TELA Bio Reports Second Quarter 2024 Financial Results and Reiterates Full Year 2024 Revenue Guidance

Rhea-AI Summary

TELA Bio reported Q2 2024 financial results, highlighting 11% revenue growth to $16.1 million compared to Q2 2023. The company reiterated its full-year 2024 revenue guidance of $74.5-76.5 million, representing 27-31% year-over-year growth. Key developments include:

1. Appointment of Greg Firestone as Chief Commercial Officer
2. Launch of robotically compatible OviTex IHR Reinforced Tissue Matrix
3. NIVIS Fibrillar Collagen Pack launch, triggering revenue share payments

Despite growth, TELA Bio faced challenges from customer-targeted cyberattacks affecting some large accounts. The company reported a gross profit of $11.1 million (69% of revenue) and a net loss of $12.6 million. Cash and cash equivalents totaled $26.5 million as of June 30, 2024.

Positive

• Revenue growth of 11% year-over-year to $16.1 million in Q2 2024
• Reiterated full-year 2024 revenue guidance of $74.5-76.5 million (27-31% YoY growth)
• Launch of robotically compatible OviTex IHR Reinforced Tissue Matrix in the U.S.
• NIVIS Fibrillar Collagen Pack launch triggering revenue share payments of $3-7 million over next eight quarters
• Expansion of commercial organization leading to new customer acquisition and increased penetration in existing accounts

Negative

• Net loss increased to $12.6 million in Q2 2024 from $10.8 million in Q2 2023
• Gross margin decreased to 69% from 70% year-over-year due to higher excess inventory charges
• Operating expenses increased to $22.6 million from $20.6 million year-over-year
• Average selling prices decreased due to product mix changes
• Cybersecurity events at key customers negatively impacted forecasted revenue

Insights

Financial Analyst

TELA Bio's Q2 2024 results show mixed signals. While revenue grew 11% year-over-year to $16.1 million, it fell short of expectations due to cybersecurity disruptions. The 69% gross margin, down from 70% last year and increased operating expenses led to a wider net loss of $12.6 million.

Despite challenges, management's confidence in maintaining full-year guidance of $74.5-76.5 million is noteworthy. The upcoming NIVIS revenue share ($3-7 million over 8 quarters) could provide a much-needed boost. However, with only $26.5 million in cash, the path to profitability remains uncertain without significant operational improvements or additional funding.

Medical Device Industry Expert

TELA Bio's focus on robotically compatible products, like the OviTex IHR, aligns with industry trends towards minimally invasive procedures. This strategic move could drive future growth, especially in high-volume markets like inguinal hernia repair. However, the decrease in average selling prices due to product mix shift is concerning.

The appointment of Greg Firestone as CCO signals a renewed focus on sales effectiveness. If successful, his initiatives to enhance training and accountability could significantly improve sales productivity and market penetration. The company's ability to navigate supply chain and cybersecurity challenges will be important for maintaining growth momentum in this competitive medical device landscape.

Cybersecurity Risk Analyst

The cybersecurity incidents affecting TELA Bio's Q2 performance highlight a critical vulnerability in the healthcare supply chain. The ransomware attack on a major GPO and another event at a multi-center hospital customer significantly impacted surgical volumes, directly affecting TELA Bio's sales.

This underscores the growing importance of robust cybersecurity measures not just for medical device companies, but across the entire healthcare ecosystem. Investors should closely monitor how TELA Bio and its partners enhance their cyber resilience to mitigate future risks. The company's ability to quickly recover from these disruptions will be a key indicator of its operational resilience and risk management capabilities.

MALVERN, Pa., Aug. 12, 2024 (GLOBE NEWSWIRE) -- TELA Bio, Inc. ("TELA Bio"), a commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions today reported financial results for the second quarter ended June 30, 2024.

Recent Highlights

• Reported revenue of $16.1 million in the second quarter, representing growth of 11% over the prior year period of 2023;
• Appointed Greg Firestone as Chief Commercial Officer on May 20, 2024 to drive our next phase of revenue growth by enhancing sales representative training, regional supervision, and performance measurement and accountability;
• Launched our robotically compatible OviTex IHR Reinforced Tissue Matrix in the U.S. to target the high-volume inguinal hernia market;
• Saw the launch of NIVIS Fibrillar Collagen Pack by its new owner in the second quarter, triggering the receipt of quarterly revenue share payments beginning in the third quarter of this year and ranging from $3 million to $7 million in total over the next eight quarters; and
• Reiterated full year 2024 revenue guidance of $74.5 million to $76.5 million, representing 27% to 31% year-over-year growth.
  

“TELA delivered double-digit growth in the second quarter notwithstanding some market disruptions from customer-targeted cyberattacks that we believe led to a shortfall in procedures at some of our largest or most rapidly growing contracted accounts,” said Antony Koblish, President and CEO of TELA Bio. “We believe many of these factors, including most notably a ransomware attack at one of our national GPOs, have been resolved and we are seeing signs of normalized growth returning in the third quarter. As a result, we expect to deliver another year of high growth and are reiterating our 2024 revenue target of $74.5 million to $76.5 million. Under new sales leadership, we are also intensely focused on improving the productivity and efficiency of our commercial organization and have initiated programs that will maximize sales and rep productivity and will provide operational leverage. We believe that with these efforts, as well as the contribution from the NIVIS revenue share, our cash and cash equivalents will be sufficient to fund us to profitability.”

Second Quarter 2024 Financial Results

Revenue was $16.1 million in the second quarter of 2024, an increase of 11% compared to the same period in 2023. The increase was primarily driven by an increase in unit sales of our products due to the addition of new customers, increased penetration within existing customer accounts and growing international sales under an expanded commercial organization. This growth was partially offset by a decrease in average selling prices caused by product mix as the share of smaller-sized units increased related to the introduction of robotically compatible OviTex IHR and our increased focus in growing market share in high-volume minimally invasive and robotic procedures. In addition, we estimate that additional forecasted revenue was negatively impacted as a result of two cybersecurity events, most notably a ransomware attack at our most recently added and consequently fastest-growing GPO, and a separate cybersecurity event at another multi-center hospital customer, which substantially reduced surgeries at those facilities during the quarter.

Gross profit was $11.1 million in the second quarter of 2024, or 69% of revenue, compared to $10.2 million, or 70% of revenue, in the same period in 2023. The decrease in gross margin was primarily due to a higher charge for excess and obsolete inventory.

Operating expenses were $22.6 million in the second quarter of 2024, compared to $20.6 million in the same period in 2023. The increase was due to additional headcount as we expanded our organization resulting in higher compensation costs and employee-related expenses, as well as increased travel and consulting.

Loss from operations was $11.6 million in the second quarter of 2024, compared to a loss from operations of $10.4 million in the same period in 2023.

Net loss was $12.6 million in the second quarter of 2024, compared to a net loss of $10.8 million in the same period in 2023.

Cash and cash equivalents on June 30, 2024 totaled $26.5 million.

Conference Call

TELA Bio will host a conference call at 4:30 p.m. Eastern Time on Monday, August 12, 2024, to discuss its second quarter 2024 financial results. Investors interested in listening to the conference call should register online. Participants are required to register a day in advance or at minimum 15 minutes before the start of the call. A live webcast and replay can be accessed via the Events & Presentations page of the investor section of TELA's website.

About TELA Bio, Inc.

TELA Bio, Inc. (NASDAQ: TELA) is a commercial-stage medical technology company focused on providing innovative technologies that optimize clinical outcomes by prioritizing the preservation and restoration of the patient's own anatomy. The Company is committed to providing surgeons with advanced, economically effective soft-tissue reconstruction solutions that leverage the patient's natural healing response while minimizing long-term exposure to permanent synthetic materials. For more information, visit www.telabio.com.

Caution Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Words such as "may," "might," "will," "should," "believe," "expect," "anticipate," "estimate," "continue," "predict," "forecast," "project," "plan," "intend" or similar expressions, or statements regarding intent, belief, or current expectations are forward-looking statements and reflect the current beliefs of TELA Bio's management. Such forward-looking statements include statements relating to our expected revenue and revenue growth for the full year 2024. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors that could cause actual results and events to differ materially and adversely from those indicated by such forward-looking statements including, among others: the impact to our business from macroeconomic conditions, including any lingering effects of the COVID-19 pandemic and other public health crises, recessionary concerns, banking instability, increasing market interest rates, and inflationary pressures, potentially impacting our ability to market our products, demand for our products due to the deferral of elective procedures, the labor and staffing environment in the healthcare industry, disruption in our supply chain, or pricing pressures concerning our products or the procedures using our products; the impact of cybersecurity events affecting or disrupting hospital operations and procedural volumes; our ability to achieve or sustain profitability; our ability to gain market acceptance for our products and to accurately forecast and meet customer demand; our ability to compete successfully; that data from earlier studies related to our products and interim data from ongoing studies may not be replicated in later studies or indicative of future data; that data obtained from clinical studies using our product may not be indicative of outcomes in other surgical settings; our ability to enhance our product offerings; development and manufacturing problems; capacity constraints or delays in production of our products; maintenance of coverage and adequate reimbursement for procedures using our products; product defects or failures; and total estimated consideration related to the NIVIS transaction. These risks and uncertainties are described more fully in the "Risk Factors" section and elsewhere in our filings with the Securities and Exchange Commission and available at www.sec.gov, including in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Any forward-looking statements that we make in this announcement speak only as of the date of this press release, and TELA Bio assumes no obligation to update forward-looking statements whether as a result of new information, future events or otherwise after the date of this press release, except as required under applicable law.

Investor Contact
Louisa Smith
ir@telabio.com

TELA Bio, Inc. Consolidated Balance Sheets (In thousands, except share and per share amounts) (Unaudited)
		June 30,				December 31,
		2024				2023
Assets
Current assets:
Cash and cash equivalents		$	26,496			$	46,729
Accounts receivable, net of allowances of $298 and $416			9,097				9,737
Inventory			13,372				13,162
Prepaid expenses and other assets			2,144				2,098
Total current assets			51,109				71,726
Property and equipment, net			2,349				1,984
Intangible assets, net			1,929				2,119
Right-of-use assets			1,851				1,954
Other long-term assets			2,701				—
Restricted cash			265				265
Total assets		$	60,204			$	78,048
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	2,314			$	1,667
Accrued expenses and other current liabilities			12,675				15,300
Total current liabilities			14,989				16,967
Long‑term debt			40,817				40,515
Other long‑term liabilities			1,528				1,685
Total liabilities			57,334				59,167
Stockholders’ equity:
Preferred stock; $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding			—				—
Common stock; $0.001 par value: 200,000,000 shares authorized; 24,675,832 and 24,494,675 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively			25				24
Additional paid-in capital			341,897				339,655
Accumulated other comprehensive income			98				91
Accumulated deficit			(339,150	)			(320,889	)
Total stockholders’ equity			2,870				18,881
Total liabilities and stockholders’ equity		$	60,204			$	78,048

TELA Bio, Inc. Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share amounts) (Unaudited)
		Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				2023
Revenue		$	16,091			$	14,494			$	32,694			$	26,403
Cost of revenue (excluding amortization of intangible assets)			4,923				4,198				10,095				8,114
Amortization of intangible assets			95				95				190				190
Gross profit			11,073				10,201				22,409				18,099
Operating expenses:
Sales and marketing			16,699				14,577				34,219				28,043
General and administrative			3,621				3,472				7,450				7,106
Research and development			2,323				2,514				4,716				4,566
Total operating expenses			22,643				20,563				46,385				39,715
Other operating income:
Gain on sale of product line			—				—				(7,580	)			—
Loss from operations			(11,570	)			(10,362	)			(16,396	)			(21,616	)
Other expense:
Interest expense			(1,331	)			(1,298	)			(2,663	)			(2,544	)
Other income			301				870				798				1,343
Total other expense			(1,030	)			(428	)			(1,865	)			(1,201	)
Net loss		$	(12,600	)		$	(10,790	)		$	(18,261	)		$	(22,817	)
Net loss per common share, basic and diluted		$	(0.51	)		$	(0.46	)		$	(0.74	)		$	(1.08	)
Weighted average common shares outstanding, basic and diluted			24,663,234				23,239,262				24,621,310				21,223,639
Comprehensive loss:
Net loss		$	(12,600	)		$	(10,790	)		$	(18,261	)		$	(22,817	)
Foreign currency translation adjustment			1				(36	)			7				(66	)
Comprehensive loss		$	(12,599	)		$	(10,826	)		$	(18,254	)		$	(22,883	)

FAQ

What was TELA Bio's revenue for Q2 2024?

TELA Bio reported revenue of $16.1 million for Q2 2024, representing an 11% growth compared to the same period in 2023.

Has TELA Bio (TELA) changed its 2024 revenue guidance?

No, TELA Bio reiterated its full-year 2024 revenue guidance of $74.5 million to $76.5 million, representing 27% to 31% year-over-year growth.

What factors affected TELA Bio's Q2 2024 performance?

TELA Bio's Q2 2024 performance was affected by customer-targeted cyberattacks, including a ransomware attack at a national GPO, which led to a shortfall in procedures at some of their largest or most rapidly growing contracted accounts.

What new product did TELA Bio launch in Q2 2024?

TELA Bio launched the robotically compatible OviTex IHR Reinforced Tissue Matrix in the U.S. to target the high-volume inguinal hernia market.

What was TELA Bio's net loss for Q2 2024?

TELA Bio reported a net loss of $12.6 million for Q2 2024, compared to a net loss of $10.8 million in the same period in 2023.