Q3 2025 TELA Bio Inc Earnings Call
Speaker #1: 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, the Gil Martin Group.
Speaker #1: Please go
Speaker #1: Thank you, Kelvin.
Speaker #2: today, TELA Bio and good afternoon, everyone. Earlier released financial results for the third quarter 2025. A copy of the press release is available on the company's website.
Speaker #2: Joining me on today's call are Tony Koblish, Chief Executive Officer; Jeff Blizzard, ard, President; and Roberto Cuca, Chief Operating Officer. And Chief Financial Officer.
Speaker #2: 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 the annual report on Form 10-K, which may cause actual results or events to differ materially from those described in these forward-looking statements.
Speaker #2: These factors may identify the specific risk factors that may include without limitation statements regarding product development and pipeline opportunities, product's potential, the impact of identified in our filings, like changes in surgical procedural volumes, the regulatory environment, sales and marketing strategies, performance.
Speaker #2: capital resources, or operating With that, I'll now turn the call over to
Speaker #2: capital resources, or operating With that, I'll now turn the call over to Tony. Thank you, Louisa, and various macroeconomic conditions
Speaker #3: joining TELA Bio's third quarter 2025 earnings call. Q3 '25 marked another important step forward in TELA Bio, as we continue to execute on expanding our commercial footprint, improving our good afternoon.
Speaker #3: reflects growing demand for our OVATEX reinforced tissue matrix and OVATEX PRS portfolios, and contributions from our expanding commercial presence in Europe. International sales grew 9% over the prior period, driven by increased traction in the UK and early progress from the commercial launch of the OVATEX IHR in Europe.
Speaker #3: foundation. We invested in our sales organization from which we expect focus on strengthening our operational Thank you for Over the financial prudence in our sales and marketing stronger commercial performance going spends, which improved as a percentage of revenue from last few months, we have placed deliberate 89.7% in Q1 to Q2, and further to 83.5% in 73.6% in Q3.
Speaker #3: Additionally, we have strengthened the capabilities and expertise valuable strategic insights through our next phase announced this evening, we have reinforced our of our board to provide of growth.
Speaker #3: growth. With these foundational elements now in place, we're poised to re-accelerate under the right leadership around financing and allow us to and the right playbook.
Speaker #3: Before turning the call over to Jeff to review balance sheet to eliminate any concerns upgrades in the commercial organization, I'd like to point focus squarely on execution and that detail TELA's expanding And finally, as presence in the soft tissue restoration market.
Speaker #3: milestones we reached in the third quarter call at the American Society of Plastic Surgeons, plastic surgery, the meeting, OVATEX PRS was featured in three scientific abstract presentations contributed to a growing and publications.
Speaker #3: meaningful body of clinical evidence, now more than 50 published or presented These works on OVATEX and 10 out some key highlights and on OVATEX PRS.
Speaker #3: Representing over 1,100 patients in peer-reviewed publications, an ongoing data collection in more than 2,500 patients has now been activated. The Hiatal Study is evaluating clinical hiatal hernia outcomes using OVATEX or ECHO.
Speaker #3: I'm also pleased to share that two first patients have been enrolled in our study. Together, these milestones reflect the continued expansion of our real-world data, strengthen surgeons' adoption, and reinforce the clinical confidence and support, as well as the broader validity of our technology.
Speaker #3: In the third quarter, we achieved a significant commercial milestone, surpassing 100,000 implantations of OVATEX and OVATEX PRS. Combined globally, this achievement further underscores our growing impact and continued progress across the soft tissue repair and reconstruction markets.
Speaker #3: We continue to expand our market presence both in the US and abroad. In Europe, we advanced awareness through the targeted surgeon engagement, including a July cadaver lab with 30 key surgeons.
Speaker #3: And made meaningful progress with the UK NHS value-based procurement initiative, securing NHS finance sign-off in September. In the US, we further strengthened our national reach through new and expanded contracts that made our portfolio available across a diverse range of health systems.
Speaker #3: From some of the nation's largest and most innovative networks to community hospitals, we broadened our market access in the quarter by an additional 835 hospitals.
Speaker #3: We recently announced two additions to our board of directors, welcoming Betty Jo Rochio and Bill Plavonic. Betty Jo will provide critical insights into our market access strategy, given her decades of experience in advancing clinical excellence and supply chain optimization at large healthcare systems and group purchasing organizations.
Speaker #3: We are also fortunate to have Bill on board. His experience as an investor combined with his direct experience running publicly held medtech companies will help drive long-term shareholder value and enhance communication with our investors.
Speaker #3: I would now like to turn the call over to Jeff, who transitioned from our board to serve as president in June. Since that time, he has strategy, and building a more patient and results-focused culture within our sales organization.
Speaker #3: Jeff brings the exact combination of being instrumental in refining our commercial strategic vision needed for this operational expertise and moment. He will provide commentary on our third quarter and our optimism for the future.
Speaker #4: Thanks, Tony. I'm pleased to report on the important progress we've made in strengthening our
Speaker #4: commercial organization, and executing against the strategic priorities that we outlined on our last earnings call. While our Q3 results came in lower than future.
Speaker #4: global quarterly revenue record of
Speaker #4: TELA's third consecutive quarter of sequential growth in 2025. This momentum reflects the durability of demand for we hoped, we still achieved a new our product lineup of soft tissue repair Jeff.
Speaker #4: solutions. Q3 was a quarter dedicated to building a $20.7 million, which marks stronger foundation and we've now positioned TELA for sustainable long-term growth. Over the last three months, we revamped our commercial field leadership, we recruited, and we recruited some of the top medical device representatives across the US.
Speaker #4: bring strategic business acumen, deep clinical expertise, and a shared commitment These individuals to our mission of improving patient outcomes. With these hires in place, we closed the quarter having reached our 2025 budgeted commercial headcount target of 76 territory managers.
Speaker #4: Another key highlight in Q3 was our continued alignment with our strategic partner, Advanced Medical Solutions, and their Liquifix fixation technology. AMS expanded field, they worked side by side with our its clinical support team in the representatives to drive patient adoption through multiple identification, utilization, and surgeon evaluations.
Speaker #4: Their investment, combined with our commercial focus, led to our best revenue quarter ever with Liquifix. Highlighted by $126% growth year over year with the user base.
Speaker #4: our partnership and the opportunity ahead. As we enter Q4 and increasingly confident in the strength and look ahead to 2026, I'm Since joining TELA in June, we've been committed to equipping our commercial This reinforces the value of organization with the best tools, resources, incentives, and compensation structures needed to capability of the team that we're building.
Speaker #4: fully unlock our team's time, the investments that we're making in medical education, market our competitive advantage and positioning us to become a market leader in access, and data analytics are expanding hernia and plastic and reconstructive surgery.
Speaker #4: We now have the right winning by being present at the leadership in place; we are drive optimal clinical outcomes for their patients. With that, I'd like to bedside.
Speaker #4: We now have the right winning by being present at the leadership in place; we are drive optimal clinical outcomes for their patients. With that, I'd like to bedside.
Speaker #4: results. Thanks, potential.
Speaker #5: Jeff. Revenue for the third quarter of 2025 increased
Speaker #5: $20.7 million, with revenue from OVATEX growing 6% At the same 12% from the prior year 9% year over year to
Speaker #5: quarter. Gross margin was
Speaker #5: 2025 and OVATEX PRS revenue growing, attracting high-quality talent, and we are in 2024. Gross profit was $14 million in the third quarter of 2025 compared to $12.9 million in the same period in 2024.
Speaker #5: Sales and marketing expenses were $15.2 million in the third quarter, compared to $16.5 million for the prior year period. This decrease costs consulting and travel was mainly due to lower compensation expenses, which were offset by higher commission expense on an increased revenue base.
Speaker #5: General and administrative expenses were $3.9 million for the third quarter, compared to $3.7 million in the prior year period. R&D expenses for the third quarter were $2.3 million, compared to $2.1 million in the prior year period.
Speaker #5: Total operating expenses were $21.5 million in the third quarter, compared to $22.2 million in the prior year period, and $23.2 million in Q2 2025.
Speaker #5: Loss from operations was $7.6 million in the third quarter, compared to $9.4 million in the prior year period. Net loss was $8.6 million in the third quarter, compared to $10.4 million in the prior year period.
Speaker #5: We ended the third quarter with $29.7 million in cash and cash equivalents, reflecting cash consumption of $5.7 million in the quarter. For the reasons that Jeff just outlined, we now expect revenue for the full year 2025 to grow at least 16% over 2024.
Speaker #5: While we don't typically provide color on the coming year this early, since we are in the middle of budgeting for 2026, we did want to provide investors with directional expectations for next year's revenues.
Speaker #5: Specifically, we are confident that revenue and full year 2026 will grow at least 15% from 2025. After we've completed our budget process, we will update our expectations and provide appropriate additional information at the latest on our 4Q25 earnings call.
Speaker #5: And finally, let me touch on some enhancements to our balance sheet that we made today. First, this afternoon, we announced the refinancing and upsizing of our debt facility from $40 million to $60 million.
Speaker #5: A second tranche of $10 million is available in the future upon attainment of trailing 12-month revenues of $100 million. Additionally, we completed a $13 million equity offering.
Speaker #5: Between the two transactions, we will add approximately $26 million in incremental net cash to our balance sheet and have access to an additional $10 million debt tranche in the future.
Speaker #5: This is a significant bolstering of our financial resources that we believe provides us with more than enough financial firepower to reach profitability. With that, I'll hand the call back to Tony for closing remarks.
Speaker #1: All right. Thank you, Roberto. Before we move to questions, I wanted to share another patient case that exemplifies the transformative impact of our OVATEX platform and our mission to move the soft tissue repair market beyond traditional synthetic mesh.
Speaker #1: A recently published case report underscores the real-world impact of OVATEX reinforced tissue matrix in a challenging abdominal wall reconstruction scenario. A 48-year-old man suffering from severe pancreatitis and abdominal compartment syndrome was initially treated using a standard of care temporary abdominal closure device.
Speaker #1: However, he failed to decompress, which necessitated multiple returns to the OR over an eight-week period. At that time, his surgical team believed that without attempting a different intervention, the patient would not recover.
Speaker #1: They then introduced OVATEX in combination with negative pressure therapy to support a staged abdominal closure, and the patient decompressed in a period of one to two weeks.
Speaker #1: The reinforced tissue matrix demonstrated early tissue integration and remodeling with minimal inflammation. At 44 weeks, full abdominal wall reconstruction was successfully completed with remarkable functional and cosmetic results.
Speaker #1: The patient is now four years post-reconstruction and leading an active lifestyle with no evidence of recurrence. This case exemplifies how OVATEX can help achieve life-changing outcomes for high-risk patients.
Speaker #1: Reinforcing the value of our technology in addressing even the most complex soft tissue challenges. Stories like this illustrate exactly why we do what we do and why our confidence in the long-term potential of our portfolio remains so strong.
Speaker #1: Each successful patient outcome reinforces the strength of our clinical foundation and validates the strategy and execution that are driving our momentum. As I reflect on Q3 and our progress this year, I am encouraged by the trajectory we're on.
Speaker #1: We've taken decisive steps to position TELA for durable growth and an opportunity to meet or exceed expectations. We have new executive leadership in place, who are initiating key strategic changes to our commercial organization, and are backed by a strong record of execution.
Speaker #1: At their prior organizations. We have added experienced strategic thinkers to our board, who bring deep expertise in clinical and GPO access, corporate governance, and street-facing communication support for the next phase of our growth.
Speaker #1: Across the organization, we have instilled a culture of operational efficiency that has already shown evidence of its impact in improvements to OPEX leverage and cash burn reduction.
Speaker #1: And finally, we have strengthened our balance sheet through a comprehensive financing initiative that will eliminate uncertainty about our runway and allow us to focus purely on delivering consistent execution and capturing growth opportunities.
Speaker #1: With these foundational elements in place, we are positioned to move forward and drive results. I'd like to thank the entire TELA Bio team for the incredible dedication and passion they bring every day to drive our mission.
Speaker #1: I also want to recognize our surgeon and hospital partners and, most importantly, the patients, who are at the center of everything we do, who inspire us to keep redefining what's possible in soft tissue repair and reconstruction.
Speaker #1: This is a pivotal time for our company, and our industry, and I am energized by what we're building together. With that, I'll now ask Kelvin to open the line for your questions.
Speaker #2: Ladies and gentlemen, we will now begin the question and answer session. I would like to remind everyone to ask a question. Please press the start button, followed by the number one on your telephone keypad.
Speaker #2: If you would like to withdraw your question, please press star one again. One moment, please, for your first question. Your first question comes from the line of Caitlin Roberts of Canaker Genuity.
Speaker #2: Please go ahead.
Speaker #3: Hey, thanks for taking the questions. Maybe just to start through, the rationale for the debt refinancing and the equity raise at this time, I mean, how comfortable do you guys feel now with your cash
Speaker #3: runway? Thanks for the question, Caitlin.
Speaker #4: We feel super comfortable about our cash runway. The rationale for the debt refinancing was that the previous facility would have begun amortizing in June 2026.
Speaker #4: And so we wanted to get ahead of that and replace it. And a possible upsize it. And as part of that process, we got some inbound requests from investors who wanted to support the company.
Speaker #4: And so we provided some access to a small side equity raise, which we completed today as well. So, between the two, on top of the $30 million that we ended the quarter with, we're adding about $26 million in net capital.
Speaker #4: And we believe that, with the addition of the potential $10 million tranche on hitting our revenue target, is much more than enough to get us to profitability.
Speaker #3: just talk through the lower guidance for 2025 and then also the early 2026 growth expectations and what you've really baked into the 15% for next year.
Speaker #4: Sure. So let me start with next year. As I mentioned in the prepared remarks, we don't usually provide color on the coming year this early since we're really in the middle of the budgeting process.
Speaker #4: But we understood that with the resetting of the fourth quarter expectations, we need to provide some base for investors. So, we took a look at our expectations for additional hiring of reps and the pacing of that, built in some cushion in case things don't go quite the way we're expecting to.
Speaker #4: And felt confident that that 15% growth number for the full year of 2025 is something attainable for us. The goal is to improve on that, but that's what the budgeting process, the internal budgeting process, will help us
Speaker #4: understand. Got it.
Speaker #3: Thanks so much
Speaker #3: for taking the questions. Thanks,
Speaker #4: Caitlin. Your next question comes
Speaker #2: from the line of Frank Takinen of Lake Street Capital Markets.
Speaker #5: Great. Thanks for taking the questions. Congrats on all the progress and congrats on the financing. I was hoping to start with maybe some more details around the sales force.
Speaker #5: Happy to hear you guys hit, I think, your hiring goal already at 76 territory managers. I think, Roberto, you were touching on some hiring next year, but maybe going a little bit deeper into kind of sales force hiring for next year would be helpful context.
Speaker #5: Thanks.
Speaker #6: Thank you. And I appreciate Jeff? the question. So as we were budgeted for 76, we are continuing to fill our pipeline. Our goal is that we'll be at 90 plus in Q1.
Speaker #6: Our time to hire has shortened. We've opened up our recruiting philosophies, our criteria, our national recruiters now know the candidates we're looking for in top-tier medical device representation.
Speaker #6: We're looking for sound, clinical, adaptability, as well as really the strategic thinking that we ask our territory managers to have. This time to hire has been shortened in some markets to one day.
Speaker #6: We put a full panel interview together. Did candidates in and by day's end, we actually have an offer and we have candidates signed by close of day.
Speaker #6: This is found as some of the best people to help support our organization to grow. So our priority is to constantly add and continue to have a bench between our account specialist team that's in place now.
Speaker #6: We promoted one last quarter. To get to the 76 total, we will constantly focus on that team as part of our bench.
Speaker #5: Yeah, Frank, what gives us confidence here is that even if you look at the third quarter, and you assess the reps the cohort of reps that have been with us for a minimum of six months, that group of 50, 52 reps performed very well in Q3 and hit virtually 100% of what their targets and quotas are.
Speaker #5: So, where we fell short was in those regions that were struggling to hire those positions, and leadership roles have been upgraded already. We have dynamite new leaders in place, as Jeff discussed already.
Speaker #5: And that's really propelled us forward to fill in that 76. You recall our plan was to have that 76 on board by around Q2.
Speaker #5: So now that we've got this momentum, we've got leadership that's solidified across all of our selling regions, it makes sense to continue on and drive towards that 90 to 95, low 90s for next year.
Speaker #5: And that cohort of 50, 52 reps is driving about a million dollars on an annualized basis. Even with the criteria of being on board for six months, so the faster that we can get a bigger cohort of reps on board, the faster we can drive them to that million dollar annualized target it allows us to have confidence in driving growth for next year.
Speaker #5: That probably circles back a little bit to Caitlin's question as well. Got it. That's helpful. I really appreciate the color. And then maybe just one more on the break-even profile in light of some of these investments, as well as the financing. Roberto, maybe you could help to kind of refresh how you guys are thinking about break-even.
Speaker #5: I think you were previously in that kind of high $20 million per quarter to support that. Maybe any color on that would be helpful.
Speaker #5: And then I'll hop back in Q. Thanks, guys.
Speaker #4: Sure. Thanks, Frank. So yes, we continue to think that high 20s is the place where we can achieve break-even. The goal is to keep OpEx reasonably flattish, not withstanding the growth in the sales force.
Speaker #4: One of the ways we expect to do that is by drawing for that growth from our account specialist ranks such that there's not as much of an incremental expense for the additional TMs.
Speaker #4: But we'll be revising all of our expenses and Jeff and his team have been digging in on pretty much every dollar that supports the sales force and the selling process and thinking how we can be more efficient with those dollars.
Speaker #3: Yeah, Frank, there's been a massive improvement in sales force efficiency down from almost 90% of sales to a little over 70% of sales just in the three quarters of this year.
Speaker #3: So we expect that efficiency to continue as well.
Speaker #2: Your next question comes from the line of Michael Sarcon of Jeffries. Please go ahead.
Speaker #4: Hey, good afternoon and thanks for taking the questions. I guess, can you provide a little more color if you're talking about roughly flattish growth in 2026, or consistent growth in 2026 versus 2025, but you're also talking about increased productivity for reps?
Speaker #4: So I guess, can you talk about kind of the moving pieces there as we're looking out to?
Speaker #4: 26? Yeah, well, I
Speaker #3: I think it's all dependent on having the heads filled, right? That's what's vexed us this year and last year. So, I think we're giving ourselves some room to operate to make sure that we get the right talent in the right seats.
Speaker #3: At the right time. And like Roberto said, we will reevaluate and have an update for you on all things related to 26 on our next earnings call.
Speaker #4: Got it. Thanks, Tony. I guess just a follow-up on the sales force. You've implemented some enhanced training programs and you're expecting a faster ramp to productivity.
Speaker #4: Can you give us any update on what you're seeing for newer classes of reps in terms of kind of the ramp curve versus older
Speaker #4: classes? Yeah, sure, Mike.
Speaker #3: I'm going to introduce a new player here in the Q&A. Jeff's number two man, Jim Hagen, has joined us for some Q&A, and this is a good opportunity for him to get to know.
Speaker #3: him. Hey,
Speaker #4: Mike. Yeah, so your question on what we are doing with the recruiting class, the enhanced training program, and time to competency. Step one, as Jeff talked about in his opening remarks, we refined the hiring profile with our recruiters, and we're actually getting candidates more in the mold of what we want to drive our growth faster on the top line.
Speaker #4: Our training team has taken them in, has built a support network around them to drive them deeper clinically. And I think part of the early proof point we had for our latest class coming through, we test everybody.
Speaker #4: Ahead of coming in person for training, collectively that group, which really represented the first wave of new hires under our new profile, had the all-time highest scores in our classes.
Speaker #4: I think the next wave of recruits coming in are just as impressive to us. So I think the infrastructure we're putting in place around our field team, the number of people we're bringing in with high caliber gives us confidence that next year is set to that minimum growth target that Roberto referenced.
Speaker #4: Got it. Thanks, Jeff. Helpful.
Speaker #2: Your next question comes from the line of Matthew O'Brien of Piper Sandler. Please go
Speaker #2: ahead. Hi, this is
Speaker #5: Samantha on for Matt. Thank you for taking our question. I guess first we wanted to touch on guidance as well, but more of the 2025 focus.
Speaker #5: It kind of implies a minimal, maybe a little upside sequentially in Q4, which I think you've talked about historically has been a stronger sequential growth quarter.
Speaker #5: So I guess could you just talk a little bit about what's baked into Q4 specifically?
Speaker #4: So we sure said that we expect that growth will be at least 16% year over year. Jeff and Jim have been getting up to speed on the sales force and moving them forward, getting some efficiencies in place.
Speaker #4: There's some potential upside from that, particularly with the hiring of the reps up to 76, which finally took place. And some of the hiring for next year is going to be taking place this year to put ourselves in place for a strong next year.
Speaker #4: So that can also be an additional source of growth. There has been a little bit of turnover in the sales force, and this accommodates for that as well.
Speaker #4: But we expect that we feel comfortable that we'll be hitting that 16%. And as I said, there is some room for upside
Speaker #4: from that number. Yeah, and I think we're giving ourselves a little
Speaker #3: bit of room, right? In Q3, there was a heck of a lot of strengthening and upgrade work done within the commercial leadership team. So at the regional director level and those types of players, we wound up upgrading three or four of those positions.
Speaker #3: So I'm not going to say that's disruption because it's improvement, but we're definitely have to make sure that those guys are allowed to get their people in place.
Speaker #3: That's where a lot of the rep shortfall in terms of hiring did reside in those weaker regions, which have been upgraded. So we're just giving ourselves some room to make sure that we get the right people in place and that we continue to transition towards a stronger and stronger organization, with our main focus being around starting 2026 with the best possible team.
Speaker #4: I have a close that question around the sales team sentiment. This is the most excited I've seen the commercial organization. We have an incentive for quarter close in Q4 that touches all the right buttons for not only for them and their individual franchises, but also for the physicians, the programs, and the patients they serve.
Speaker #4: We've put programs that really mirror the business and where we're headed, optimizing outcomes and making that a key focus. So for us, selfishly, this is the most excited I've been as a leader of the sales organization to come to year-end.
Speaker #4: And we'll. Hopefully have a strong Q4 announcement that reflects really the energy and pace that we're going to attack the
Speaker #4: business. That was perfect.
Speaker #5: Thank you.
Speaker #2: There are no further questions at this time. And with that, I will turn the call back to Anthony Koblish, CEO, for closing remarks. Please go
Speaker #2: ahead. All right.
Speaker #4: Thank you, Kelvin. Really appreciate the efforts of our team. Want to thank them for jumping in and embracing this patient-centric culture. I see the difference.
Speaker #4: It's working. And I want to thank all of our supporters, both in the financing and in the investor community and all those who have an interest in seeing us succeed and bringing next-generation technologies that are woefully needed to this soft tissue reconstruction space.
Speaker #4: So with that, thank you and we'll see you next
Speaker #4: time. Ladies and gentlemen, this