TELA Bio Q3 2026 Earnings Call Transcript

TELA Bio (NASDAQ:TELA) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

TELA Bio reported Q3 2026 revenue of $19 million, a decrease of 8% year-over-year, with U.S. hernia revenue up slightly sequentially and European revenue growing 18% year-over-year.

A $17 million cost reduction plan was implemented, aimed at preserving capital and improving commercial execution, resulting in a 55% improvement in adjusted EBITDA loss sequentially.

The company regained compliance with Nasdaq’s minimum bid price requirement and will not implement a reverse stock split at this time.

Strategic changes included a new go-to-market strategy focusing on higher ASP procedures and aligning commercial resources, sales processes, and incentives.

Clinical validation was strengthened with four new peer-reviewed publications and FDA clearance of the Liora Monofilament Scaffold, a new fully reabsorbable surgical mesh.

Management expressed confidence in returning to double-digit growth, driven by disciplined execution, core product focus, and strategic contraction efforts to expand market access.

The PRS segment faced declines due to key surgeon departures, but efforts are underway to rebuild momentum through enhanced training and strategic sales initiatives.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the TELA Bio third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Louisa Smith.

Louisa Smith (Investor Relations)

Thank you, operator, and good afternoon, everyone. Earlier today, TELA Bio released financial results for the third quarter ended September 30, 2026. A copy of the press release is available on the company’s website. Joining me on today’s call are Heather Goetz, Chief Executive Officer; Jeffrey Blizard, President; and Jim Hagan, Senior Vice President of Strategic Commercial Operations and Marketing. 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 quarterly reports on Form 10-Q, which identify the specific risk 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, pipeline opportunities, sales and marketing strategies, and the impact of various additional risk factors as identified in our regulatory filings. Heather will begin with the Q3 results and the changes made to strengthen TELA Bio. Jeff will discuss the commercial performance, and then Heather will finish with a review of the financial results in more detail before we take your questions. With that, I’ll now turn the call over to Heather.

Heather Goetz (Chief Executive Officer)

Good afternoon, everyone, and thank you for joining us. Last week marked my 90th day as CEO of TELA Bio, and I want to use this time not just to walk through our Q3 results, but to share what I’ve learned, what’s already in the process of being changed, and where we’re headed. When I joined in August, I made a commitment to our board, our employees, and all of you that I would listen first but act swiftly to stabilize the company and extend our runway.

Over these past three months, I have done just that. I’ve met with surgeons, investors, and employees across the organization. Three things became clear. First, we believe our core product portfolio is best in class at providing both value and performance and is supported by robust clinical data, even more than I originally appreciated. I will be discussing today additional evidence of OviTex’s outstanding clinical profile which was issued recently.

Second, our capital allocation needed to be much more focused. We’ve been spreading investments across too many initiatives and too quickly without clear prioritization. Third, when we adjusted our go-to-market strategy late last year, we created some gaps that also need to be addressed. The good news is that we have already made meaningful progress on addressing these items, as you will hear today. I’ll start with the $17 million cost reduction plan commenced on September 1st. The program was intended to preserve capital while maintaining investment in our core growth priorities as well as product innovation. We intend to translate the lower cost structure into reduced cash consumption as we improve commercial execution. Second, on October 5th, Nasdaq notified us that we had regained compliance with its minimum bid price requirement, and TELA Bio will remain listed on the Nasdaq Global Market under the symbol TELA.

Importantly, as disclosed following our October 8th special meeting, we do not intend to implement a reverse stock split at this time, but have the option for 12 months if so needed. Third, we implemented an adjusted go-to-market strategy that centers our commercial resources on selling the whole bag, with a focus on winning complex, higher ASP procedures as well as targeted selling in other segments that leverage access and opportunity. To do this, we aligned all of our resources that touch the customer, including medical affairs, strategic contracting, and sales operations.

We enhanced field training of both clinical and sales processes, and we updated our sales incentive structure to reward both retention and growth. While I believe we will see sequential improvement in Q4, this is not a one-quarter fix; it is a multi-pronged, multi-quarter process. I am proud of how the team navigated the third quarter, selling against the continued practice of anti-competitive contracting and bundling in hospitals, overcoming the disruption from the organizational realignment, as well as a challenging market dynamic in which many hospitals and other medical device companies reported that elective procedures were down. Despite these headwinds, we finished Q3 with 19 million in revenue. We delivered sequential revenue and unit growth in the U.S. hernia portfolio, year-over-year volume growth in the U.S. hernia portfolio, and continued year-over-year growth in Europe.

These results are encouraging signs of our portfolio strength and our team’s commitment. We also recognize that PRS remains below where it needs to be, and we believe with our recently fine-tuned sales strategy we will return to previously strong adoption rates in the coming quarters. To be clear, there is no issue with the product, but changes need to be made on how we are addressing the market. Jeff will provide specific details in his commentary about our plans to grow PRS sales.

Clinically, we continue to validate the strength of our portfolio with four new peer-reviewed publications and podium presentations on both OviTex and OviTex PRS, demonstrating favorable outcomes compared to gold standard synthetic and biologic alternatives. One was the OviTex meta-analysis authored by three internationally respected KOLs and published in Hernia. These results demonstrated significantly reduced ventral hernia recurrence rates and comparable safety outcomes with OviTex compared to traditional biologic and synthetic mesh, despite being used in patients with increased risk factors and comorbidities.

Another was the publication of our largest PRS study to date that has been accepted for publication in the Plastic and Reconstructive Surgery journal. This study demonstrates no statistical differences in major infections or operative complications while showing lower odds of seroma formation. I also want to recognize our engineering, quality, and regulatory teams for the FDA 510(k) clearance of the Liora Monofilament Scaffold. Liora is a fully reabsorbable surgical mesh for soft-tissue reinforcement and our first implant fully developed in our Malvern cleanroom. Our ability to develop and produce a product in-house creates a foundation for greater ownership of the path from product design to manufacturing. We are proud of this achievement and the capabilities it represents.

We are taking a disciplined approach to the next steps with Liora. We will provide you with an update to the commercial plan in early 2027. As you have just heard, we have made significant operational progress across the organization in a relatively short period of time. Going forward, our strategy depends on disciplined execution. We are doubling down on our core products and selling our whole bag in areas where we have opportunity to, while continuing to add access at the GPO, IDN, and hospital level. Every dollar of capital needs to be allocated to where we will see the highest ROI.

Now I’ll turn the call over to Jeff to discuss our commercial results in more detail.

Jeffrey Blizard (President)

Thank you. As Heather just highlighted, our third quarter results demonstrate meaningful progress and positive momentum across our global commercial organization. At 19 million in total sales, the U.S. revenue was 15.4 million while European revenue ended at 3.6 million. Breaking down the 15.4 million in the third quarter, our U.S. hernia revenue was up slightly sequentially while volume grew both year over year and sequentially. LIQUIFIX also delivered its strongest performance to date, setting a new TELA Bio quarterly sales record with its customer base expanding 60% year to date.

As discussed in previous calls, a gap has been created between unit and revenue growth as continued adoption in minimally invasive and robotic hernia repair has shifted demand towards smaller product sizes. In Q4, we expect this gap to continue to narrow as year over year comparisons stabilize the product mix. While we do not anticipate immediate convergence, our revenue growth should be more in line with our unit growth. Turning to plastic and reconstructive surgery, we were able to slow the decline and refocus and retrain the sales team.

OviTex PRS revenue was down 20% year over year and 6% sequentially. It is important to note that the decline in PRS revenue has been concentrated in a limited number of markets rather than broadly across the organization. In 2026, in addition to some turnover, we had several key surgeons experience personal or professional circumstances forcing them to step away from their practices, which adversely affected procedural volumes. We are supporting a renewed focus on PRS with enhanced product and procedural training alongside expanded medical office capabilities to provide deeper clinical and educational support to both our sales teams and surgical customers. Collectively, these actions are designed to strengthen commercial effectiveness, deepen surgeon engagement, and rebuild momentum in this strategically important part of our business. Given the longer sales cycle in PRS and the more concentrated surgeon community, the progress we have made in several high-volume centers have not yet offset the declines.

Shifting to our international business, in Europe, we’ve maintained strong momentum, delivering double-digit year over year growth at 18%. This year over year growth was driven by higher value complex cases, particularly in the UK. In late September, we hosted 120 European surgeons in Madrid for a two-day educational event entitled Advancing Reconstruction. This program brought together multiple surgical specialties to exchange clinical experiences, share best practices, and explore innovative approaches to improving patient outcomes, all challenging the notion that hernias are a chronic disease.

Innovations in surgical techniques and OviTex products provide surgeons with a greater opportunity to achieve a successful outcome during this initial procedure. Ultimately, the goal is to deliver durable repair, minimize the risk for recurrence, and reduce the need for subsequent interventions. We believe initiatives like these strengthen our global surgical community and support long-term portfolio growth. I’d now like to touch on our initiatives in strategic contracting. While we continue to face market access barriers from large competitors, we’re not sitting idle. Our field is making progress in developing clinical champions, and our contracting team is complementing these efforts in establishing OviTex agreements site by site. While this process takes longer, these practices are necessary to get OviTex used within these hospitals and their health systems given the contracting environment in the U.S. In parallel, TELA Bio will continue to pursue a national agreement to broaden access and simplify contracting. The focus remains on translating access into hospital approvals, physician adoption, and sustained utilization.

As I close, I want to emphasize the most important takeaway from Q3: the resilience and execution of our commercial team. In Q3 we constructed a data-driven plan that built around our top markets, strategically positioned our team in the areas with the greatest opportunity to win. By aligning territories with contract access, surgeon partnerships, and high-potential programs, we have concentrated our talent to where we have the clearest path for revenue growth.

This disciplined approach ensures that our strongest commercial resources are deployed where we have access, relationships, and opportunity, all while preserving continuity across key accounts. In the midst of these changes to our organization, we delivered sequential U.S. hernia growth that accelerated post realignment, achieved a record quarter for LIQUIFIX, and posted another quarter of double-digit European growth. These accomplishments reinforce our confidence in the direction of our entire commercial organization.

Heather, I’ll turn it back to you for the financial review.

Heather Goetz (Chief Executive Officer)

Thank you, Jeff. As we discussed, revenue was 19 million in the third quarter of 2026, a decrease of 8% compared to the third quarter of 2025. The decrease in revenue was driven by a decline in OviTex PRS of 2 million, partially offset by growing international sales. U.S. hernia revenue was down slightly year over year, and we saw sequential increases in the U.S. hernia products, both volume and revenue. Gross profit was 12.3 million, or 64.9% of revenue in the third quarter of 2026, compared to 14 million, or 67.5% of revenue in the same period of 2025. The decrease in gross margin was primarily due to a higher charge for excess and obsolete inventory as a percentage of revenue. After adjusting for the 1.1 million non-cash charge, gross margin would have been 71%.

Total operating expenses, excluding other expenses, were 17.6 million in the third quarter of 2026 compared to 21.4 million in the third quarter of 2025, a decrease of 17.8%. Loss from operations was 7.3 million in the third quarter of 2026, a 300,000 improvement compared to 2025. Adjusted EBITDA loss was 3.4 million in the third quarter of 2026, an improvement of 40% year over year and 56% sequentially. These improvements can be attributed to our realignment in the third quarter, which totaled 17 million of annualized savings across the organization, including a targeted headcount reduction of approximately 20% and the streamlining of external resources while preserving our ability to invest in our core growth priorities and product innovation. We ended the quarter with 22.7 million in cash and cash equivalents.

Also to note, Perceptive agreed to suspend minimum revenue covenant testing for two quarters under our credit agreement. That covenant will not be tested for the quarters ending September 30th and December 31st, 2026. We appreciate their support as we execute our cost reduction program. This consent is specific to the minimum revenue covenant. We continue to manage the business against our other obligations under the facility. Before we open the line for questions, I want to again thank our employees for the important work they do every day to make OviTex an option to patients around the world. The U.S. sequential hernia growth and the continued European growth are encouraging, particularly given the organizational changes during the quarter. We built on our strong clinical foundation with the four peer-reviewed publications detailing OviTex and OviTex PRS’s outstanding performance.

The Leora clearance is another achievement we can be proud of. In addition to these achievements, we have taken meaningful steps to reduce operating costs and strengthen TELA Bio’s foundation, extending our runway. Our objective moving forward is to convert our operational and commercial progress, along with our lower cost structure, into a more durable business model. The renewed energy and commitment I have seen is contagious, and I am proud to be a part of the mission to build the best-in-class solution for soft tissue repair.

With that, we are ready to take your questions. Operator, please proceed.

OPERATOR

Thank you. At this time we will conduct the 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. We do ask that you please limit yourself to one question and one follow-up. Our first question comes from the line of Frank Takanen of Lake Street Capital Markets. Your line is now open.

Frank Takanen (Analyst)

Great. Thank you for taking the questions. I was hoping to start with a bigger picture question off the bat. Obviously you’re only 90 days in, Heather, but I think a key question many investors are asking is what can the growth potential of this business be? Previously, I think we thought of this, the potential had definitely a 20% plus growth profile over time. Curious, now that you’ve been there for a little bit, what kind of growth company do you think this can become?

Not necessarily looking for a timeline once that’s achieved, but maybe a longer-term thought process of the growth profile this company can carry.

OPERATOR

Speakers, please hold for one moment. Speakers, we’re not hearing any audio from your line.

Heather Goetz (Chief Executive Officer)

Can you hear me now?

OPERATOR

I can hear you now. There we go. Your audio is back. Okay, speakers, it looks like we have you connected.

Heather Goetz (Chief Executive Officer)

Okay. Can you hear us?

OPERATOR

We can hear you loud and clear. Thank you so much for your patience.

Heather Goetz (Chief Executive Officer)

Okay, and do we still have Frank on the line?

Frank Takanen (Analyst)

I’m still here.

Heather Goetz (Chief Executive Officer)

Okay. So sorry about that. Hopefully the cost reductions didn’t affect our phone bill. But what I was saying was, you had asked about what our growth ability is, and we still believe that we have substantial growth ability, and the changes that we’ve put into effect will allow us to accelerate back into double-digit growth. The timing of that is what I’m still evaluating with what type of acceleration we can get through year-end and into 2027. But we still are addressing a very substantial market, about a 4 billion dollar TAM worldwide, 3 billion in the U.S., and we still have the products that can meet the needs of the surgeons and the patients within both markets.

Frank Takanen (Analyst)

Okay, very helpful. And then maybe just for my second one, was going to follow up on PRS a little bit more. I think if I remember correctly, a big piece of the initiative was you previously had dedicated PRS reps. Now that’s being rolled back into the broader sales team. Can you talk about where we are in the process of rolling that back into the rest of the sales team, maybe how many reps are back actively selling the whole bag, and then any other dynamics occurring in the PRS business, whether that be competitive or other outside factors that are impacting growth there?

Heather Goetz (Chief Executive Officer)

Sure. So PRS, the organizational changes that we made within sales have been implemented, and what we’re focused now on is rebuilding that sales funnel and supporting the existing users while continuing to improve the knowledge of our sales team. The PRS market has a longer tail cycle than hernia, and developing new surgeon relationships and reactivating previously engaged accounts will take time. So we expect the business to build over time, and we were able to gain some traction in Q3.

Unfortunately, it was not enough to offset the immediate loss of some of the other accounts through physicians, some retiring or going out on maternity leave. So there’s nothing wrong with the product, and we believe that we’ll regain our previous momentum. Do you want to add anything?

Jeffrey Blizard (President)

No, I think Heather nailed it, Frank. Those changes organizationally to the PRS pilot, where we looked at moving to exclusive salespeople, was only six people that we had targeted in key cities, and we suspended that trial or the clinical pivot to those people in Q1. So it’s been a while since we’ve now put it back in the full sales bag, and everybody has full portfolio responsibility.

Frank Takanen (Analyst)

Okay, very helpful. Thank you for taking the questions.

Heather Goetz (Chief Executive Officer)

Thanks, Frank.

OPERATOR

Thank you. Our next question comes from the line of Michael Sarcone of Jefferies. Your line is now open.

Michael Sarcone (Analyst)

Thanks, and good afternoon, and thanks for taking the questions. I guess just a follow-up on the PRS topic. Heather, I think you had mentioned you’ve got some confidence in getting PRS back to previous growth levels. Can you talk about what underlies that confidence to return to growth?

Heather Goetz (Chief Executive Officer)

Sure. So, as I mentioned, a couple things. One, some of the challenges that we have within that market are self‑inflicted with the breaking out of the PRS reps and then putting them back in, and then also from an educational perspective, getting our newest reps back engaged and focused on selling the whole bag, not just hernia. That’s taken time. And because it is a slightly different market with different requirements in how we sell, that does have a bit of a ramp.

I also mentioned that the market is a bit more concentrated, so that when we did lose some key users, it’s a little bit more difficult to replace that immediately than in the hernia market. So we’re confident the product works. It works well. One of the publications that we had this quarter was with PRS. It was our largest study to date, and that actually compared us to a traditional biologic, and it found that our product performed just as well as that product.

And in some cases, such as in the formation of seromas, we actually showed less seroma formation than that competition. So we are gaining clinical evidence to demonstrate the efficacy of that product, and we’re reengaging and retraining our sales team to ensure that they have the skills to sell it.

Michael Sarcone (Analyst)

Great, thank you. And then just on U.S. hernia, I understand volumes grew year over year in 3Q. Do you think you can return to year-over-year growth starting in 4Q?

Heather Goetz (Chief Executive Officer)

We’re getting close. What I do believe is that we’ll see sequential growth from Q3 into Q4. Q4 of last year was our highest quarter of the year, and so that will be an inflection point for us as well.

Michael Sarcone (Analyst)

Okay, great. Thanks very much.

OPERATOR

Thank you. Our next question comes from the line of Caitlin Roberts of Canaccord Genuity. Your line is now open.

Caitlin Roberts (Analyst)

Hi, great, thanks for taking the questions. Just to start on the sales force, maybe an update on the total headcount and how the reps are starting to ramp that were newer adds.

Jeffrey Blizard (President)

So, to date globally we have about 90, including our full sales leadership team. For us, our ramp time is dependent. We have some that are now over a year in that sales force and others that are coming up. And as Heather mentioned, we’ve improved our training and onboarding, especially around the PRS side, with a focus on product, the patient selection, the product results, and then ultimately the requirement for us to be bedside. So a lot of that in the onboarding is building those relationships, especially with plastic and hernia surgeons, to be in these programs. And I’d say after the reorganization that was made in September, we did see a big inflection of our revenue jump for that last month in September. So that’s what we’re most proud of, that these changes were not only deliberate, but they are starting to pay off.

Caitlin Roberts (Analyst)

Understood. And you also noted the elective procedure environment. Maybe some more color on that, what you saw and how much of an impact that did have in Q3, and how much you expect that to have going forward.

Heather Goetz (Chief Executive Officer)

Yeah, you know, Caitlin, it’s hard to say. That was more of a macro commentary that we’ve heard generally within the market. Q3 also does tend to be a more challenging market with procedures, as you know, the summer months, both domestically as well as in Europe. So I couldn’t put a number on it, just more that we do think that it impacted our ability to be fully productive in Q3.

Caitlin Roberts (Analyst)

Understood. Thank you.

OPERATOR

Thank you. Thanks, Caitlin. Our next question comes from the line of Samantha Munoz of Piper Sandler. Your line is now open.

Samantha Munoz (Analyst)

Hi. Thank you for taking our question. We also wanted to touch on expectations for Q4, and then if you could just talk about the puts and takes for growth of the business looking into 2027.

Heather Goetz (Chief Executive Officer)

Yeah. Hi. So, look, we’re encouraged by the progress that we’ve made in Q3 and going into Q4. Given that I am 90 days in and 60 days post our realignment, I’m still evaluating what that growth trajectory or ramp will look like. But I do believe that we will see sequential growth going into the fourth quarter and that growth will continue into 2027.

Samantha Munoz (Analyst)

Okay, great. And then just one more on the cost reduction initiative of the 17 million. Could you help us think through the timing of those savings, and then the balance of expense discipline versus also the investments that you’re making?

Heather Goetz (Chief Executive Officer)

So the reductions are substantially complete as of the end of the quarter, and even with just a partial quarter of those reductions, we had a 55% improvement in our adjusted EBITDA loss from Q2 to Q3 and a 40% year-over-year improvement. What I would expect, I think a good way to look at it, is that the 17 million of reductions is based on our first-half run-rate annualized. So when you look into 2027, we would expect our expenses to be in that $76 to $78 million range.

That being said, the first part of the year, with things like national sales meetings and some other medical events that we host, the front part of the year does tend to be a little bit heavier in expenses than the second part in sales and marketing.

Samantha Munoz (Analyst)

All right, thank you.

OPERATOR

Thank you. Our next question comes from the line of Chase Knickerbocker of Craig-Hallum. Your line is now open.

Nick Mariachi (Analyst)

Hey, guys, this is Nick Mariachi on for Chase. Thanks for taking our questions. So, Heather, I know you touched on this a bit in your prepared remarks, but now that you’ve had more time to speak with customers and just get familiar with the business, can you talk about how you view the competitive positioning of the OPEX portfolio and where you see it having the clearest right to win? And also then how you’re aligning the sales strategy around those opportunities to drive market share gain?

Heather Goetz (Chief Executive Officer)

Sure. Yeah. I was incredibly impressed when I was in the field and talking with surgeons. They love our product, and they love the outcomes that they’re seeing with our product. The biggest challenges we face are really getting into some of the accounts where there are competitive bundling contracts occurring. So when you think about that, there’s about 10% to 20% of their business that we’re able to gain, and we’re also competing against other folks in that arena as well.

And so, I mean, look, we look at it, and when people use us, they love it. And what we try to do is get it into the most people’s hands as possible so that they do have the ability to experience it, and then it allows them to become our champions in the administration or in the supply chain in order to advocate for our products. I think you had some additional—I don’t think I hit on all the pieces.

Jeffrey Blizard (President)

No, no, I think you covered that. Yeah.

Nick Mariachi (Analyst)

And then just the next one for me is I think you guys mentioned that the U.S. hernia growth accelerated following the realignment. Can you talk about the trends you’ve seen across the business since the restructuring and if there’s been any disruption at all, and if you’re willing to share anything about how the trends have progressed in October?

Jeffrey Blizard (President)

Yeah, our total hernia growth is combined with LIQUIFIX now, and LIQUIFIX set a new quarterly record here at TELA Bio. What happened, I think post the reorganization, was really some discipline and organization that Heather had put back into TELA Bio. We had made sure that each rep assumed the full portfolio of the total bag between OviTex, PRS, and LIQUIFIX. We now compete where we have a clear right to win, and that’s going after higher-risk and more complex procedures.

We’ve prioritized our contract status with accounts where we can go in and build business, where we have physician championships, and ultimately we have better onboarding now—clinical sales training, customer targeting tools like MedScout. And we have aligned our territories to go seek the business where we know that those pockets are, and we can build with key programs, especially in the academic centers.

Nick Mariachi (Analyst)

Got it. I appreciate you guys taking the questions.

OPERATOR

Thank you. Thank you. I am showing no further questions at this time, so I would like to turn it back to Heather Goetz for closing remarks.

Heather Goetz (Chief Executive Officer)

Great. Thank you, everyone, for joining us today and for your interest in TELA Bio. I appreciate all of our employees’ efforts and our customers’ trust. I’m excited about the momentum that we have within the organization and for 2027, and I look forward to updating you on our next call. Thank you.

OPERATOR

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.