Financial Performance and Risks - The company has incurred significant operating losses since inception and expects to continue incurring losses in the future[17] - Revenue is highly dependent on the commercial success of the OviTex product line, which has generated substantially all of the company's revenue to date[17] - The company may require substantial additional capital to finance planned operations, which may not be available on acceptable terms[17] - The COVID-19 pandemic has negatively impacted certain aspects of the business, potentially leading to material adverse effects on operations and financial condition[16] - The trading price of the company's common stock has been and could continue to be highly volatile, reflecting market uncertainties[22] Manufacturing and Supply Chain Risks - The company relies on Aroa as the exclusive manufacturer and supplier of its products, which poses risks related to production capacity and quality[17] Market Acceptance and Regulatory Challenges - The commercial success of the company's products will largely depend on achieving significant market acceptance[17] - The company faces risks related to achieving and maintaining adequate levels of coverage or reimbursement for its products, which could hinder commercial success[17] - Regulatory developments may delay or prevent the necessary approvals for future products, impacting the company's growth[22] - The company has limited data regarding the safety and efficacy of its products, which may affect future clinical trial results[22] Company Classification and Accounting Standards - The company is classified as an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain reporting exemptions[537] - The company has elected to opt out of the extended transition period for complying with new or revised accounting standards[537] - This election is irrevocable, meaning the company will not be subject to the same accounting standards as other public companies[537]

Financial Data and Key Metrics Changes - Total revenue for Q4 2020 was $5.7 million, representing a growth of approximately 17% compared to Q4 2019 [5][18] - Full-year 2020 revenue increased by 18% to $18.2 million compared to 2019 [18] - Gross margins improved to 65% in Q4 2020 from 61% in the prior-year period, and full-year gross margins increased to 62% from 60% [19] - Loss from operations was $6.7 million in Q4 2020 compared to $5.8 million in the prior-year period, and for the full-year 2020, the loss was $25.3 million compared to $19.2 million in 2019 [22] - Net loss for Q4 2020 was $7.8 million compared to $6.5 million in the same period in 2019, and for the full-year 2020, net loss was $28.8 million compared to $22.4 million in 2019 [22] Business Line Data and Key Metrics Changes - OviTex products saw a sequential increase in LPR unit sales by 32% in Q4 2020 [11] - Approximately 50% of OviTex usage in Q4 came from minimally invasive and robotic procedures [11] - The plastic and reconstructive market experienced record unit volume and dollar growth in Q4 2020 [13] Market Data and Key Metrics Changes - The company increased the number of hospital customers from 270 to 325 in Q4 2020 [15] - The number of HealthTrust accounts increased significantly, with about a third of accounts generating approximately a third of revenue in Q4 [76] Company Strategy and Development Direction - The company plans to continue being a leader in developing tissue reinforcement materials for soft tissue reconstruction [5] - TELA Bio is focusing on expanding its commercial team and increasing the number of sales representatives to enhance market penetration [15] - The company is optimistic about the transition from plastic mesh to more natural products like OviTex, driven by increasing concerns over synthetic mesh complications [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recovery of surgical procedures as COVID-19 cases decline [7][25] - The company expects total revenues in 2021 to be in the range of $27 million to $30 million, representing growth of 48% to 65% over 2020 [24] - Management highlighted the importance of increasing the number of sales representatives and ensuring access to hospitals for future growth [32] Other Important Information - The BRAVO study showed promising results for OviTex, with a hernia recurrence rate of 2.6% at 12 months and 0% at 24 months [9] - The company ended 2020 with $74.4 million in cash and cash equivalents, an increase from $54.6 million at the end of 2019 [23] Q&A Session Summary Question: Guidance and softness in hernia and plastic sides - Management acknowledged some softness in December and January but noted a rebound in February and March [31] Question: TELA LIVE program effectiveness - Approximately a third of surgeons participating in TELA LIVE have shown increased usage of the product, with a 115% increase in average usage post-program [40] Question: Cash burn expectations - The company expects to burn approximately $28 million to $30 million based on revenue guidance for 2021 [43] Question: Hernia mesh lawsuits update - Management indicated that litigation related to synthetic mesh is expected to commence soon, which may positively impact the conversation around natural repair products [56] Question: Competitive response and HealthTrust penetration - The company has seen a positive shift in conversations towards natural repair products, with a significant increase in HealthTrust accounts contributing to revenue [72][76]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR Delaware (State or other jurisdiction of incorporation or organization) 1 Great Valley Parkway, Suite 24 Malvern, Pennsylvania (Address of principal executive offices) (484) 320-2930 (Registrant's telephone number, including area code) Securities registered ...

TELA Bio, Inc. (NASDAQ:TELA) Q3 2020 Earnings Conference Call November 11, 2020 4:30 PM ET Company Participants Stuart Henderson - VP, Corporate Development and IR Tony Koblish - President and CEO Nora Brennan - CFO Conference Call Participants Raj Denhoy - Jefferies Matthew O'Brien - Piper Sandler Kyle Rose - Canaccord Dave Turkaly - JMP Securities Operator Good afternoon, ladies and gentlemen, and welcome to the TELA Bio's Third Quarter 2020 Earnings Conference Call. At this time, all participants are in ...

Market Opportunity - TELA Bio addresses a ~$2 billion U S market opportunity in soft tissue reconstruction[4] - The annual U S total addressable hernia market opportunity for OviTex is approximately $1.5 billion[5,6] - Plastic and reconstructive surgery represents an approximate $500 million annual U S market opportunity[41] Product & Technology - TELA Bio markets a new category of tissue reinforcement materials for soft tissue reconstruction[4] - OviTex products are designed with over 95% biologic material and less than 5% polymer/synthetic content[24] - OviTex LPR is tailored for robotic-assisted hernia surgical repairs, with 4 total SKUs available after commercial introduction of 3 additional SKUs in December 2019[32] Clinical Evidence - The BRAVO study showed a 0% hernia recurrence rate in the first 20 patients at 24 months and a 2% hernia recurrence rate in the first 57 patients at 12 months[34,38] - Post-market clinical studies of competitive materials show hernia recurrence rates of 5% to 23% for resorbable synthetic mesh (Phasix) at 12 to 36 months, and 22% to 33% for biologic matrix (Strattice) at 12 to 24 months[38] Financial Performance - Q2 2020 revenue increased 6% over the prior year period[57] - As of June 30, 2020, total cash and cash equivalents were $85.5 million[57]

Financial Performance - Total revenue for Q2 2020 was $3,507,000, representing a 6.2% increase from $3,303,000 in Q2 2019[17] - Gross profit for the six months ended June 30, 2020, was $4,285,000, up 15.6% from $3,705,000 in the same period of 2019[17] - Total operating expenses increased to $7,251,000 in Q2 2020, compared to $6,207,000 in Q2 2019, reflecting a 16.9% rise[17] - Net loss attributable to common stockholders for Q2 2020 was $6,081,000, compared to a loss of $8,023,000 in Q2 2019, indicating a 24.2% improvement[17] - The company reported a net loss of $13.3 million for the six months ended June 30, 2020, compared to a net loss of $11.2 million for the same period in 2019, indicating an increase in losses of approximately 18.5%[24] - The company incurred net losses of $6.1 million and $13.3 million for the three and six months ended June 30, 2020, respectively, compared to $5.3 million and $11.2 million for the same periods in 2019[91] - Operating losses increased to $13.3 million for the six months ended June 30, 2020, compared to a loss of $11.2 million in the same period of 2019[127] - The company expects to incur losses for the foreseeable future due to ongoing uncertainties related to the COVID-19 pandemic[91] Cash and Liquidity - Cash and cash equivalents increased to $85,471,000 as of June 30, 2020, from $45,302,000 at the end of 2019, showing a 88.7% growth[16] - Cash and cash equivalents at the end of the period were $85.5 million, a significant increase from $15.9 million at the end of June 2019, reflecting a net increase of $40.2 million[24] - As of June 30, 2020, the company had cash equivalents of $84,879,000, an increase from $34,918,000 at December 31, 2019[49] - Cash used in operating activities for the six months ended June 30, 2020, was $13.7 million, slightly higher than $13.0 million for the same period in 2019[24] - Cash provided by financing activities for the six months ended June 30, 2020, was $44.6 million, compared to $12.2 million for the same period in 2019[151] - The company must maintain a minimum cash balance of $2.0 million under the OrbiMed Credit Facility[61] Assets and Liabilities - Total assets rose to $97,550,000 as of June 30, 2020, compared to $67,922,000 at the end of 2019, marking a 43.6% increase[16] - Total liabilities decreased to $34,147,000 as of June 30, 2020, down from $36,960,000 at the end of 2019, a reduction of 4.9%[16] - Stockholders' equity increased significantly to $63,403,000 as of June 30, 2020, compared to $30,962,000 at the end of 2019, reflecting a 104.5% increase[16] - The accumulated deficit as of June 30, 2020, was $181.2 million, highlighting ongoing financial challenges since inception[28] Revenue Sources - Revenue from OviTex for the three months ended June 30, 2020, was $2,942,000, down from $3,212,000 in 2019, representing a decrease of 8.4%[45] - Revenue increased by $0.6 million, or 9%, to $7.2 million for the six months ended June 30, 2020, driven by increased unit sales despite COVID-19 impacts[129] - Unit sales of OviTex increased by 15% to 1,950 units for the six months ended June 30, 2020, compared to 1,694 units in the same period of 2019[129] Expenses - General and administrative expenses increased by 78% from $1.2 million in Q2 2019 to $2.1 million in Q2 2020[114] - Total operating expenses increased by 17% from $6.2 million in Q2 2019 to $7.3 million in Q2 2020[114] - The company incurred stock-based compensation expenses of $943,000 for the six months ended June 30, 2020, compared to $119,000 for the same period in 2019, representing a substantial increase[24] - Research and development expenses decreased by $0.8 million, or 30%, to $1.9 million for the six months ended June 30, 2020, attributed to reduced licensing payments and lower laboratory spending[136] Offerings and Financing - The company raised $44.7 million in net proceeds from a public offering in June 2020, selling 3,000,000 shares at a price of $16.00 per share[30] - The Company closed its IPO in November 2019, raising net proceeds of $50.6 million from the sale of 4,398,700 shares at $13.00 per share[29] - The OrbiMed Term Loans consist of up to $35.0 million, with $30.0 million borrowed from Tranche 1 and $5.0 million available in Tranche 2[152] - The OrbiMed Term Loans bear interest at a rate of 7.75% plus the greater of one-month LIBOR or 2.0%, with a maturity date of November 16, 2023[154] Strategic Focus and Risks - The company is focused on the commercialization of OviTex Reinforced Tissue Matrix and the development of additional medical devices in collaboration with a strategic partner[27] - The company has faced risks including product development uncertainty, the impact of COVID-19, and dependence on collaborative partners[31] - The company plans to continue investing in research and development to enhance existing products and develop new features[89] - The average daily sales at their lowest point in the first half of April 2020 were more than 70% below pre-COVID-19 levels, but improved steadily in May and June[96] Compliance and Governance - The company has not identified any material weaknesses in its internal control over financial reporting as of the end of the reporting period[168] - There are no current material legal proceedings against the company[170]

Financial Data and Key Metrics Changes - Total revenue for Q2 2020 was $3.5 million, an increase of 6% year-over-year, despite significant declines in April due to COVID-19 [9][29] - Gross margin improved to 59% from 58% in the prior year, primarily due to a decrease in charges for excess and obsolete inventory [30] - Loss from operations was $5.2 million in Q2 2020, compared to $4.3 million in the prior year [33] - The company ended Q2 2020 with $85.5 million in cash, bolstered by a successful public offering that raised approximately $45 million [33][34] Business Line Data and Key Metrics Changes - The company reported a significant increase in average monthly revenue of products among surgeons who participated in virtual programs, with a nearly 200% increase [15][58] - Sales and marketing expenses rose to $4.1 million in Q2 2020 from $3.9 million in the same period in 2019, driven by higher salaries and commissions [31] - R&D expenses slightly decreased to $1 million in Q2 2020 from $1.1 million in the prior year [32] Market Data and Key Metrics Changes - The company experienced a significant drop in daily sales in April, with sales more than 70% below pre-COVID-19 levels, but saw a recovery in May and June [9][10] - The sales team adapted to varying hospital access conditions, with improved access noted in many regions by late June [16] Company Strategy and Development Direction - The company is focusing on scaling up its sales force in territories where elective procedures are returning to pre-COVID-19 levels [22] - TELA Bio is implementing virtual sales solutions to educate surgeons about its product portfolio, which has been well received [14][15] - The company is actively pursuing additional IDN and GPO contracts while managing cash judiciously [25][34] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding the impact of COVID-19 on future sales, noting that the situation remains fluid with potential for localized restrictions [10][11] - The management team is optimistic about the company's long-term growth potential, emphasizing the strength of their initiatives and commitment to pushing forward [11][37] Other Important Information - The interim analysis of the BRAVO study showed promising patient outcomes with no recurrences or complications at the 24-month follow-up [17][19] - The company is expanding its commercial launch of OviTex PRS products following positive feedback from surgeons [26] Q&A Session Summary Question: How did the business perform in June and what are the trends in July and August? - Management noted a strong recovery in June, with July starting off well, but some moderation was observed due to regional COVID-19 flare-ups [43][44] Question: What factors are driving growth during this period? - Management indicated that growth is driven by new products, expanding sales force, and the success of the TELA LIVE program [48][49] Question: Can you provide insights on the performance of the sales force? - New sales representatives contributed over 10% of revenue in Q2, with a significant increase in revenue from surgeons participating in TELA LIVE programs [55][58] Question: What is the split between hernia and plastic surgery products? - The split remains approximately 90% hernia and 10% plastic surgery products [63] Question: How is the company managing its GPO contracting strategy? - The company is focused on implementing HealthTrust accounts while also pursuing large IDNs, with positive developments in contracting [80][81]

PART I FINANCIAL INFORMATION This section presents the company's financial statements, management's discussion, market risk disclosures, and controls and procedures [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents TELA Bio, Inc.'s unaudited interim consolidated financial statements for the quarter ended March 31, 2020, including balance sheets, statements of operations, and cash flows [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2020 and December 31, 2019 | Balance Sheet Highlights (in thousands) | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $41,411 | $45,302 | | Total current assets | $55,313 | $64,334 | | Total assets | $58,841 | $67,922 | | Total current liabilities | $4,232 | $6,713 | | Long-term debt with related party | $30,381 | $30,243 | | Total liabilities | $34,614 | $36,960 | | Total stockholders' equity | $24,227 | $30,962 | [Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Details the company's revenues, expenses, and net loss for the three months ended March 31, 2020 and 2019 | Statement of Operations (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Revenue | $3,726 | $3,306 | | Gross profit | $2,200 | $1,798 | | Sales and marketing | $5,269 | $3,995 | | General and administrative | $2,518 | $1,324 | | Research and development | $912 | $1,659 | | Loss from operations | ($6,499) | ($5,180) | | Net loss | ($7,220) | ($5,966) | | Net loss per common share | ($0.63) | ($27.00) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2020 and 2019 | Cash Flows (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,307) | ($7,777) | | Net cash provided by (used in) investing activities | $3,932 | ($548) | | Net cash (used in) provided by financing activities | ($514) | $484 | | Net decrease in cash and cash equivalents | ($3,891) | ($7,846) | [Notes to Unaudited Interim Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Interim%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the interim consolidated financial statements - The company has incurred recurring losses and negative cash flows since inception, with an accumulated deficit of **$175.1 million** as of March 31, 2020[23](index=23&type=chunk) - In November 2019, the company closed its IPO, receiving net proceeds of **$50.6 million**[24](index=24&type=chunk) - The full extent of the COVID-19 pandemic's impact on the company's business is highly uncertain and may affect future estimates in financial statements[30](index=30&type=chunk) | Revenue by Product (in thousands) | Three months ended March 31, 2020 | | :--- | :--- | | OviTex | $3,239 | | OviTex PRS | $487 | | **Total revenue** | **$3,726** | - The company has a **$30.0 million** term loan with OrbiMed, a related party, which matures on November 16, 2023, and bears interest at **7.75%** plus the greater of one-month LIBOR or **2.0%**[53](index=53&type=chunk)[54](index=54&type=chunk)[56](index=56&type=chunk) - As a subsequent event, in April 2020, the company implemented temporary base salary reductions for all employees, including senior executives, in response to the COVID-19 pandemic[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 financial performance, noting a 13% revenue increase and widened net loss, while addressing COVID-19 impacts and liquidity - The company is a commercial-stage medical technology firm focused on soft tissue reconstruction with its OviTex and OviTex PRS product lines, which are sold to over **265 hospital accounts**[76](index=76&type=chunk)[78](index=78&type=chunk) - In response to COVID-19, the company initiated cost-containment measures in April, including salary reductions for senior executives (**30-35%**) and other employees (**5-20%**), a hiring freeze, and suspension of 401(k) matching contributions[98](index=98&type=chunk) - The COVID-19 pandemic led to the deferral of elective surgeries, which began to impact revenue in the second half of March 2020, with a significantly greater negative financial impact expected in the second quarter of 2020[99](index=99&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) | Financial Summary (in thousands) | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,726 | $3,306 | $420 | 13% | | Gross profit | $2,200 | $1,798 | $402 | 22% | | Gross margin | 59% | 54% | - | - | | Total operating expenses | $8,699 | $6,978 | $1,721 | 25% | | Loss from operations | ($6,499) | ($5,180) | ($1,319) | 25% | | Net loss | ($7,220) | ($5,966) | ($1,254) | 21% | - As of March 31, 2020, the company had **$46.7 million** in cash, cash equivalents, and short-term investments and believes these resources are sufficient to fund operations for at least the next **12 months**[115](index=115&type=chunk)[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, including credit risk, interest rate risk from its floating-rate debt, and inflation - The company's cash is held in amounts exceeding the **$250,000** FDIC insurance limit, but at institutions believed to have little or no credit risk[134](index=134&type=chunk) - The OrbiMed Credit Facility has a floating interest rate tied to LIBOR with a **2.0%** floor; as of March 31, 2020, LIBOR was below this floor, so a **1.0%** increase in interest rates would not increase annual interest payments[136](index=136&type=chunk) - The company does not believe inflation has had a material impact on its financial condition or results of operations to date[137](index=137&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[139](index=139&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[140](index=140&type=chunk) PART II OTHER INFORMATION This section covers legal proceedings, updated risk factors, equity sales, and other required disclosures [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently subject to any material legal proceedings - The company is not currently a party to any material legal proceedings[142](index=142&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section updates the company's risk factors, primarily focusing on the significant and uncertain impacts of the COVID-19 pandemic on sales, supply chain, and capital access - The primary update to risk factors is the negative impact of the COVID-19 pandemic on the company's commercialization strategy and sales[143](index=143&type=chunk)[144](index=144&type=chunk) - The deferral of elective surgeries and limited hospital access for sales professionals due to COVID-19 have negatively impacted sales efforts and market penetration for OviTex and OviTex PRS products[145](index=145&type=chunk)[146](index=146&type=chunk) - The company relies on a single supplier, Aroa, in New Zealand, creating a supply chain risk if their operations are disrupted by COVID-19[147](index=147&type=chunk) - The full extent of the COVID-19 pandemic's impact on the business is highly uncertain and cannot be predicted with reasonable accuracy, depending on future developments[150](index=150&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered equity sales and confirms the use of **$50.6 million** net IPO proceeds for commercial expansion and product development as intended - The company's November 2019 IPO generated net proceeds of approximately **$50.6 million** after deducting underwriting discounts and offering costs[153](index=153&type=chunk) - The planned use of IPO proceeds remains unchanged and is allocated to hiring sales and marketing personnel, funding product development, R&D activities, and potential strategic investments[154](index=154&type=chunk) [Defaults Upon Senior Securities](index=28&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports that there were no defaults upon senior securities during the period - None[157](index=157&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[159](index=159&type=chunk) [Other Information](index=28&type=section&id=Item%205.%20Other%20Information) This item is not applicable - Not applicable[160](index=160&type=chunk) [Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including employment agreements, supply addendums, and CEO/CFO certifications - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[162](index=162&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q1 2020 increased by 13% year-over-year to $3.7 million, driven by new sales and increased penetration within existing accounts [11] - Gross profit as a percentage of revenue improved to 59% from 54% in the prior year, attributed to higher revenue and reduced charges for excess and obsolete inventory [12] - Loss from operations was $6.5 million in Q1 2020, compared to $5.2 million in the prior year [14] - Cash, cash equivalents, and short-term investments at the end of Q1 2020 totaled $46.7 million, expected to be sufficient for at least the next 12 months [15] Business Line Data and Key Metrics Changes - Sales and marketing expenses rose to $5.3 million in Q1 2020 from $4 million in Q1 2019, due to higher salaries and commissions from sales expansion [13] - R&D expenses decreased to $0.9 million in Q1 2020 from $1.7 million in Q1 2019, due to reduced licensing payments and lower laboratory expenses [14] Market Data and Key Metrics Changes - The company experienced a significant decline in surgical volumes, with a reported 70% decline in April compared to pre-COVID-19 levels, improving to about 50% in early May [37][38] - The majority of procedures in the portfolio can be deferred, but complex hernias will eventually require surgery, indicating a potential rebound in volumes as elective procedures resume [20][21] Company Strategy and Development Direction - The company is focused on ensuring employee and customer safety, conserving capital, and driving quality engagement with customers through virtual programs [22][23] - Plans to leverage recently awarded GPO contracts to drive adoption of OviTex and OviTex PRS products, with a focus on cost savings for hospital customers [30] - The company aims to expand its surgeon network and continue developing new generations of OviTex products [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty caused by the COVID-19 pandemic and its impact on elective procedures, but expressed optimism about recovery as hospitals begin to resume surgeries [18][21] - The company has implemented cash conservation strategies and is monitoring cash burn relative to revenue [15][25] - Management remains confident in the fundamental strength of the business and its ability to achieve sustainable growth in the long term [34] Other Important Information - The BRAVO clinical study has shown promising results, with a 0% hernia recurrence rate at 24 months in the first 20 patients studied [28] - The company has maintained its entire commercial organization during the pandemic to ensure readiness for recovery [66] Q&A Session Summary Question: How did the quarter progress, particularly in April? - Management noted that April started slow with a 70% decline in surgical volumes, but there was improvement as the month progressed, with May showing a 50% decline compared to pre-COVID levels [37] Question: What is driving growth despite the pandemic? - The company has seen success with virtual surgeon VIP programs, leading to commitments from surgeons to use their products [40] Question: What are the plans for operating expenses? - The company aims to cut variable expenses by 20% to 25% and has implemented salary reductions to conserve cash [44][46] Question: What is the split between OviTex and PRS products? - The mix was approximately 91% for OviTex and 9% for PRS, with a focus on managing inventory effectively [49] Question: How will the company approach market share movement? - The company plans to leverage virtual programs to engage surgeons and drive implementation of their products, especially in the complex ventral and PRS areas [62] Question: What is the status of the BRAVO study data? - The next update on the BRAVO study is expected in Q3, with ongoing presentations during virtual VIP events [79]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Table of Contents (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-37526 TELA Bio, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction ...