TELA Bio, Inc. Q4 FY2025 earnings call

2025 was a year of strategic change. Jeff Blizzard was appointed president in June and the company undertook a significant rebuild of the commercial foundation. They made changes to the U.S. commercial organization, upgraded the commercial leadership team, addressed silos, rolled out promotion pathways, redesigned the sales talent profile, accelerated hiring, developed and rolled out sales enablement technology, designed a new compensation program, adjusted sales and marketing focus, and instilled spending discipline. They launched Ovitex LTR, enrolled first patients in the hiatal hernia trial, reinforced and upsized debt facility, and upgraded the board of directors. In 2026, they are focused on sustaining momentum, achieving further sales growth, and continuing product innovation. Howard Langstein was promoted to Chief Medical Officer. European teams are stable and delivering above plan.

Revenue for the fourth quarter of 2025 increased 18% year-over-year to $20.9 million and grew 16% for the full year to $80.3 million. Revenue from Obatex grew 12% and Obatex PRS grew 20% for the year. Ovitex unit sales grew 20% for the quarter and 22% for the year, while PRS unit sales grew 12% for the quarter and for the year. Lipofix revenue more than tripled over the fourth quarter of 2024. European sales accounted for 15% of total revenue, or $12.1 million, in 2025, a 17% increase from 2024. Gross margin was 66% for the fourth quarter and 68% for the full year. Sales and marketing expenses were $14.5 million in the fourth quarter and $63.2 million for the full year. General and administrative expenses were $3.8 million for the fourth quarter and $15.7 million for the full year. R&D expenses for the fourth quarter were $2.1 million and for the full year were $9.2 million. Loss from operations was $6.6 million in the fourth quarter of 2025 and $33.8 million for the full year. Net loss was $9 million in the fourth quarter and $38.8 million for the full year

For 2026, anticipate revenue growth of at least 8% over 2025, with Q1 2026 revenue of approximately $18.5 million. Expect operating loss and net loss to continue to decline for the year, although there may be a step up from the past fourth quarter to the first quarter. The cadence of the year is expected to be similar to prior years with a step up from first to second quarter, smaller step up from second to third, and bigger step up from third to fourth quarters, with the step up from second to third being smaller due to summer holidays. The newest reps are in early stages of ramp-up, earlier cohorts are gaining traction, and tenured reps are solid. There is a new product launch in April 1st, and focus on contract execution

Factors that may cause actual results or events to differ materially from forward-looking statements include product development, pipeline opportunities, sales and marketing strategies, and various additional risk factors as identified in regulatory filings. There is complexity in contract implementation with varying hospital processes, contracting complexity including market share and cross-product portfolio bundling and rebate structure. The shift in territories and splitting of territories may cause some short-term loss as they work through the transition

Q: Starting off with the fiscal year top line guidance for at least 8%, color on why it was below Q3 call and cadence for the year.

A: Given wholesale change, prudence, new reps and moving parts, territory restructuring, contract conversion complexity. Cadence expected to be similar to prior years with step ups.

Q: How many IDNs or GPOs have been transferred to recategorize Obatex and expectations for 2026.

A: Team did well in 2025 getting agreements signed, 2026 is execution year, focus on executing within existing agreements.

Q: Follow up on Q1 guidance, specific to Q1.

A: Prudence, seasonality, territory restructuring and splitting causing some short-term loss.

Q: View on steady state growth profile of TELA.

A: Markets mid single digits, anticipate outgrowing market, units growth good.

Q: When ASPs in hernia could start to flatten out and stabilize.

A: Dependent on mix between inguinal and ventral, modality of procedure.

Q: Follow up on Q1 guidance change from mid-November.

A: Change curve of organization through change was longer and more complex than planned.

Q: Methods to broaden out penetration in existing accounts.

A: Deeper penetration by focusing on more users per site, leveraging full portfolio.

Q: Impact of weather in Q1 and confidence in back-end loaded guide.

A: Weather impacted some procedures, focus on controllables like hiring and territory shift. Confidence from past growth and new reps' potential