TELA Bio, Inc. Q3 FY2024 earnings call

• Third quarter marked a return to growth rates across the portfolio, with revenue up 26% Y/Y. Unit sales for OviTex and OviTex PRS grew 39% and 44% respectively, and European business grew 67% Y/Y.
• Europe showed strong performance with market share gains in multiple countries, achieving the first $1 million month in Europe. OviTex is established as a market leader in the U.K. and Netherlands.
• Significant growth in hernia and abdominal wall reconstruction, with nearly 5,000 OviTex units sold, 60% used in minimally invasive procedures. Plastic and reconstruction portfolio also saw growth, topping $6.3 million in Q3.
• Active participation at key society meetings, including the American Hernia Society and Plastic Surgery The Meeting, to increase brand awareness and surgeon engagement.
• Implemented cost-saving initiatives to reduce 2025 operating expenses by $5 million to $10 million, with savings expected to start kicking in Q4.

In the third quarter of 2024, TELA Bio reported revenue of $19 million, a 26% year-over-year increase. Revenue from OviTex grew 23% and OviTex PRS grew 31%. Gross margin was 68% for the quarter. Sales and marketing expense was $16.5 million, general and administrative expense was $3.7 million, and R&D expense was $2.1 million. The company ended the third quarter with $17.3 million in cash and cash equivalents, and after a public equity offering, had net proceeds of approximately $43 million.

• Remain on track to achieve full-year revenue guidance of $74.5 million to $76.5 million, reflecting 28%-31% growth over 2023. Excludes potential effects of IV fluid shortages from natural disasters.
• Expect operating expenses to be lower sequentially in Q4 as cost-saving efforts begin to take effect.

• Monitoring elective procedure volumes for disruption due to natural disasters, but as of yet, no meaningful impact detected.

Q: Can you provide more color on the $5 million to $10 million in OpEx savings?

A: Primary source is headcount reductions by redeploying clinical development specialists and reducing non-quota-carrying roles, with savings expected to be sustainable into 2026.

Q: Did you recover procedures from the cyberattack challenges in Q2?

A: No discernible backlog load up from Q2, as hernia procedures returned to normal levels and patients affected by cyber hack weren't all reallocated to TELA's customers.

Q: Thoughts on 2025 growth and applying international success to US market?

A: Haven't provided 2025 guidance yet, but international success with shared decision-making models in Europe can be extrapolated to the US as permanent plastic use is expected to decline.

Q: Trends in Q4 and IHR growth impact on ASP?

A: October was a record high first month of a quarter, indicating progress toward Q4 targets. IHR growth may cause some ASP pressure, but balanced selling across products could offset some of this.

Q: Elaboration on sales rep training?

A: Perpetual training is in place with a purpose-built training team focusing on continuous updates and field training to maintain competitive advantage through innovation and clinical data communication.