TELA Bio, Inc. Q1 FY2026 earnings call

• Commercial Strategy Reset Progress

  • Completed hiring targets for the U.S. commercial field team, reaching fully staffed 2026 planned levels, the largest field team in company history
  • 40% of the current field team was hired between Q4 2025 and Q1 2026; nearly three quarters of these new hires will reach the 6-month tenure milestone by end of Q2 2026, which is the typical inflection point for break-even and increasing productivity
  • New hires are outperforming prior new hire cohorts on early metrics including account conversations and clinical engagement scores
  • Completed territory realignment to focus on higher-density, higher-volume regions, with a strategy of deepening hospital relationships and selling the full product portfolio

• Product Portfolio Updates

  • Launched Ovatex LTR (Long-Term Resorbable Reinforcement Portfolio) for full U.S. commercial launch on April 1, 2026; one of the only fully resorbable tissue-based hernia repair solutions on the market
  • Ovatex LTR is priced comparably to the rest of the hernia portfolio, with early field feedback overwhelmingly positive
  • Ovatex IHR and Ovatex LPR (low-profile robotic) are the fastest growing sub-segments, aligned with the U.S. market trend toward less invasive/robotic hernia procedures
  • LiquiFix achieved greater than 50% year-over-year growth, serving as an effective engagement tool for new surgeons

• European Business Performance

  • European revenue grew 41% year-over-year in Q1 2026, driven entirely by the hernia portfolio (PRS is still in European regulatory approval)
  • Received strong validation via the UK NHS supply chain value-based procurement evaluation, which selected Ovitex for complex abdominal wall reconstruction procedures; independent analysis found Ovitex reduces revisional surgeries, lowers post-operative complications, and cuts costs compared to competing biologic mesh options
  • The European commercial playbook (consistent OR presence, multi-specialty surgeon engagement, peer-to-peer education) served as the model for U.S. commercial restructuring

• Corporate Governance Updates

  • Four long-serving board members will step down after the June 9, 2026 annual shareholder meeting
  • Four new directors with deep medtech scaling and strategic transformation experience will join the board, with Joe Capper expected to serve as chairman; two existing directors will stand for re-election to provide continuity

• Clinical Evidence Growth

  • A recent meta-analysis presented at SAGES concluded Ovitex is a safe and effective ventral hernia repair option with significantly lower recurrence rates than competing products
  • New real-world data on a competing resorbable product showed recurrence rates over 20%, nearly 10x higher than rates observed across the Ovitex portfolio

Total company revenue for Q1 2026 was $19.1 million, a 3% increase from $18.5 million in Q1 2025. Ovitex (hernia portfolio) total revenue was $12.6 million, up from $12.1 million year-over-year, representing 66% of total Q1 2026 revenue. Ovitex unit volume grew 16% year-over-year to 5,800 units, though dollar growth was partially offset by a product mix shift to smaller-sized units that compressed average selling price. Ovitex PRS revenue was $5.9 million in Q1 2026, flat compared to $6.0 million in Q1 2025, representing 31% of total revenue. International (primarily European) sales were $3.7 million, representing 19% of total revenue, with 41% year-over-year growth. Other revenue (including LiquiFix) was $0.6 million, representing 3% of total revenue. Gross profit was $12.5 million (66% gross margin), flat year-over-year, with a 200 basis point decline driven by higher excess/obsolete inventory charges. Total operating expenses were $23 million, flat year-over-year, with operating loss of $10.5 million, also flat year-over-year.

• Management reiterates full year 2026 guidance of at least 8% total revenue growth over 2025
• Q2 2026 revenue is guided to approximately $20.0 million
• Management expects operating loss to improve markedly throughout 2026 as revenue grows, with significant revenue traction and inflection starting in the second half of 2026, driven by new sales rep productivity ramping
• Management confirms confidence in the 8% full-year growth target, supported by full U.S. sales staffing, 19 new greenfield territories, strong overperformance in Europe, the Ovatex LTR launch, and growing favorable clinical evidence for Ovitex relative to competitors
• Management expects unit growth to outpace revenue growth for the remainder of 2026 due to ongoing product mix shift, but notes strong unit growth confirms ongoing market share gains

• Ovitex PRS revenue is currently concentrated among a small number of high-volume implanters; Q1 2026 PRS utilization declined due to temporary absences of several top implanters, highlighting this concentration risk, which the new commercial strategy is designed to mitigate
• The U.S. contracting environment is more complex and opaque than Europe's, with bundled pricing, rebate strategies, and GPO/IDN contracting creating barriers to market entry that the restructured commercial strategy must overcome
• New sales reps require a 6-month ramp period before reaching break-even and meaningful productivity, so full benefits of the expanded sales force will not be realized until the second half of 2026
• Forward-looking results are subject to risk factors identified in the company's SEC filings, including risks related to product development, commercial execution, and regulatory progress

Q: Can you elaborate on how Q1 commercial strategy disruption impacted results, and what impact is expected in Q2? / A: Management rolled out a new strategy, expanded territories, and a revised compensation plan all in Q1, an unusually large amount of internal change, but the team still delivered year-over-year growth and prepared for the Ovatex LTR launch. Onboarding training has been redesigned to speed up ramp time, and a substantial portion of the new sales force will hit the 6-month break-even/inflection point by the end of Q2. Management expects significant revenue traction from this cohort to appear in Q3 and Q4 2026.

Q: How do European pricing and market dynamics differ from the U.S. and drive the region's strong 41% growth? / A: Most European markets have socialized medicine with centralized tender processes that evaluate products on clear clinical and economic value propositions, which TELA wins with Ovitex's strong data and competitive pricing. The U.S. market is far more complex, with opaque bundling, rebate, and tiered pricing structures through GPOs and IDNs that create barriers to entry. TELA's new U.S. strategy of smaller, more focused territories is designed to break through these barriers, mirroring the success of the European model.

Q: What factors give management confidence in the steep second half revenue ramp, compared to 2023 when a similar-sized sales force only delivered 55% of annual revenue in the second half? / A: Compared to 2023, TELA now has formalized processes, better territory alignment, stronger field leadership, and more robust training. TELA also has growing clinical evidence from influential leading hernia surgeons, a newly launched product (Ovatex LTR) in the fast-growing fully resorbable category, that did not exist in 2023. The expanded sales force was completed in late Q4 2025/early Q1 2026, so new reps will hit their productivity inflection right at mid-year, driving disproportionate second half growth. Improved recruiting has also made TELA a destination for top talent, supporting strong retention expectations.

Q: What is the outlook for PRS after the Q1 utilization decline, and how is this being addressed? / A: The Q1 decline was driven by temporary absences (maternity leave, professional scheduling) of a small number of high-volume implanters, which is exactly the concentration risk TELA's new commercial strategy was designed to fix. Management has added extra focus on PRS in the realigned sales organization, with a goal of training more users per account to reduce dependence on a small group of implanters. Some recapture of lost utilization is expected in Q2 as the new strategy takes effect.