospital system gets up to speed, as the hospitals with COVID-19 do, they're going to prioritize more lucrative surgeries before the less remunerative ones, which means that the period may take a little bit longer to get up to speed at those hospitals.

Speaker Change: Reschedule reschedule below one approach other loan to the biggest ventral hernia repairs is watchful waiting so you can delay those per month.

Tony Koblish: We continue to expect to deliver sales of $74.5 million to $76.4 million for the year. Reflecting growth of $27.5 over $27.5% over $20.3 million and the end of the range. Essentially, we expect a second quarter headwind to affect the timing but not overall delivery of revenues in 2024. As it relates to our product portfolio, we continue to receive positive feedback from surgeons who have utilized the two products we launched in March and April, liquefix.

Antony Koblish: So you can't delay those for a month. But our expectation, though, is that as the hospital system gets up to speed, like the hospitals in COVID-19, they're going to prioritize more lucrative surgeries before the less lucrative ones, which means that they're going to be able to do that. The podium may take a little bit longer to get up to speed at those hospitals. All that said, we do have indications, particularly from the performance in July, that this is something that's been isolated to the second quarter and that things are pretty close to back to normal.

Speaker Change: Our expectation, though is that as the hospital system gets up to speed as the hospitals when COVID-19, they're going to prioritize.

Speaker Change: More remunerative surgeries before.

Speaker Change: Remunerative ones, which means.

Speaker Change: Premium may take a little bit longer to get up to speed on at those hospitals and all of that said.

Tony Koblish: All that said, we do have indications, particularly from the porters in July, that this is something that's been isolated to the second quarter, and that things are pretty close to back to normal. And added to that, the initiatives that Greg has kicked off, and the morale that we see in our sales forces as a result of all that work, we feel very strongly about being able to perform in the second half and recoup the lost procedures that we got in the second quarter.

Tony Koblish: All that said, we do have indications, particularly from the performance in July, that this is something that's been isolated to the second quarter and that things are pretty close to back to normal. And added to that, the initiatives that Greg has kicked off and the morale that we see in our sales force as a result of all that work, we feel very strongly about being able to perform in the second half and recoup the lost procedures that we got in the second quarter. And I'm just going to add a little bit more to that color, Frank.

Speaker Change: We do have indications, particularly from the performance in July that this is something thats been isolated to the second quarter and that things are pretty close to back to normal.

Tony Koblish: The only FDA approved liquid adhesive for internal use and hernia surgery and over text IHR, a trocar compatible next generation soft tissue repair platform designed for england areas, specifically for use in laparoscopic and robotic assisted procedures. IHR is available in three configurations and compliments our existing product portfolio and allows for further penetration into the england market, which has historically been dominated by permanent synthetic meshes. Across the market, we're seeing a deliberate shift away from permanent synthetic mesh and our englandal product is poised to capture share as part of that underlying market trend.

Antony Koblish: And added to that, the initiatives that Greg has kicked off and the morale that we see in our sales force as a result of all that work, we feel very strongly about being able to perform in the second half and recoup the lost procedures that we got in the second quarter. And I'm just gonna add a little bit more, Frank, to that color. I mean, keep in mind, or if you recall, this GPO is super important to us, right? It's not the biggest, that's for sure.

Speaker Change: And added to that the initiatives that Greg has kicked off.

Greg Firestone: The morale that we see in our sales force as a result of all that work, we feel very strongly about being able to perform in the second half and recoup.

Greg Firestone: The.

Greg Firestone: Lost procedures that we got in the second quarter.

Antony Koblish: But the structure of the contract was the most favorable to us, right? Dual source contract, us and another player, and that other player was not the market leader, right? So the contract had not annualized yet over the year. And so it's also our fastest growing. So, you know, acutely painful for us.

Tony Koblish: I mean, keep in mind, or if you recall, this GPO is super important to us, right? It's not the biggest, that's for sure. But the structure of the contract was the most favorable to us, right? A dual source contract, us and another player, and that other player was not the market leader, right? So the contract has not annualized yet this year, and so it's also our fastest growing. So, you know, it is acutely painful for us.

Tony Koblish: I'm just going to add a little bit more frank to that color. I mean, keep in mind, or if you recall, this GPO is super important to us. It's not the biggest, that's for sure. Structure of the contract was the most favorable to us. Dual-source contract, us and another player, and that other player was not the market leader. So the contract had not annualized yet over the year, and so it's also our fastest growing. So, you know, acutely painful for us.

Frank Kennon: I'm, just going to add a little bit more frank to that color I mean keep in mind.

Speaker Change: If you recall this GPO is super important to us it's not the biggest that's for sure but the structure of the contract with the most favorable to US right dual source contract us and another player and at other player with not the market leader right. So the contract had not annualized yet over the year and so it's also our fastest growing so.

Tony Koblish: Very few players in the space are as well positioned as Kella to be an alternative to the plastics predominantly used in englandal repairs. In the second quarter, over text units grew 29% year over year with a greater share of growth among the smaller units that are employed for englandal hernia repairs, including in robotic and laparoscopic procedures. We expect to see continued adoption of over text IFR, IHR as we educate surgeons on the benefits of this product and create greater product awareness in the market, particularly around its ease of use within robotic cases.

Speaker Change: Acutely painful for us.

Frank Takkinen: Okay, that's helpful, Culler, and maybe I'll sneak two in and ask them both at the same time. How should we think about the split of revenue in Q3 versus Q4 to get to the guided range of $74.5? to 76.5. And then how should we think about kind of a blended Ovatex ASB with IHR now in the mix? So, I'll start with the first question. So, we expect more revenue to be in the fourth quarter.

Frank Takkinen: Okay, that's helpful color, and maybe I'll sneak two in, and I'll ask them both.

Frank Takkinen: Okay, that's helpful, Culler. And I'll maybe sneak two in, and I'll ask them both at the same time. How should we think about the split of revenue and Q3 versus Q4 to get to the guided range of 74 and a half to 76 and a half? And then how should we think about kind of a blended Ovatex ASB with IHR now in the mix?

Speaker Change: Okay. That's helpful color and I'll, maybe I'll sneak two in and I'll ask them. Both at the same time, how should we think about the split of revenue in Q3 versus Q4 to get to the guided range of 74 and a half.

Frank Takkinen: Same time, how should we think about the split of revenue in Q3 versus Q4 to get to the guided range of 74 and a half to 76 and a half, and then how should we think about kind of a blended over-text ASB with IHR now on the next?

Speaker Change: So 76, and a half and then how should we think about kind of a blended overtax ASB with IHS now on the mix.

Roberto Cuca: So, I'll start with the first question. So, we expect more revenue to be in the fourth quarter. If you think about the way, you know, what we think will be driving it, our ability to regain it, the initiatives that Greg is kicking off. And those have some ramping effects, so you'll see more of an effect in the fourth quarter and the third quarter, although we expect to see it in both.

Tony Koblish: So I'll start with the first question. So we expect more of the revenue to be in the fourth quarter. If you think about the way, you know, what we think will be driving it, our ability to regain it is the initiative that Greg is kicking off, and those have some ramping effects. So you'll see more of an effect in the fourth quarter and the third quarter, although we expect to see it in both. As regards ASP, we do expect ASP to begin to average down as we get more volume in the IHR space. As a general matter, we've always expected that our ASPs will, on average, be lower in the longer term because we entered the market at the larger end of the hernia repair spectrum, so with the large ventral repairs with big pieces, and we've always expected that we'd be moving into the rest of the markets by entering with smaller pieces.

Speaker Change: So I'll start with the first question. So we expect more of the revenue to be in the fourth quarter. If you think about the way what we think will be driving it our ability to regain it is the initiatives that Greg is kicking off.

Tony Koblish: Outside the US, we are experiencing significant momentum in Europe where over text was launched in 2019. As a reminder, over text PRS has not yet received CE certification. The hernia portfolio is now sold in seven countries, Great Britain, Austria, Germany, the Netherlands, Switzerland, Spain, and Italy. In June, we secured a long-term agreement with the group purchasing organization Santa and a cough, logistic GMBH of Ismaning, Germany. Santa is the largest GPO in Germany and this contract provides that over text access to Santa's 350 corporate partners in the country.

Frank Takkinen: If you think about the way, you know, what we think will be driving it, our ability to regain it, the initiatives that Greg is kicking off, and those have some ramping effects. So, you'll see more of an effect in the fourth quarter and the third quarter, although we expect to see it in both. As regards ASP, we do expect ASP to begin to average down as we get more volume in the IHR space.

Speaker Change: Have some ramping effects, so youll see more of an effect in the fourth quarter in the third quarter, Although we expect to see it in both.

Roberto Cuca: As regards ASP, we do expect ASP to begin to average down as we get more volume in the IHR space. As a general matter, we've always expected that our ASPs would, on average, be lower in the longer term because we entered the market at the larger end of the hernia repair spectrum, so with the large ventral repairs with big pieces, and we always expected that we'd be moving into the rest of the markets by entering with smaller pieces. So, you know, we don't view this as a bad thing.

Speaker Change: As regards.

Speaker Change: Asps.

Speaker Change: Yeah.

Speaker Change: We do expect Asps to begin to average down as we get more volume in the <unk> space.

Frank Takkinen: As a general matter, we've always expected that our ASPs would, on average, be lower in the longer term because we entered the market at the larger end of the hernia repair spectrum, so with the large ventral repairs with big pieces, and we've always expected that we'd be moving into the rest of the markets by entering with smaller pieces. So, you know, we don't view this as a bad thing.

Speaker Change: As a general matter, we've always expected that our asp's will on average be lower in the longer term because we entered the market at the larger end of the hernia repair spectrum, so with the large vessel repairs with big pieces.

Tony Koblish: We achieved 2.4 million in sales in Europe in Q2 versus 1.5 million in 2023, with year-to-date unit growth of 87%. In the second quarter, EU revenues were 15% of our total revenue, with the same gross margin as in the US given the structure of our agreement with our manufacturer. As a more recently launched product market, we expect continued strong growth from our EU colleagues. We look forward to updating you soon on a collaboration with the National Health Service in England regarding over text so stay tuned for that.

And we've always expected that we'd be moving into the rest of the markets by entering with smaller pieces.

Tony Koblish: So, you know, we don't view this as a bad thing. It's an outcome of gaining greater share across the range of different repairs. And it might be a little choppy, Frank. You know, as we stored out the mix between the large complex cases with large pieces, and the slope or the ramp rate of the IHR, both products should grow, but it may be, you know, out of sync every now and then, but I think, you know, definitely what Roberto said is correct. We want the volume at some point.

Speaker Change: So we don't view this as a bad thing, it's an outcome of gaming greater share across the range of different repairs.

Roberto Cuca: It's the outcome of gaining greater share across the range of different repairs. And it might be a little choppy, Frank, as we sort out the mix between the large complex cases with large pieces and the slope or the ramp rate of the IHR. Both products should grow, but they may be out of sync every now and then. But I definitely think what Roberto said is correct.

Frank Takkinen: It's the outcome of gaining greater share across the range of different repairs. And it might be a little choppy, Frank, as we sort out the mix between the large, complex cases with large pieces and the slope or the ramp rate of the IHR. Both products should grow, but they may be out of sync every now and then. But I definitely think what Roberto said is correct. We want the volume on at some point.

Speaker Change: And it might be a little choppy Frank.

Speaker Change: As we sort out the mix between the large complex cases with large pieces and the slope of the ramp rate of the IH are both products should grow.

Frank Kennon: But it may be out of sync every now and then.

Speaker Change: But I think.

Frank Takkinen: We want the volume up at some point. Got it. All right, I'll stop there.

Definitely what Roberto said is correct, we want the volume at some point.

Frank Takkinen: All right.

Frank Takkinen: Got it. All right, I'll stop there. Thanks for the question. Thanks, Frank.

Frank Takkinen: Thanks for the question. Thanks, Frank. Please wait one moment for our next question. Our next question comes from a line called Caitlin Cronin of Canada Corp Genuity. Your line is now open.

Frank Takkinen: I'll stop there.

Frank Takkinen: Thanks for the question.

Speaker Change: Got it alright, I'll stop there thanks for the questions.

Louisa Smith: Thanks, Frank.

Speaker Change: Thanks, Brian.

Caitlin Cronin: Thank you. One moment for our next question. Our next question comes online from Caitlin Cronin of Canacrogeny Lee. Your line is now open.

Operator: Thank you one moment for our next question. Our next question comes from the line of Caitlin Cronin of Canada. Coordinated, your line is now open.

Speaker Change: Thank you our next question.

Speaker Change: Our next question comes from the line of Kevin Cronin of Canaccord Genuity. Your line is now open.

Caitlin Cronin: Hey guys, thanks for taking the questions. You know, Cashburn was still pretty high this quarter.

Caitlin Cronin: Hey guys, thanks for taking the questions. You know, cash burn was still pretty high this quarter. Was this, you know, mostly just due to not getting the leverage, you know, off the revenue growth or, you know, anything else to really call out here? Sure, that's exactly it. If you think about revenue having been higher, or had it been higher, you know, we learned of the disruption partway through May, you know, towards the end of May, even though it began earlier in May. So, there was not much opportunity to adjust expense within the second quarter.

Caitlin Cronin: Hey guys, thanks for taking the questions. Um, cash burn was still pretty high this quarter. Was this, you know, mostly due to not getting the leverage, you know, off the revenue growth or, you know, anything else to really call out here? Sure.

Kevin Cronin: Hey, guys. Thanks for taking my questions.

Kevin Cronin: Cash burn with still pretty high this quarter was this mostly just due to not getting the leverage wassa.

Roberto Cuca: Was this, you know, mostly just due to not getting the leverage, you know, off the revenue growth or, you know, anything else to really call out here?

Speaker Change: And whilst the revenue growth or anything else to call out yet.

Tony Koblish: Additionally, we participated in several national and regional conferences with exposure to thousands of surgeons and attended two exclusive meetings hosted by Intuitive Surgical. Intuitive Connect, which hosted more than 1,000 general surgeons who used the DaVinci robot and women in DaVinci surgery, a smaller but equally impactful opportunity for TELA. Given over-texts, unique compatibility for robotic hernia repair, we are excited to deepen this relationship and look forward to attending Intuitive 360 in September.

Roberto Cuca: Sure, that's exactly it. If you think about revenue having been higher, or had it been higher, you know, we learned of the disruption partway through May, you know, towards the end of May, even though it began earlier in May. So, there was not much opportunity to adjust expenses within the second quarter. We, you know, did make some small, minor changes in the timing of expenses to try and offset them and give ourselves some more flexibility as we were doing the analysis to determine exactly what was happening during the quarter.

Roberto Cuca: Sure, that's exactly it. If you think about the revenue having been higher or had it been higher, you know, we learned of the disruption partly through May, you know, towards the end of May, even though it began earlier in May. So there was not much opportunity to adjust expense within the second quarter. We, you know, did make some small minor changes in timing of the expenses to try and offset it and give ourselves some more flexibility as we were doing the analysis to determine exactly what was happening during the quarter. But had, we had that additional revenue on top of the optics that you saw on the second quarter that should have all dropped to the bottom line.

Speaker Change: Sure that's exactly it if you think about.

Speaker Change: The.

Speaker Change: Revenue, having been higher had it been higher.

Speaker Change: We learned of the disruption part way through May.

Speaker Change: Towards the end of May even though began earlier in may so there was not much opportunity to adjusted expense within the second quarter.

Roberto Cuca: We, you know, did make some small, minor changes in the timing of expenses to try and offset them and give ourselves some more flexibility as we were doing the analysis to determine exactly what was happening during the quarter. But had we had that additional revenue on top of the opex that you saw in the second quarter, that should have all dropped to the bottom line. But we expect to get back on track with that, as we indicated in the guidance.

Speaker Change: We did make some small minor changes in timing of expenses to try and offset it and give ourselves some more flexibility as we are doing the analysis to determine exactly what was happening during the quarter, but had we had the additional revenue on top of the Opex that you saw in the second quarter that should have all dropped to the bottom line.

Roberto Cuca: But had we had that additional revenue on top of the opex that you saw in the second quarter, that should have all dropped to the bottom line. But we expect to get back on track with that, as we indicated with the guidance. And then, you know, one thing that we believe investors may not be as sensitive to in the third quarter: we'll start getting that revenue share payment, which will be, you know, equivalent to 100% gross margin. Depending on how quickly that ramps, it could be more or less front loaded over the coming eight months and eight quarters, excuse me, and that will obviously contribute to our cash for this.

Roberto Cuca: But we expect to get back on track with that, as we indicated with the guidance. And then, you know, one thing that we believe investors may not be as sensitized to in the third quarter, we'll start getting that revenue share payment, which will be, you know, equivalent to 100 percent growth margin. Depending on how quickly that ramps, it could be more or less front loaded over the coming eight months and up a quarter, and that will obviously contribute to our cash position.

Speaker Change: We expect to get back on track with that as we indicated with the guidance and then.

Roberto Cuca: And then, you know, one thing that we believe investors may not be as sensitive to in the third quarter: we'll start getting that revenue share payment, which will be, you know, equivalent to 100% gross margin. Depending on how quickly that ramps, it could be more or less front loaded over the coming eight months and eight quarters. Excuse me. And that will obviously contribute to our cash. Great. And then just on gross margins, what are your expectations really going forward given the IHR launch more broadly? So IHR, the way we pay for the product that we manufacture from our manufacturers is with a revenue share.

Speaker Change: One thing that.

Speaker Change: We believe investors may not be a sensitize to in the third quarter, we will start getting that revenue share payment.

Speaker Change: Which will be.

Speaker Change: Equivalent to a 100% gross margin depending on how quickly that ramps it could be more or less frontloaded over the coming eight months and up eight quarters excuse me and that will obviously contribute to our cash position.

Caitlin Cronin: Great.

Caitlin Cronin: Great. And then just on gross margins, what are your expectations really going forward given the IHR launch more broadly?

Roberto Cuca: And then just on growth margins, what are your expectations really going forward given the IHR launch more broadly? So IHR, the way we pay for the product that we manufacture from our manufacturers, with a revenue share, so we give them 27 percent of the revenue that's to across our portfolio with very minor adjustments in certain cases. So even though those products are low ASP, they should be fairly close to that standard 27 percent revenue share. We split the cost of shipping, so that takes about a percent point or two off.

Speaker Change: Great.

Speaker Change: And then just on gross margins what are your expectations going forward given the.

Tony Koblish: On the commercial side, we have a maturing sales organization now led by Greg Firestone. In May, we appointed Greg as chief commercial officer to drive our backstage of growth by refocusing the U.S, sales force on balanced, data driven selling. Greg has been pivotal to the TELA story since 2017, supporting our commercial strategy and securing contracts with key GPO and IDNs. He has experienced navigating GPO and IDN contracting and will be instrumental as we secure further access to new organizations. Greg is already enhancing sales rep training, increasing operational efficiency, and refining productivity metrics across the organization. He and we are committed to having one of the best trained sales forces in the marketplace.

Speaker Change: The IHI launch more broadly.

Roberto Cuca: So IHR, the way we pay for the product that we manufacture from our manufacturers with a revenue share, so we give them 27% of the revenue. That's true across our portfolio with very minor adjustments in certain cases. So even though those products are low ASP, they should be fairly close to that standard 27% revenue share. We split the cost of shipping, so that takes about a percentage point or two off, and so the long-term, you know, goal of gross margin is about 70%, plus or minus a little bit.

Speaker Change: So <unk>.

Speaker Change: The way, we pay for the product that we manufacture from our manufacturers with a revenue share. So we give them 27% of the revenue thats true across our portfolio with very minor adjustments in certain cases.

Roberto Cuca: So we give them 27% of the revenue. That's true across our portfolio with very minor adjustments in certain cases. So even though those products are low ASP, they should be fairly close to that standard 27% revenue share. We split the cost of shipping.

Speaker Change: So even though those products are lower ASP, they should be fairly close to that standard 27% revenue share.

Speaker Change: We split the cost of shipping so that takes about a percentage point or two off and so the long term goal of gross margin is about 70% plus or minus a little bit.

Caitlin Cronin: So that takes about a percentage point or two off. And so the long-term goal of gross margin is about 70%, plus or minus a little bit. Awesome. And then just a quick one, what was the split this quarter between OPITEX and PRS? So this quarter PRS was 30% of the total revenue, right, a little bit down. Got it, thanks.

Roberto Cuca: And so the long term, you know, goal of growth margin is about 70 percent plus or minus a little bit.

Caitlin Cronin: Awesome.

Roberto Cuca: And then just a quick one, what was the split this quarter between OPITEX and PRS? Uh, so this

Roberto Cuca: And then just a quick one, what was the split this quarter between Obatex and PRS? So this quarter of PRS was 30 percent of the total revenue, right? A little bit down. Got it.

Speaker Change: Awesome.

Speaker Change: And then just a quick one what was the split.

Speaker Change: This quarter between protection and Prs.

Roberto Cuca: So this quarter, PRS was 30% of total revenue. Right. A little bit down.

Speaker Change: So this quarter Prs was 30% of the total revenue right a little bit down.

Louisa Smith: Thanks. Thank you. One moment for next question.

Speaker Change: Got it thanks.

Roberto Cuca: With that, I'll turn the call over to Roberto to provide more specifics on our financial results. Thanks, Tom. Revenue for the second quarter of 2024 will 11% year-of-a-year to $16.1 million, with revenue from overtext growing 11% and overtext PRS growing 9% in the period. The double-digit close was primarily driven by increasing unit sales of products due to the addition of new customers, increased penetration within existing customer accounts, and growing international sales under our expanded commercial organization.

Caitlin Cronin: Thank you one moment for the next question. Our next question comes from a line of Matthew O'Brien from Pepper Sandler. Your line is now open.

Speaker Change: Thank you gentlemen for next question.

Speaker Change: Yes.

Matthew Bryan: Our next question comes from the line of Matthew Bryan from Purpose Houndler. Your line is now open. Dude, afternoon. Thanks for taking the question.

Speaker Change: Our next question comes from the line of Matthew O'brien from Piper Sandler Your line is now open.

Matthew O'brien: Good afternoon. Thanks for taking the question. Just one clarification question. What was the split between U.S. versus O.U.S.? Did I hear you right?

Matthew O'brien: Good afternoon. Thanks for taking the question. Just one clarification question. What was the split between US versus OUS? Did I hear you right?

Matthew O'brien: Good afternoon. Thanks for taking my question just one clarification question what was the split U S versus O U S did I hear you right <unk> $2 4 million in the quarter up about 60%.

Matthew Bryan: Just one clarification question. What was the split US versus OUS? Did I hear you right? OUS is 2.4 million in the quarter, up about 60 percent. Correct. Yeah. Good. Got it.

Matthew O'brien: O.U.S. is 2.4 million in the quarter, up about 60 percent. Correct. Correct. I've got it.

Matthew O'brien: OUS is $2.4 million in the quarter, up about 60%. Correct. Correct, yeah. I've got it.

Speaker Change: Correct correct.

Matthew O'brien: And then, you know, and I'm sorry to push your guys, but I'm looking at the guide for the year. And the low end of the range assumes about $42 million for the rest of the year, so $21 million, you know, on average per quarter. And obviously, Q3 is going to be slower than Q4. It's just hard to get the model all the way up to that level.

Matthew O'brien: And then, you know, and I'm sorry to push your guys, but I'm looking at the guide for the year. And the low end of the range assumes about $42 million for the rest of the year. So $21 million, you know, on average per quarter. And obviously, Q3 is going to be slower than Q4. It's just hard to get the model all the way up to that level. So what did you see in July, you know, from a growth rate point of view? I don't know what you can share.

Matthew Bryan: And then, you know, and I'm sorry to push your guys, but I'm looking at the guide for the year, and the low end of the range assumes about 42 million for the rest of the year, so 21 million, you know, on average per quarter, and obviously Q3 is going to be slower than Q4. It's just hard to get the model all the way up to that level. So what did you see in July, you know, from a growth rate? I don't know what you can share. And then, you know, why is it even the low end of the range, the right number?

Speaker Change: Okay got it and then.

Roberto Cuca: This is partially offset by a decrease in that average selling crisis caused by a shift in product mix as our strategy to more broadly penetrate the Inglinal and minimally invasive, pernier repair markets showed success. As Tony mentioned, there was one larger and a couple of smaller adverse dynamics effect in the quarter, so we do not expect to meaningfully affect revenue in the second half of 2024. Growth for the first half of 2024 was up 24% over the first half of 2023, reflecting more general commercial performance before the customer focused in the second quarter.

Speaker Change: And I'm, sorry to push here guys, but im looking at the guide for the year and the low end of the range assumes about $42 million for the rest of the year, so $21 million.

Speaker Change: On average per quarter, and obviously Q3 is going to be slower than Q4, it's just hard to get the model all the way up to that level. So what did you see in July from a growth rate out on what you can share and then why are they even the low end of the range. The right number it seems like we should probably go a little bit below that just given the disruptions that you saw the fact that.

Matthew O'brien: So what did you see in July, you know, from a growth rate perspective? I don't know what you can share. And then, you know, why is even the low end of the range the right number? It seems like, you know, we should probably go a little bit below that, just given the disruptions that you saw and the fact that some of those cases, you know, you're not going to be able to get now because they went to other hospitals. So again, why is even the bottom end of the range the right number?

Matthew Bryan: It seems like, you know, we should probably go a little bit below that just given the disruption that you saw in the fact that some of those cases, you know, you're not going to be able to get now, because they went to other hospitals. So again, why is even the bottom end of the range, the right number? Correct.

Speaker Change: Some of those cases, you're not going to able to get now.

Roberto Cuca: Growth margin was 69% for the second quarter, compared to 70% in the prior year period. The decrease was primarily due to higher charges for excess and obsolete inventories of percentage of revenue as a result of inventory purchases during the quarter. Sales and marketing expense was $16.7 million in the second quarter of 2024, compared to $14.6 million in the same period in 2023. This increase was mainly due to higher compensation costs as a result of our expanded commercial organization, increased travel expenses and a marketing distribution fee which offset lower marketing expense.

Speaker Change: Because they went to other hospital. So again why is even the bottom end of the range the right number.

Matthew O'brien: And then, you know, why is even the low end of the range the right number? It seems like, you know, we should probably go a little bit below that just given the disruptions that you saw and the fact that some of those cases are, you know, you're not going to be able to get now because they went to other hospitals.

Roberto Cuca: Sure. So, thanks for the question. First, let me start with July. As you know, our quarters tend to be slightly back-loaded. So, the first month of the quarter tends to be the lowest of the quarter, below 33% of the quarter.

Roberto Cuca: So, thanks for the question. So first, let me start with July. So, as you know, our quarters tend to be slightly backloaded. So the first month of the quarter tends to be the lowest of the quarter, below 33% of the quarter. So one of the things we look at on a quarterly basis is how that first month of the quarter looks compared to other first months of quarters. So what I can tell you is that July was the highest first month of a quarter that we had in our history. So that suggests that we are back on track for growth and that in particular, because had the disruption that you've seen in the second quarter lasted into the third quarter, that should have suppressed the July; you wouldn't have seen that kind of performance in the first month of the quarter.

Speaker Change: Sure. So thanks for the question. So first let me start with July so.

Speaker Change: As you know our quarters tend to be slightly back loaded to the first quarter first month of the quarter tends to be the lowest of the quarter below 33% of the quarter.

Roberto Cuca: So again, why is even the bottom end of the range the right number? Sure. So, thanks for the question. First, let me start with July. So, as you know, our quarters tend to be slightly back-loaded. So, the first month of the quarter tends to be the lowest of the quarter, below 33% of the quarter. So, one of the things we look at on a quarterly basis is how that first month of the quarter looks compared to other first months of the quarter. So, what I can tell you is that July was the highest first month of a quarter that we've had in our history.

Roberto Cuca: So, one of the things we look at on a quarterly basis is how that first month of the quarter looks compared to other first months of the quarter. So, what I can tell you is that July was the highest first month of a quarter that we've had in our history. So that suggests that we are back on track for growth, and that, in particular, because had the disruption that you've seen in the second quarter lasted into the third quarter, that should have suppressed July, you wouldn't have seen that kind of performance in the first month of the quarter.

So one of the things we look at on a quarterly basis is how.

Speaker Change: First month of the quarter, it looks compared to other first months or quarters. So what I can tell you that July was the highest first month of a quarter that we've had in our history.

Roberto Cuca: So that suggests that we are back on track for growth and, in particular, because had the disruption that you've seen in the second quarter lasted into the third quarter, that should have suppressed July, you wouldn't have seen that kind of performance in the first month of the quarter. The second thing that makes us comfortable about achieving, you know, the amount over the second half that we need to hit our guidance is the plans that we had in place even at the beginning of the year, which we felt strongly about, and then what Greg has been doing since he took over a little bit less than three months ago.

Roberto Cuca: General and administrative expense was $3.6 million compared to $3.5 million in the same period of 2023. R&D expenses $2.3 million in the second quarter compared to $2.5 million in the prior year. The decrease was primarily due to lower study and development costs which offset higher compensation and benefits. Loss from operations was $11.6 million in the second quarter of 2024, compared to $10.4 million in the prior year period. Net loss was $12.6 million in the second quarter of 24, compared to $10.8 million in the same period in 2023.

Speaker Change: So that suggests that we are back on track for growth and that in particular because had the disruption that you've seen in the second quarter lasted into the third quarter that should suppressed. The July you wouldn't have seen that kind of performance in the first month of the quarter.

Roberto Cuca: The second thing that makes us comfortable about achieving the amount over the second half that we need to, the head of guidance, is the plans that we had in place, even at the beginning of the year, which we felt strongly about, and then what Greg has been doing since he took over a little bit less than three months ago. So he was instrumental in structuring our response to our disruption in the third quarter of last year, in which we revamped our education of our sales forces, in which we retargeted our compensation system and it extended that into this year and then took over in May at the end of May and had extended that and extended it.

Roberto Cuca: The second thing that makes us comfortable about achieving, you know, the amount over the second half that we need to hit our guidance is the plans that we had in place even at the beginning of the year, which, you know, we felt strongly about. And then what Greg has been doing since he took over a little bit less than three months ago. So he was instrumental in structuring our response to our disruption in the third quarter of last year, in which we revamped our education of our sales forces, in which we retargeted our compensation system, and has extended that into this year. And then he took over in May, at the end of May, and has extended that and expanded it.

Speaker Change: The second thing that makes us comfortable about achieving.

Speaker Change: The amount over the second half that we need to to hit our guidance.

Speaker Change: Is the plans that we have in place even at the beginning of the year.

Speaker Change: Which we felt strongly about and then what Greg has been doing since you took over a little bit less than three months ago. So he was one of the.

Roberto Cuca: We ended the first quarter with $26.5 million in cash and cash equivalency, turning to the outlook for 2024. We continue to project revenue for the full year to be in the range of $74.5 million to $76.5 million, representing growth of 27% to 31% from the prior year. Additionally, we continue to expect operating loss and net loss to be less than 2020-24 than in 2023, even excluding the contribution from the best attire of NIVIS.

Roberto Cuca: So he was instrumental in structuring our response to our disruption in the third quarter of last year, in which we revamped our education of our sales forces, in which we refocused our compensation system, and has extended that into this year, and then he took over in May, at the end of May, and has extended that and expanded it. And so what we're seeing with our sales force and how they're responding to it and the morale that they're exhibiting as a result gives us a lot of confidence about being able to make up the shortfall that we saw in the second quarter. Yeah, that said, I think Matt, we're going to be weighted a little bit more towards the fourth quarter. Once all the programs and all the training and all the elements kick in,

Greg Firestone: He was instrumental in structuring a response to a disruption in the third quarter of last year, and which we revamped our education of our sales forces and which we targeted our compensation system and have extended that into this year and then took over in may at the end of May.

Roberto Cuca: Operating expenses will remain steady or slightly lower sequentially over the course of the year, so that both operating loss and net loss declined from quarter to quarter over the course of 2024, again, even excluding the contribution from the best attire of NIVIS. Relatedly, cash consumption should be significantly lower in the second half of the year. Added to this, in the third quarter, we will begin to receive revenue share payments related to the best attire of NIVIS.

Roberto Cuca: And so what we're seeing with our sales force and how they're responding to it and the morale that they're exhibiting as a result gives us a lot of confidence about being able to make up the shortfall that we saw in the second quarter.

Speaker Change: <unk> has extended that and expanded it and so what we're seeing with our sales force and how they are responding to it and the morale.

Roberto Cuca: And so what we're seeing with our sales force and how they're responding to it, and the morale that they're exhibiting as a result, gives us a lot of confidence about being able to make up the shortfall that we saw in the second quarter. Yeah, that said, I think, Matt, we're going to be weighted a little bit more towards the fourth quarter. Right, once all the programs and all the training and all the elements kick in. Okay, I guess. But how much wiggle room did you really factor in? You know, does everything have to go perfectly for you to get to the low end?

Speaker Change: Existing as a result gives us a lot of confidence about being able to make up the shortfall that we saw in the second quarter.

Roberto Cuca: Yeah, that said, I think that we're going to be weighted a little bit more towards the fourth quarter, right, once all the programs and all the training and all the elements kick in.

Speaker Change: Yes that said I think Matt, we deliberately weighted a little bit more towards the fourth quarter.

Speaker Change: Once all of this.

Speaker Change: Our programs and all the training and all of the elements kick in.

Roberto Cuca: Okay, I guess how much wiggle room did you really factor in, you know, does everything have to go perfectly for you to get to the low end, and, you know, are there some other factors that we're just considering to get you all the way there. Yeah, so as we've been describing over the course of this year, we view this guidance range as a commitment to investors. So we placed it in a place where we felt comfortable that we had all the resources to hit it. And what we did going through the years said, if we learn over the course of the year to performance in any one of the quarters that there's additional upside, we would adjust that guidance number later rather than trying to express the full amount of what could be achieved early on before we had some data points.

Roberto Cuca: Okay, I guess, how much wiggle room did you really factor in, you know? Does everything have to go perfectly for you to get to the low end, or are there some other factors that we're just not considering to get you all the way? Yeah, so as we've been describing over the course of this year, we view this guidance range as a commitment to investors. So we placed it in a place where we felt comfortable that we had all the resources to hit it.

Matt: Okay, I guess, how much wiggle room did you really factor in because everything I have to go perfectly for you to get to the low end and.

Roberto Cuca: Over the course of the next eight quarters, these payments will sum to at least $3 million and could be as much as $7 million. With this combination of growing revenue, improving operating leverage, and incremental NIVIS payments, we continue to expect that our cash and cash equivalence will be sufficient from this to profitability.

Matthew O'brien: You know, or are there some other factors that we're just kind of considering to get you all the way? Yeah, so as we've been describing over the course of this year, we view this guidance range as a commitment to investors. So we placed it in a place where we felt comfortable that we had all the resources to hit it.

Speaker Change: Or are there. Some other factors that were just added considering to get you all the way there.

Roberto Cuca: And what we did through the years said, if we learned over the course of the year through performance in any one of the quarters that there's additional upside, we would adjust that guidance number later rather than trying to express the full amount of what could be achieved early on before we had some data points. So we feel very confident with that range. And, you know, we will be expending considerable effort to make sure we hit not just the bottom end of the range but get pretty close to the top end of the range.

Speaker Change: Yes, so as we've been describing over the course of this year. We view this guidance range as a commitment to investors. So we placed it in a place where we felt comfortable that we had all the resources to hit it.

Tony Koblish: With that, I'll hand the call back to Tony for closing remarks. Thanks, Roberto. Please buy the company's progress and resilience in the second quarter, and I'm excited by the enormous opportunity in front of us.

Speaker Change: And what we did going through the years said, if we learn over the course of the year to performance in any one of the quarters that there is additional upside we would adjust that guidance number later rather than trying to express the full amount of what could be achieved early on before we have some data points. So we feel very confident with that range.

Tony Koblish: I believe the telebio has never been better positioned for success for several reasons. First, I have been very impressed by great leadership of our season commercial team so far, and I'm confident that he will do an excellent job in driving adoption of our portfolio of products. Box. Second, we possess broad GPO coverage and have products that position us well for the ongoing shift to robotic hernia repair. Finally, and most importantly, our products offer patients, insurgents, unparalleled clinical outcomes at a competitive price.

Tony Koblish: We are confident that this combination of essential factors for success can drive solid road for talent for years to come.

Roberto Cuca: So we feel very confident with that range. And, you know, we will be expanding considerable efforts to make sure we get not just the bottom end of the range, but get pretty close to the top end of the range. Orange. Got it.

Speaker Change: We will be expanding considerable efforts to make sure we hit not just with one another end of the range, but get pretty close to the top end of the range.

Matthew Bryan: Thanks so much. Thank you.

Speaker Change: Got it thanks, so much thanks.

Matt: Thanks, Matt.

Michael Sarcone: Thank you, Momu, for the next question. Our next question comes from Lindo, Michael Sarcone of Jeffries. Your line is now open.

Speaker Change: Thank you Mahmud for next question.

Operator: So with that, I'll now ask Marvin to open the line for your questions. Please go ahead. Thank you. At this time, we will conduct a question answer session. As a reminder to ask a question, you will need to press star 111 on your telephone and wait for your name to be announced. To withdraw your question, please press star 111 again. Please stand by while we compile the Q&A roster.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Michael Sarcone of Jeffries. Your line is now open.

Matthew O'brien: Thanks, Matt. Thank you. One moment for our next question. Our next question comes from the line of Michael Sarcone of Jeffries. Your line is now open.

Speaker Change: Our next question comes from the line of Michael <unk> of Jefferies. Your line is now open.

Michael Sarcone: Thanks, good afternoon, and thanks for taking the questions. I guess, can you give us a little more color? You know, you talked about bringing on Greg Firestone, and then you mentioned he's refining some of the training processes and the productivity metrics. Can you give us a little more color on what specifically Greg is doing in terms of making changes and how that's going to drive incremental productivity?

Michael Sarcone: Thanks, good afternoon, and thanks for taking the questions.

Michael Sarcone: Thanks. Good afternoon. And thanks for taking the questions. I guess, could you give us a little more color?

Michael: Thanks, Good afternoon, and thanks for taking the questions.

Michael Sarcone: I guess, could you give us a little more color? You talked about bringing on Greg Firestone, and then you mentioned he's refining some training processes and the productivity metrics. Can you give us a little more color on what specifically Greg is doing in terms of making changes and how that's going to drive the incremental productivity?

I guess could you give us a little more color I know you talked about bringing on Greg Firestone and you mentioned it.

Greg Firestone: Refining some of the training processes.

Speaker Change: And the productivity metrics can you give us a little more color on what specifically Greg is doing in terms of making changes in how that's going to drive incremental productivity.

Michael Sarcone: You talked about bringing on Greg Firestone, and then you mentioned he's refining some of the training processes and the productivity metrics. Can you give us a little more color on what specifically Greg is doing in terms of making changes and how that's going to drive incremental productivity? Absolutely.

Tony Koblish: Absolutely. So Greg's been with us for seven years, as you know. He's really been, you know, one of our top commercial guys along the way, but more focused on GPO contracting, etc. So, you know, I feel like we made a lot of progress in getting the GPOs, and now we've got to transition towards synthesizing that attainment with implementation into the GPOs.

Tony Koblish: Absolutely. So Greg's been with us for seven years, as you know. He's really been one of our top commercial guys along the way, but more focused on GPO contracting, etc. So, you know, I feel like we made a lot of progress in getting the GPOs, and now we've got a transition towards synthesizing that attainment with implementation into the GPOs. So one of the things that Greg is deeply focused on is talk track and messaging and training. Right? So there are subtle differences in talk track when you talk to supply chain, right? At a contract, at a hospital, at a GPO.

Speaker Change: Absolutely so Greg has been with us for seven years as you know.

Tony Koblish: Can you help us understand a little bit better of what's really occurring at the account level when these cyber attacks occurred and really what I'm trying to understand is when this occurred are these procedures in backlog where the physician is able to use a different mesh where they're using no mesh and kind of how does that lead into the confidence behind the guide and backlog and those types of things to think about the second half of the year. Frank, I'll start that off.

Speaker Change: He has really been one of our top commercial guys along the way.

Speaker Change: But more focused on GPO contracting.

Speaker Change: Et cetera. So.

Speaker Change: I feel like we made a lot of progress in getting the GPO and now we've got a transition towards synthesizing that attainment with implementation into the GPO. So.

Antony Koblish: So, Greg's been with us for seven years, as you know. He's really been one of our top commercial guys along the way, but more focused on GPO contracting, etc. So, I feel like we made a lot of progress in getting the GPOs, and now we've got to transition towards synthesizing that attainment with implementation into the GPOs. So, one of the things that Greg is deeply focused on is the talk track and messaging and training, right?

Tony Koblish: So one of the things that Greg is deeply focused on is talk track and messaging and training, right? So there are subtle differences in talk track when you talk to supply chain, right, at a contract, at a hospital, at a GPO. So, you know, there's competitive dynamics with competitors, certainly. There are pricing and strategic dynamics, but the messaging is different, and I think the messaging is going to be inordinately important at the supply chain level as we go through this transition away from polypropylene, don't we?

Speaker Change: One of the things that Greg is deeply focused on his talk track and messaging and training right. So there are subtle differences and talk track when you talk to supply chain right at a contract at a hospital at a GPO.

Tony Koblish: To the best of our understanding, what was happening is the patient records are basically getting held hostage. What that does is it creates a situation where to treat the patient, a lot of things that are done on the EMR are done by hand now. So prescriptions, note dictation, I mean, you name it every aspect of a surgical procedure is impacted. So it makes the hospitals think deeply about which procedures they have to do and which procedures they don't have to do.

Antony Koblish: So, there are subtle differences in talk track when you talk to supply chain, right, at a contract, at a hospital, at a GPO. There's competitive dynamics with competitors, certainly. There are pricing and strategic dynamics, but the messaging is different, and I think the messaging is going to be inordinately important at the supply chain level as we go through this transition away from polypropylene, right? So, polypropylene mesh has been the subject of these lawsuits. It's going to settle at some point in the future, and we're seeing lots of activity at the GPO level in transitioning those companies that have polypropylene mesh toward other more natural repair products.

Tony Koblish: You know, there's competitive dynamics with competitors, certainly. There's pricing and strategic dynamics, but the messaging is different. And I think the messaging is going to be inordinately important at the supply chain level as we go through this transition away from polypropylene, right? So, you know, polypropylene mesh has been the subject of these litigations. You know, it's going to settle at some point in the future, and we're seeing lots of activity at the GPO level in transitioning for those companies that have polypropylene mesh towards other more natural repair products. So having Greg in the middle of this allows us to be strong when we need to be strong with GPO and contracting messaging, right?

Speaker Change: Competitive dynamics with competitors, certainly there's pricing and strategic dynamics, but the messaging is different and I think the messaging is going to be inordinately important at the supply chain level.

Speaker Change: As we go through this transition away from polypropylene right. So polypropylene mesh has been the subject of these litigations.

Tony Koblish: So, you know, polypropylene mesh has been the subject of these litigations. You know, it's going to settle at some point in the future, and we're seeing lots of activity at the GPO level in transitioning those companies that have polypropylene mesh toward other more natural repair products.

Speaker Change: It's going to settle at some point in the future.

Tony Koblish: So from what we've heard, they've shipped patients off to other facilities. You know, that's not great for us if we don't have those other facilities up and running yet, right as part of our implementation. So to the best of our knowledge, the attacks, even the secondary attack outside of the GPO system that, you know, there may have been others, but that's the ones, those are the ones that affected us the most.

Speaker Change: And we're seeing lots of activity at the GPO level in transitioning for those companies that have polypropylene mesh towards other more natural repair.

Antony Koblish: So, having Greg in the middle of this allows us to be strong when we need to be strong with GPO and contracting messaging, right, and supply chain. The other factor is that Greg's been around for a long time. He's run sales organizations. He has gravitas and credibility about him, which is very, very good for a young organization like ourselves. So he is commanding and is going to demand accountability.

Tony Koblish: So having Greg in the middle of this allows us to be strong when we need to be strong with GPO and contracting messaging, right? It's with supply chain. The other factor is that Greg's been around for a long time. He's run sales organizations. He has gravitas and credibility about him, which is very, very good for a young organization like ourselves. So he is commanding and is going to demand accountability.

Speaker Change: Products, so having Greg in the middle of this allows us to be strong when we need to be strong with GPO and contracting messaging right with supply chain.

Tony Koblish: It's with supply chain. The other factor is, is Greg's been around for a long time. He's run sales organizations. He has a gravitas and credibility about him, which is very, very good for a young organization like ourselves. So he is commanding and is going to demand accountability. And that's going to drive efficiency, leverage, and part of that is training, right? So one of the brilliant things that he's done since he started, he's moving very fast, is rather than thinking in terms of broad brush with the whole sales force, in terms of training and education and talk track and messaging, we did benchmark testing for everybody in the organization, whether they're sales leadership or territory managers, and everybody.

Tony Koblish: We'll primarily tied to the patient medical records and sort of just locking up the hospital and their ability to function day in and day out. Yeah, and so Frank, what I'd add is, you know, if you do some research, you'll see some accounts where the affected hospital system was redirecting ambulances to alternative hospitals, so it's not to have them arrive at their emergency departments. So for at least two weeks, they were doing very, very few procedures, if any.

Speaker Change: The other factor is as Greg has been around for a long time he is around sales organizations.

Speaker Change: Has a gravitas and credibility about him.

Speaker Change: <unk> is very very good for a young organization like ourselves.

Greg Firestone: He is commanding and is going to demand accountability, and that's going to drive efficiency leverage.

Antony Koblish: And that's going to drive efficiency, leverage, and part of that is training, right? So one of the brilliant things that he's done since he started, and he's moving very fast, is rather than thinking in terms of broad brush with the whole sales force in terms of training and education and talk track and messaging, we did benchmark testing for everybody in the organization, whether they're sales leadership or territory managers, everybody, and we got a strength and weakness profile for everybody individually.

Tony Koblish: And that's going to drive efficiency, leverage, and part of that is training, right? So one of the brilliant things that he's done since he started, he's moving very fast, is rather than thinking in terms of broad brush with the whole sales force in terms of training and education and talk, track, and messaging, we did benchmark testing for everybody in the organization, whether they're sales leadership or territory managers, everybody, and we got a strength and weakness profile for everybody individually.

Speaker Change: And part of that is training right. So one of the brilliant things that he's done.

Tony Koblish: When they were able to lift the ransomware attack and regain access to their systems, they began getting up speed somewhat slowly. It sounds like it took another couple of weeks before they were back where they were before. And so, you know, the procedures that we are involved in were either delayed or redirected to other locations. As in the COVID-19 experience, we expect that probably the PRS type procedures were sent to other hospitals, yeah, more difficult to reschedule, but that the hernia surgeries were simply delayed.

Speaker Change: Since he started he is moving very fast is rather than thinking in terms of broad brush with the whole sales force in terms of training and education and talk track and messaging we.

Speaker Change: We did benchmark testing for everybody in the organization, whether they are sales leadership or territory managers any everybody.

Tony Koblish: And we got a strength and weakness profile for everybody individually. And it allows us to really customize and develop our people on an individual basis, which is going to strengthen their talk track around GPOs and continue to strengthen and talk track their way around the surgeons. The other thing that we've done, that he's doing a great job, is he's implementing our two surgeons that we have on staff. So we've had Bruce Friedman, general surgeon on staff now for a year or two. He's been instrumental in helping us do training and peer-to-peer discussions on the hernia side.

And we got a strengthened weakness profile for everybody individually.

Antony Koblish: And it allows us to really customize and develop our people on an individual basis, which is going to strengthen their talk track around GPOs and continue to strengthen and talk their way around, you know, the surgeons.

Tony Koblish: And it allows us to really customize and develop our people on an individual basis, which is going to strengthen their talk track around GPOs and continue to strengthen and talk their way around, you know, the surgeons. The other thing that we've done that he's doing a great job is implementing our two surgeons that we have on staff. So we've had Bruce Friedman, a general surgeon, on staff now for a year or two.

Speaker Change: <unk>.

Speaker Change: And it allows us to really customize and develop our people on an individual basis, which is going to strengthen their talk track around GPO and continuing to strengthen and talk track their way around.

Tony Koblish: We don't think there's going to be a big backlog. It's about a month worth of surgery and hernia repairs in particular are. Reschedulable? You know, one approach other than to the biggest ventral hurting repairs is washable weighting, so you can delay those for a month. Our expectation, though, is that as the hospital system gets up to speed, as the hospitals in COVID-19, they're going to prioritize more remunerative surgeries before the last remunerative ones, which means pretty many take a little bit longer to get up to speed at those hospitals.

Antony Koblish: The other thing that we've done that he's doing a great job is implementing our two surgeons that we have on staff. So we've had Bruce Friedman, a general surgeon, on staff now for a year or two. He's been instrumental in helping us do training and peer-to-peer discussions on the hernia side. But Howard Langstein has joined us as well, one of the unfortunate losses in PRS business. He was a big customer of ours up until recently, but he's retired. He was the chief of plastic surgery at the University of Rochester.

Speaker Change: The surgeons the other thing that we've done that he is doing a great job as he is implementing our two surgeons that we have on staff. So we have had Bruce Freedman general surgeon on staff now for a year or two.

Tony Koblish: He's been instrumental in helping us do training and peer-to-peer discussions on the hernia side. But Howard Langstein has joined us as well. One of the unfortunate losses in PRS business, he was a big customer of ours up until recently, but he's retired. He was the chief of plastic surgery at the University of Rochester.

He has been instrumental in helping us do training and.

Speaker Change: And peer to peer discussions on the hernia side, but Howard Lance Dean has joined us as well one of the one of the unfortunate losses in Prs business. He was a big customer of ours up until recently, but he's retired he was the chief of plastic surgery at the University of Rochester.

Tony Koblish: But Howard Langstein has joined us as well. One of the unfortunate losses in PRS business; he was a big customer of ours up until recently, but he's retired. He was the chief of plastic surgery at the University of Rochester. Very sophisticated man, awesome presenter and teacher and educator. And he's being deployed as part of our PRS surgeon peer-to-peer educational programs and also supply chain as well.

Tony Koblish: A very sophisticated man, an awesome presenter, teacher, and educator. And he's being deployed as part of our PRS surgeon peer-to-peer educational programs and also supply chain as well. So, you know, Greg's been looking after the sales force, you know, as a colleague for the last several months, and it was just evident to us that he has the right stuff for all of these elements to take us to the next level. Thank you for that question. It was good for me to explain that.

Antony Koblish: A very sophisticated man, an awesome presenter, teacher, and educator, and he's being deployed as part of our PRS surgeon peer-to-peer educational programs and also supply chain as well. So, you know, Greg's been looking after the sales force for the last several months, and it was just evident to us that he has the right stuff for all of these elements to take us to the next level. Thank you for that question. It was good for me to explain that. Got it. Thanks a lot, Tony. And maybe one for Roberto too.

<unk> sophisticated man awesome presenter and teacher in educator.

Speaker Change: And he has gained deployed as part of our Prs.

Speaker Change: Surging peer to peer educational programs and also supply chain as well so.

Tony Koblish: So, you know, Greg's been looking after the sales force as a co- for the last several months, and it was just evident to us that he has the right stuff for all these elements to take us to the next level.

Greg Firestone: Greg is going be looking after the sales force as a co for the last several months and it was just evident to us that he has the right stuff for all of these elements and take us to the next level. Thank you for that question. It was good for me to explain that.

Michael Sarcone: Thank you for that question. That was good for me to explain now.

Michael Sarcone: Got it. Thanks a lot, Tony. And maybe one for Roberto.

Michael Sarcone: Thank you so much.

Roberto Cuca: And maybe one for Roberto. I think you just mentioned in the commentary you've got your eye on profitability in the near future. So maybe you can elaborate more on that.

Speaker Change: Got it thanks, a lot and maybe one for Roberto I think you did mentioned in the prepared commentary.

Michael Sarcone: I think you just mentioned in the prepared commentary that you've got your eye on profitability in the near future. So maybe you can elaborate more on that. You know, what kind of profitability are you talking about and the timing and what we need to see to really get there? Sure. So, you know, the goal is to keep OPEX flattish to declining over the course of this year. With revenue growing on top of that, obviously, that drops to the bottom line and, you know, reduces sequentially our cash consumption.

Tony Koblish: I'm just going to add a little bit more frank to that color. I mean, keep in mind, or if you recall, this GPO is super important to us. It's not the biggest, that's for sure, structure of the contract was the most favorable to us. Dual-source contract, us and another player, and that other player was not the market leader. So the contract had not annualized yet over the year, and so it's also our fastest growing. So, you know, acutely painful for us.

Roberto Cuca: I think you just mentioned in the commentary that you've got your eye on profitability in the near future, so maybe you can elaborate more on that, you know, what kind of profitability are you talking about, the timing, and what we need to see to really get there.

Roberto Cougar: You've got your eye on profitability in the near future. So maybe you can elaborate more on that.

Roberto Cuca: You know, what kind of profitability, you know, are you talking about and timing and what we need to see to really get there? Sure. So, you know, the goal is to keep OPEX flattish to declining over the course of this year. With revenue growing on top of that, obviously that drops to the bottom line and reduces sequentially our cash consumption, or there is some seasonality to our cash usage. But we expect that even next year, you know, we should be able to hold OPEX flatt, potentially even to declining next year, such that with additional year on your revenue growth next year on top of that OPEX savings, and then combined with the contribution from the nervous revenue share that can range from $3 to $7 million.

Speaker Change: What kind of profitability are you talking about and timing and what we need to see to really get there.

Michael Sarcone: Sure, so you know the goal is to keep OPEX flattish to declining over the course of this year. With revenue growing on top of that, obviously, that drops to the bottom line and, you know, reduces sequentially our cash consumption, although there is some seasonality to our cash usage. But we expect that even next year, you know, we should be able to hold OPEX flat, potentially even to declining, next year, such that with additional year-on-year revenue growth next year on top of that OPEX savings and then combined with the contribution from the Nivis revenue share that can range from three to seven million dollars, that that together should get us to profitability, so cash break, cash flow break even.

Speaker Change: Sure so.

Speaker Change: The goal is to keep opex flattish to declining over the course of this year.

Speaker Change: With revenue growing on top of that obviously that drops to the bottom bottom line and.

Tony Koblish: Okay, that's helpful color, and maybe I'll sneak two in, and I'll ask them both. Same time, how should we think about the split of revenue in Q3 versus Q4 to get to the guided range of 74 and a half to 76 and a half, and then how should we think about kind of a blended over-text ASB with IHR now on the next? So I'll start with the first question. So we expect more of the revenue to be in the fourth quarter.

Speaker Change: Reduces sequentially, our cash consumption, although there is some seasonality to our cash usage.

Michael Sarcone: Although there is some seasonality to our cash usage, But we expect that even next year, you know, we should be able to hold OPEX flat, potentially even to declining next year, such that with additional year-on-year revenue growth next year, on top of that OPEC savings, and then combined with the contribution from the NIVS revenue share that can range from $3 to $7 million, that that together should get us to profitability, so cash flow break-even.

Speaker Change: But we expect that even next year.

Speaker Change: We should be able to hold opex flat potentially even to declining next year.

Speaker Change: With additional year on year revenue growth next year on top of that Opex savings and then combined with the contribution from <unk> revenue.

Speaker Change: Our revenue share that can range from $3 million to $7 million.

Tony Koblish: If you think about the way, you know, what we think will be driving it, our ability to regain it, is the initiative that Greg is kicking off, and those have some ramping effects. So you'll see more of an effect in the fourth quarter and the third quarter, although we expect to see it in both. As regards ASP, we do expect ASP to begin to average down as we get more volume in the IHR space.

Roberto Cuca: That that together should get us to profitability. So, cash flow breakeven.

Speaker Change: That together should get us to profitability, so cash rate cash flow breakeven.

Roberto Cuca: Great. Thanks, Roberta. Thanks, Mike.

Roberto Cuca: Great. Thanks, Roberta. Thanks, Mike. Thank you. One moment for the next question. Our next question comes from the line of David Turkaly of Citizen JNB. Your line is now open. Good afternoon.

Michael Sarcone: Great. Thanks, Roberto. Thanks, Mike.

Speaker Change: Great. Thanks, Robert.

Speaker Change: Thanks, Mike.

Operator: Thank you. One moment for our next question. Our next question comes from the line of David Turkaly of Citizen JMP. Your line is now open.

David Turkaly: Thank you. One moment for next question. Our next question comes online from David Tercule, a citizen, JNP. Your line is now open.

Thank you Hillman for next question.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of David <unk> of citizen JMP. Your line is now open.

David Turkaly: Good afternoon. Tony, did you have a CCO in that position in the past?

Tony Koblish: As a general matter, we've always expected that our ASPs will, on average, be lower in the longer term, because we entered the market at the larger end of the hernia repair spectrum, so with the large ventral repairs with big pieces, and we've always expected that we'd be moving into the rest of the markets by entering with smaller pieces. So, you know, we don't view this as a bad thing. It's an outcome of gaining greater share across the range of different repairs.

David Turkaly: Tony, did you have a CCO in that position in the past? Yes, we did. Yeah, he was more of a traditional, you know, VP of sales type of guy. You know, Greg is a more senior executive who has more of a strategic, fulsome set of experiences. And Chris Smith is still there. No, the VP of Sales has moved on. You know, we've focused the business around Greg and the senior leadership that's been in place now for the last couple of years. We have a group of area directors that report in to Greg that are our most talented and senior folks. They've been with us, you know, for years, so it's a very tenured organization.

David Turkaly: Good afternoon.

David: Good afternoon.

Tony Koblish: Tony, did you have a CCO, that position in the past? Yes, we did. Yeah, he was more of a traditional, you know, VP of Sales type of guy. You know, Greg is a more senior executive, who has more of a strategic, full, some set of experiences.

Speaker Change: Did you have a CTO that position in the past.

Tony Koblish: Yes, we did. Yeah, he was more of a traditional, you know, VP of sales type of guy. You know, Greg is a more senior executive who has more of a strategic, fulsome set of experiences.

Speaker Change: Yes, we did yes, he was more of a traditional VP.

Speaker Change: VP of sales type of Guy Greg is a more senior executive who is more of a strategic.

Tony Koblish: And Chris Smith is still there.

Speaker Change: Fulsome set of experiences.

Tony Koblish: And Chris Smith is still there? No, VP of Sales has moved on. You know, we've focused the business around Greg and the senior leadership that's been in place now for the last couple of years. We have a group of area directors that report into Greg that are most talented, most senior folks. They've been with us, you know, for years. So, it's a very tenured organization.

Speaker Change: And Chris Smith is still there.

Tony Koblish: No, the VP of Sales has moved on. You know, we've focused the business around Greg and the senior leadership that's been in place now for the last couple of years. We have a group of area directors that report into Greg that are our most talented, most senior folks. They've been with us, you know, for years. So it's a very tenured organization.

Speaker Change: No VP of sales.

Speaker Change: Moves on.

Speaker Change: We focused the business around Greg and.

Tony Koblish: And it might be a little choppy, Frank. You know, as we stored out the mix between the large complex cases with large pieces, and the slope or the ramp rate of the IHR, both products should grow, but it may be, you know, out of sync every now and then, but I think, you know, definitely what Roberto said is correct. We want the volume at some point.

Speaker Change: And the senior leadership, that's been in place now for.

For the last couple of years, we have a group of area directors that reporting to Greg that our most talented most senior folks they've been with us for years. So it's a it's a very tenured organization.

David Turkaly: One last one, just, you know, as we think about this, Nivis: the revenue share.

Antony Koblish: And one last one, just, you know, as we think about this, Nivis, the revenue share. I'm just trying to think about even just the back half of the year. I know it's over eight quarters, but could that be a million dollars a quarter? Is that a possibility? Or is that too much?

David Turkaly: And one last one, just, you know, as we think about this, Nivis, the revenue share. I'm just trying to think about even just the back half of the year. I know it's over eight quarters, but could that be a million dollars a quarter? Is that a possibility? Or is that too much? Yes, so the structure of it is that we...

Speaker Change: And one last one just as we think about this device that the revenue share.

Roberto Cuca: I'm just trying to think about even just the back half of the year. I know it's over eight quarters, but I mean, could that be a million dollars a quarter? Is that a possibility? Is that too much? Yeah, so the structure of it is that we, for the first four quarters, get 50% of in each quarter of what the new owner sells for Nivis. And then in the second four quarters, we get 25%.

Speaker Change: I'm just trying to think about even just the back half of the year.

Speaker Change #100: Over eight quarters, but could that be a $1 billion a quarter is that a possibility or is that is that too much.

Frank Takkinen: All right. I'll stop there. Thanks for the question. Thanks, Frank. Thank you, one moment for our next question.

David Turkaly: Yes, so the structure of it is that we, for the first four quarters, we get 50% of, in each quarter, of what the new owner sells for Nivus. And then in the second four quarters, we get 25%. So depending on how quickly the new owner is able to ramp it up, they could potentially sell $2 million in the third or fourth quarters, and then we would get half of that, which would be a million.

Roberto Cuca: Yes, so the structure of it is that we, for the first four quarters, we get 50% of, in each quarter, of what the new owner sells for Nivus. And then in the second four quarters, we get 25%. So depending on how quickly the new owner is able to ramp it up, they could potentially sell $2 million in the third or fourth quarters. And then we would get half of that, which would be a million.

Speaker Change #101: Yes, so the structure of it is that we for the first four quarters, we get 50% of in each quarter of what the new owner sales for <unk>.

Roberto Cuca: Our next question comes online of Caitlin Cronin, of Canacrogeny Lee. Your line is now open. Hey guys, thanks for taking the questions. You know, Cashburn was still pretty high this quarter. Was this, you know, mostly just due to not getting the leverage, you know, off the revenue growth or, you know, anything else to really call out here? Sure, that's exactly it. If you think about the revenue having been higher or had it been higher, you know, we learned of the disruption partly through May, you know, towards the end of May, even though it began earlier in May.

Speaker Change #100: And then in the <unk>.

Speaker Change #100: Second four quarters, we get 25% so depending on how quickly the new owner is able to ramp it.

Roberto Cuca: So, depending on how quickly the new owner is able to ramp it, you know, they could potentially sell two million dollars in the third or fourth quarters, and then we would get half of that, which would be a million. Yeah, CEO has been quite optimistic in the past on the product's uptake, but it's just launching months or so ago. Yeah, so it launched in the second quarter. That triggered, since the way it's right, the degree of the structure is that it triggers for the first full quarter of launch, the public, etc.

Speaker Change #102: Could potentially sell $2 million in the third or fourth quarters, and then we would get half of that which would be a million. Yes, CEO has been quite optimistic in the past on the product uptake.

Roberto Cuca: Yeah, the CEO has been quite optimistic in the past on the product's uptake, but it's just launched a month or so ago. Yeah, so it launched in the second quarter. That triggered it since the way the agreement is structured is that it triggers for the first full quarter of launch the obligations, et cetera. Thank you. Thanks, Dave.

David Turkaly: Yeah, the CEO has been quite optimistic in the past on the product's uptake, but it's just launched a month or so ago. Yeah, so it launched in the second quarter. That triggered it since the way the agreement is structured is that it triggers the obligations for the first full quarter of launch, et cetera.

Speaker Change #102: But it is just launching month.

Speaker Change #102: Month or so ago.

Speaker Change #102: Yes, so it launched in the second quarter that triggered since the width right with the agreement is structured is that it triggers for the first full quarter of launch.

Roberto Cuca: So there was not much opportunity to adjust expense within the second quarter. We, you know, did make some small minor changes in timing of the expenses to try and offset it and give ourselves some more flexibility as we were doing the analysis to determine exactly what was happening during the quarter. But had, we had that additional revenue on top of the optics that you saw on the second quarter that should have all dropped to the bottom line.

David Turkaly: Thank you. Thanks, Dave.

Speaker Change #104: Obviously the revenues.

Roberto Cuca: Thank you. Thanks, Dave. Thank you. I'm asking no further questions at this time. Thank you for your participation in today's program.

Speaker Change #105: Thank you.

Dave: Thanks, Dave.

Louisa Smith: Thank you.

Operator: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you for watching!

Louisa Smith: I'm showing all further questions at this time. Thank you for your participation in today's conference.

Speaker Change #107: Thank you I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

This has concluded the program. You may now disconnect.

Yes.

Roberto Cuca: But we expect to get back on track with that as we indicated with the guidance. And then, you know, one thing that we believe investors may not be as sensitized to in the third quarter, we'll start getting that revenue share payment, which will be, you know, equivalent to 100 percent growth margin, depending on how quickly that ramps, it could be more or less front loaded over the coming eight months and up a quarter, and that will obviously contribute to our cash position.

Speaker Change #107: Okay.

Speaker Change #107: [music].

Speaker Change #107: Yes.

Speaker Change #107: Sure.

Speaker Change #107: Okay.

Okay.

Speaker Change #107: [music].

Speaker Change #107: Sure.

Roberto Cuca: Great. And then just on growth margins, what are your expectations really going forward given the IHR launch more broadly? So IHR, the way we pay for the product that we manufacture, from our manufacturers with a revenue share, so we give them 27 percent of the revenue that's to across our portfolio with very minor adjustments in certain cases. So even though those products are low ASP, they should be fairly close to that standard 27 percent revenue share.

Roberto Cuca: We split the cost of shipping so that takes about a percent point or two off. And so the long term, you know, goal of growth margin is about 70 percent plus or minus a little bit. Awesome.

Roberto Cuca: And then just just a quick one, what was the split this quarter between obatex and PRS? So this quarter of PRS was 30 percent of the total revenue, right? A little bit down. Got it. Thanks.

Operator: Thank you, one moment for next question.

Matthew Bryan: Our next question comes from the line of Matthew Bryan from Purpose Houndler. Your line is now open. Dude, afternoon. Thanks for taking the question. Just one clarification question. What was the split US versus OUS? Did I hear you right? OUS is 2.4 million in the quarter, up about 60 percent. Correct. Yeah. Good. Got it.

Tony Koblish: And then, you know, and I'm sorry to push your guys, but I'm looking at the guide for the year and the low end of the range assumes about 42 million for the rest of the year, so 21 million, you know, on average per quarter and obviously Q3 is going to be slower than Q4. It's just hard to get the model all the way up to that level. So what did you see in July, you know, from a growth rate?

Tony Koblish: I don't know what you can share. And then, you know, why is it even the low end of the range, the right number? It seems like, you know, we should probably go a little bit below that just given the disruption that you saw in the fact that some of those cases, you know, you're not going to be able to get now, because they went to other hospitals. So again, why is even the bottom end of the range, the right number? Correct.

Tony Koblish: So, thanks for the question. So first, let me start with July. So as you know, our quarters tend to be slightly backloaded. So the first month of the quarter tends to be the lowest of the quarter below 33% of the quarter. So one of the things we look at on a quarterly basis is how that first month of the quarter looks compared to other first months of quarters. So what I can tell you is that July was the highest first month of a quarter that we had in our history.

Tony Koblish: So that suggests that we are back on track for growth and that in particular, because had the disruption that you've seen in the second quarter lasted into the third quarter, that should have suppressed the July, you wouldn't have seen that kind of performance in the first month of the quarter. The second thing that makes us comfortable about achieving the amount over the second half that we need to, the head of guidance, is the plans that we had in place, even at the beginning of the year, which we felt strongly about, and then what Greg has been doing since he took over a little bit less than three months ago.

Tony Koblish: So he was instrumental in structuring our response to our disruption in the third quarter of last year in which we revamped our education of our sales forces in which we retargeted our compensation system and it extended that into this year and then took over in May at the end of May and had extended that and extended it. And so what we're seeing with our sales force and how they're responding to it and the morale that they're exhibiting as a result gives us a lot of confidence about being able to make up the shortfall that we saw in the second quarter.

Tony Koblish: Yeah, that said, I think that we're going to be weighted a little bit more towards the fourth quarter, right, once all the programs and all the training and all the elements kick in. Okay, I guess how much wiggle room did you really factor in, you know, does everything have to go perfectly for you to get to the low end and, you know, or are there some other factors that we're just considering to get you all the way there.

Tony Koblish: Yeah, so as we've been describing over the course of this year, we view this guidance range as a commitment to investors. So we placed it in a place where we felt comfortable that we had all the resources to hit it. And what we did going through the years said, if we learn over the course of the year to performance in any one of the quarters that there's additional upside, we would adjust that guidance number later rather than trying to express the full amount of what could be achieved early on before we had some data points.

Tony Koblish: So we feel very confident with that range. And, you know, we will be expanding considerable efforts to make sure we get not just the bottom end of the range, but get pretty close to the top end of the range. Orange. Got it. Thanks so much. Thank you.

Michael Sarcone: Thank you, Momu, for next question.

Tony Koblish: Our next question comes from Lindo, Michael Sarcone of Jeffries. Your line is now open. Thanks, good afternoon, and thanks for taking the questions. I guess, could you give us a little more color? You talked about bringing on Greg Firestone, and then you mentioned he's refining some training processes and the productivity metrics. Can you give us a little more color on what specifically Greg is doing in terms of making changes and how that's going to drive the incremental productivity?

Tony Koblish: Right? So there are subtle differences in talk track when you talk to supply chain, right? At a contract, at a hospital, at a GPO. You know, there's competitive dynamics with competitors certainly. There's pricing and strategic dynamics, but the messaging is different. And I think the messaging is going to be inordinately important at the supply chain level as we go through this transition away from polypropylene, right? So, you know, polypropylene mesh has been the subject of these litigations.

Tony Koblish: You know, it's going to settle at some point in the future, and we're seeing lots of activity at the GPO level in transitioning for those companies that have polypropylene mesh towards other more natural repair products. So having Greg in the middle of this allows us to be strong when we need to be strong with GPO and contracting messaging, right? It's with supply chain. The other factor is, is Greg's been around for a long time.

Tony Koblish: He's run sales organizations. He has a gravitas and credibility about him, which is very, very good for a young organization like ourselves. So he is commanding and is going to demand accountability. And that's going to drive efficiency, leverage, and part of that is training, right?

Tony Koblish: So one of the brilliant things that he's done since he started, he's moving very fast, is rather than thinking in terms of broad brush with the whole sales force, in terms of training and education and talk track and messaging, we did benchmark testing for everybody in the organization, whether they're sales leadership or territory managers, any everybody. And we got a strength and weakness profile for everybody individually. And it allows us to really customize and develop our people on an individual basis, which is going to strengthen their talk track around GPOs and continue to strengthen and talk track their way around the surgeons.

Tony Koblish: The other thing that we've done, that he's doing a great job, is he's implementing our two surgeons that we have on staff. So we've had Bruce Friedman, general surgeon on staff now for a year or two. He's been instrumental in helping us do training and peer-to-peer discussions on the hernia side. But Howard Langstein has joined us as well. One of the unfortunate losses in PRS business, he was a big customer of ours up until recently, but he's retired.

Tony Koblish: He was the chief of plastic surgery at the University of Rochester. Very sophisticated man, awesome presenter and teacher and educator. And he's being deployed as part of our PRS surgeon peer-to-peer educational programs and also supply chain as well. So, you know, Greg's been looking after the sales force as a co- for the last several months, and it was just evident to us that he has the right stuff for all these elements to take us to the next level. Thank you for that question. That was good for me to explain now. Thank you so much.

Roberto Cuca: And maybe one for Roberto. I think you just mentioned in the commentary you've got your eye on profitability in the near future. So maybe you can elaborate more on that.

Roberto Cuca: You know, what kind of profitability, you know, are you talking about and timing and what we need to see to really get there? Sure. So, you know, the goal is to keep OPEX flattish to declining over the course of this year. With revenue growing on top of that, obviously that drops to the bottom line and reduces sequentially our cash consumption, or there is some seasonality to our cash usage. But we expect that even next year, you know, we should be able to hold OPEX flatt potentially even to declining next year, such that with additional year on your revenue growth next year on top of that OPEX savings, and then combined with the contribution from the nervous revenue share that can range from $3 to $7 million. That that together should get us to profitability. So, cash flow breakeven.

Roberto Cuca: Great. Thanks, Roberto. Thanks, Mike.

David Turkaly: Thank you, one moment for next question. Our next question comes online of David Tercule, a citizen, JNP. Your line is now open.

Tony Koblish: Good afternoon. Tony, did you have a CCO that position in the past? Yes, we did. Yeah, he was more of a traditional, you know, VP of Sales type of guy. You know, Greg is a more senior executive, who has more of a strategic, full, some set of experiences. And Chris Smith is still there? No, VP of Sales has moved on. You know, we've focused the business around Greg and the senior leadership that's been in place now for the last couple of years. We have a group of area directors that report into Greg that are most talented, most senior folks they've been with us, you know, for years. So, it's a very tenured organization.

David Turkaly: One last one, just, you know, as we think about this, Nivis, the revenue share. I'm just trying to think about even just the back half of the year. I know it's over eight quarters, but I mean, could that be a million dollars or quarter? Is that a possibility? Is that too much? Yeah, so the structure of it is that we, for the first four quarters, we get 50% of in each quarter of what the new owner sells for Nivis.

David Turkaly: And then in the second four quarters, we get 25%. So, depending on how quickly the new owner is able to ramp it, you know, they could potentially sell two million dollars in the third or fourth quarters, and then we would get half of that, which would be a million. Yeah, CEO has been quite optimistic in the past on the products uptake, but it's just launching months or so ago. Yeah, so it launched in the second quarter, that triggered, since the way it's right, the degree of the structure is that it triggers for the first full quarter of launch, the public, etc.

David Turkaly: Thank you. Thanks, Dave. Thank you.

Operator: I'm showing all further questions at this time. Thank you for your participation in today's conference. This has conclude the program. You may now disconnect.

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