Financial Performance - Revenue for Q3 2021 was $7,654,000, representing a 44% increase from $5,313,000 in Q3 2020[18] - Gross profit for the nine months ended September 30, 2021, was $13,154,000, up from $7,572,000 in the same period of 2020, indicating a 74% increase[18] - Total operating expenses for Q3 2021 were $11,819,000, compared to $10,150,000 in Q3 2020, reflecting a 16% increase[18] - Net loss for Q3 2021 was $8,266,000, compared to a net loss of $7,703,000 in Q3 2020, showing an increase in loss of 7%[18] - For the nine months ended September 30, 2021, the company reported a net loss of $24.657 million, compared to a net loss of $21.004 million for the same period in 2020, representing an increase in loss of approximately 17%[27] - Total revenue for the nine months ended September 30, 2021, was $21.089 million, a 68.5% increase from $12.546 million in the same period of 2020[44] - Revenue increased by $2.3 million, or 44%, from $5.3 million for the three months ended September 30, 2020, to $7.7 million for the same period in 2021[91] - The net loss for the three months ended September 30, 2021, was $8.3 million, an increase of $0.6 million, or 7%, from $7.7 million for the same period in 2020[91] Cash and Assets - Cash and cash equivalents decreased to $53,636,000 as of September 30, 2021, down from $74,394,000 at the end of 2020, a decline of 28%[16] - Total assets decreased to $68,809,000 as of September 30, 2021, from $86,458,000 at the end of 2020, a reduction of 20%[16] - Cash and cash equivalents at the end of the period were $53.636 million, down from $81.467 million at the end of the same period in 2020, indicating a decrease of 34.1%[27] - The company reported a net decrease in cash and cash equivalents of $20.8 million for the nine months ended September 30, 2021[141] Liabilities and Deficits - Total liabilities increased to $41,080,000 as of September 30, 2021, compared to $37,432,000 at the end of 2020, an increase of 7%[16] - Accumulated deficit increased to $221,310,000 as of September 30, 2021, from $196,653,000 at the end of 2020, reflecting a 12% increase[16] - The company has an accumulated deficit of $221.3 million as of September 30, 2021[91] - The company anticipates incurring additional losses until it can generate sufficient revenue from its products to cover expenses[31] Research and Development - Research and development expenses for the nine months ended September 30, 2021, were $5,018,000, up from $3,092,000 in the same period of 2020, a 62% increase[18] - Research and development expenses increased by $0.2 million, or 17%, to $1.4 million for the three months ended September 30, 2021, driven by increased testing and development expenses[119] Product Performance - Revenue from OviTex for the nine months ended September 30, 2021, was $16.500 million, up 54.3% from $10.707 million in 2020[44] - The company recognized revenue from OviTex PRS of $4.589 million for the nine months ended September 30, 2021, compared to $1.839 million in 2020, representing a significant growth of 149.5%[44] - Unit sales of OviTex increased by 62% to 5,341 units for the nine months ended September 30, 2021, compared to 3,300 units in the same period of 2020[125] - The OviTex product line is used by more than 380 hospital accounts in the U.S.[84] - The recurrence rate for ventral hernias treated with OviTex is 2.7% at 12 months and remains below 5% at 24 months[83] Operating Activities - The company reported a net cash used in operating activities of $20.844 million for the nine months ended September 30, 2021, compared to $17.352 million in 2020, an increase of 20.5%[27] - Cash used in operating activities for the nine months ended September 30, 2021, was $20.8 million, compared to $17.4 million for the same period in 2020, reflecting an increase of 14.0%[142][143] Expenses - Total operating expenses for the nine months ended September 30, 2021, increased by $8.9 million, or 34%, to $34.9 million, reflecting higher sales and marketing, general and administrative, and research and development costs[123] - Sales and marketing expenses rose by $0.6 million, or 10%, to $6.9 million for the three months ended September 30, 2021, attributed to higher travel and consulting expenses[117] - General and administrative expenses increased by $0.9 million, or 33%, to $3.5 million for the three months ended September 30, 2021, due to higher professional and consulting expenses[118] Financing and Credit Facilities - The company has a credit facility with OrbiMed consisting of up to $35.0 million, with $30.0 million already borrowed[147] - 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[149] - The Company must maintain a minimum cash balance of $2.0 million under the OrbiMed Credit Facility[60] Future Outlook - The company expects to incur losses for the foreseeable future due to ongoing uncertainties from the COVID-19 pandemic[91] - The company plans to continue investing in its commercial organization by hiring additional account managers and clinical development specialists[88] - The company is exploring new packaging technology to increase the shelf life of OviTex products[89]

Revenue Performance - Revenue for Q2 2021 was $7,558,000, a 115.8% increase compared to $3,507,000 in Q2 2020[18] - Total revenue for the six months ended June 30, 2021, was $13.44 million, a 85.5% increase from $7.23 million in the same period of 2020[43] - Revenue from OviTex for the six months ended June 30, 2021, was $10.43 million, up 68.5% from $6.18 million in the same period of 2020[43] - Revenue increased by $4.1 million, or 116%, from $3.5 million for the three months ended June 30, 2020, to $7.6 million for the same period in 2021[90] - For the six months ended June 30, 2021, revenue increased by $6.2 million, or 86%, to $13.4 million from $7.2 million in the same period of 2020[125] Profit and Loss - Gross profit for the six months ended June 30, 2021, was $8,552,000, up from $4,285,000 in the same period of 2020, representing a 99.5% increase[18] - Net loss for Q2 2021 was $8,255,000, compared to a net loss of $6,081,000 in Q2 2020, indicating a 35.9% increase in losses[18] - For the six months ended June 30, 2021, the net loss was $16.39 million, compared to a net loss of $13.30 million for the same period in 2020, representing a 23.3% increase in losses year-over-year[27] - The company reported a comprehensive loss of $8,254,000 for Q2 2021, compared to a comprehensive loss of $6,077,000 in Q2 2020[18] - The company reported a net loss of $8.3 million for the three months ended June 30, 2021, an increase of $2.2 million, or 36%, compared to a net loss of $6.1 million for the same period in 2020[90] Expenses and Liabilities - Total operating expenses for Q2 2021 were $12,398,000, compared to $7,251,000 in Q2 2020, reflecting a 71.5% increase[18] - Total operating expenses for the six months ended June 30, 2021, were $23.1 million, an increase of $7.2 million, or 45%, compared to $16.0 million in the same period of 2020[123] - The company incurred stock-based compensation expense of $2.11 million for the six months ended June 30, 2021, compared to $943,000 for the same period in 2020, indicating a significant increase in compensation costs[27] - Total liabilities increased to $38,834,000 as of June 30, 2021, compared to $37,432,000 at the end of 2020[16] - Total accrued expenses and other current liabilities as of June 30, 2021, amounted to $6,017,000, a slight increase from $5,953,000 as of December 31, 2020[55] Cash and Assets - Cash and cash equivalents decreased to $60,292,000 as of June 30, 2021, down from $74,394,000 at the end of 2020[16] - Cash and cash equivalents at the end of the period were $60.29 million, down from $85.47 million at the end of the same period in 2020, reflecting a decrease of 29.5%[27] - As of June 30, 2021, the company had cash and cash equivalents of $60.3 million and working capital of $63.4 million[136] - The company had a net decrease in cash and cash equivalents of $14.1 million, compared to an increase of $40.2 million in the same period of 2020[141] - The accumulated deficit increased to $213,044,000 as of June 30, 2021, from $196,653,000 at December 31, 2020[16] Strategic Developments - The company has received FDA clearance for OviTex PRS, which addresses unmet needs in plastic and reconstructive surgery, indicating ongoing product development efforts[29] - The company is exploring strategic partnerships for distribution and product development, which may involve low single-digit royalties[88] - The company plans to continue investing in its commercial organization by hiring additional account managers and clinical development specialists to support new accounts[87] - The company anticipates incurring additional losses until it can generate sufficient revenue to cover its expenses, indicating a cautious outlook[30] - The ongoing impact of COVID-19 has led to uncertainty regarding future revenue growth and product development plans[97] Stock and Financing - The Company has an Equity Distribution Agreement allowing it to sell up to $50 million of common stock, with no sales made under this agreement during the six months ended June 30, 2021[61] - The company must maintain a minimum cash balance of $2 million under the OrbiMed Credit Facility[59] - The OrbiMed Term Loan bears an interest rate of 9.75% as of June 30, 2021, with a maturity date of November 16, 2023[60] - The company has used approximately $36.0 million of the net proceeds from its IPO for working capital and general corporate purposes, including product development and marketing[166] - Cash provided by financing activities decreased significantly to $0.2 million in the first half of 2021 from $44.6 million in the same period of 2020, primarily due to a lack of follow-on public offerings[145]

TELA Bio, Inc. (NASDAQ:TELA) Q2 2021 Earnings Conference Call August 11, 2021 4:30 PM ET Company Participants Greg Chodaczek – Investor Relations Tony Koblish – President and Chief Executive Officer Megan Smeykal – Vice President and Corporate Controller Conference Call Participants Drew Stafford – Piper Jaffray Operator Good day and thank you for standing by. Welcome to the TELA Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentati ...

Advancing Soft Tissue Reconstruction Investor Presentation May 2021 Forward Looking Statements This presentation contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this document, including but not limited to statements regarding possible or assumed future results of operations, business strategies, development plans, regulatory activities, market opportunity competitive position ...

TELA Bio Inc. (NASDAQ:TELA) Q1 2021 Earnings Conference Call May 13, 2021 4:30 PM ET Company Participants Hannah Jeffrey - Gilmartin Group Tony Koblish - President and CEO Nora Brennan - CFO Conference Call Participants Anthony Petrone - Jefferies Dave Turkaly - JMP Securities Kyle Rose - Canaccord Operator Good afternoon, ladies and gentlemen, and welcome to the TELA Bio First Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like t ...

[PART I FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents TELA Bio, Inc.'s unaudited interim consolidated financial statements and management's analysis for the three months ended March 31, 2021 [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents TELA Bio, Inc.'s unaudited interim consolidated financial statements and notes for Q1 2021 and 2020 [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show the company's financial position as of March 31, 2021, and December 31, 2020, indicating a decrease in total assets and stockholders' equity, while liabilities remained relatively stable Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :----------------------------- | :------------- | :---------------- | | Total assets | $78,319 | $86,458 | | Total liabilities | $36,628 | $37,432 | | Total stockholders' equity | $41,691 | $49,026 | | Cash and cash equivalents | $65,829 | $74,394 | | Accumulated deficit | $(204,789) | $(196,653) | [Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The Consolidated Statements of Operations and Comprehensive Loss detail the company's financial performance for the three months ended March 31, 2021, and 2020, showing significant revenue growth but also an increased net loss due to higher operating expenses Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $5,877 | $3,726 | | Gross profit | $3,465 | $2,200 | | Operating expenses | $10,734 | $8,699 | | Loss from operations | $(7,269) | $(6,499) | | Net loss | $(8,136) | $(7,220) | | Net loss per common share, basic and diluted | $(0.56) | $(0.63) | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) The Consolidated Statements of Stockholders' Equity outline changes in equity for the three months ended March 31, 2021, and 2020, reflecting the impact of net loss, stock-based compensation, and stock option exercises Stockholders' Equity Changes (in thousands) | Metric | Balance at March 31, 2021 | Balance at March 31, 2020 | | :-------------------------------- | :------------------------ | :------------------------ | | Total Stockholders' Equity | $41,691 | $24,227 | | Accumulated Deficit | $(204,789) | $(175,079) | | Stock-based compensation expense | $694 | $449 | | Net loss | $(8,136) | $(7,220) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows summarize cash movements for the three months ended March 31, 2021, and 2020, indicating a significant net decrease in cash and cash equivalents primarily due to operating activities Cash Flow Summary (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(8,585) | $(7,307) | | Net cash (used in) provided by investing activities | $(22) | $3,932 | | Net cash provided by (used in) financing activities | $36 | $(514) | | Net decrease in cash and cash equivalents | $(8,565) | $(3,891) | | Cash and cash equivalents, end of period | $65,829 | $41,411 | [Notes to Unaudited Interim Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Interim%20Consolidated%20Financial%20Statements) These notes provide essential context and detail for the unaudited interim consolidated financial statements, covering the company's background, risks, liquidity, significant accounting policies, and specific financial line items such as accrued expenses, long-term debt, stockholders' equity, and stock-based compensation - Unaudited interim consolidated financial statements are prepared in accordance with **GAAP** for interim financial information and **Rule 10-01 of Regulation S-X**[31](index=31&type=chunk) - Management makes significant judgments and estimates, particularly for the **fair value of stock-based awards** and **recoverability of inventory**[35](index=35&type=chunk) - The full extent of the **COVID-19 pandemic's impact** on business, results of operations, and financial condition is highly uncertain, and estimates may change in future periods[36](index=36&type=chunk) [(1) Background](index=10&type=section&id=1.%20Background) TELA Bio, Inc. was incorporated in Delaware in 2012, focusing on commercializing OviTex Reinforced Tissue Matrix, a surgical reconstruction medical device technology licensed from Aroa Biosurgery Ltd. The company also conducts R&D for additional medical devices and internally developed technologies, including OviTex PRS, which received FDA 510(k) clearance in April 2019 - TELA Bio, Inc. was incorporated in **Delaware** on April 17, 2012, and wholly owns TELA Bio Limited (UK)[27](index=27&type=chunk) - The company focuses on commercialization and sale of **OviTex Reinforced Tissue Matrix**, licensed from Aroa Biosurgery Ltd[27](index=27&type=chunk) - Received **510(k) clearance** from the U.S. Food and Drug Administration (**FDA**) for **OviTex PRS Reinforced Tissue Matrix** in April 2019 for plastic and reconstructive surgery[27](index=27&type=chunk) [(2) Risks and Liquidity](index=10&type=section&id=2.%20Risks%20and%20Liquidity) The company has incurred recurring losses and negative cash flows since inception, with an accumulated deficit of $204.8 million as of March 31, 2021. It anticipates further losses and faces risks including product development uncertainty, COVID-19 impact, economic uncertainty, and dependence on partners and key personnel - Incurred recurring losses and negative cash flows from operations since inception, with an accumulated deficit of **$204.8 million** as of March 31, 2021[28](index=28&type=chunk) - Anticipates incurring additional losses until sufficient revenue is generated to cover expenses[28](index=28&type=chunk) - Operations are subject to risks including product development uncertainty, the impact of **COVID-19**, economic uncertainty, commercial acceptance, competing technologies, dependence on collaborative partners, and government regulations[29](index=29&type=chunk) [(3) Summary of Significant Accounting Policies](index=10&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This section refers to the complete summary of significant accounting policies in the December 31, 2020 Annual Report, highlighting that the interim financial statements are unaudited and prepared in accordance with GAAP for interim information, with management making estimates and assumptions, particularly regarding stock-based awards and inventory recoverability, and the impact of COVID-19 [Interim Financial Statements](index=10&type=section&id=Interim%20Financial%20Statements) The unaudited interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC Rule 10-01 of Regulation S-X, with only normal recurring adjustments. They do not include all annual disclosures but are deemed adequate and should be read with the December 31, 2020 Annual Report - **Unaudited** interim consolidated financial statements prepared in accordance with **GAAP** for interim financial information and **Rule 10-01 of Regulation S-X**[31](index=31&type=chunk) - All adjustments consist only of normal recurring adjustments[31](index=31&type=chunk) - Should be read in conjunction with the **December 31, 2020 consolidated financial statements** and footnotes included in the Annual Report[31](index=31&type=chunk) [Use of Estimates](index=10&type=section&id=Use%20of%20Estimates) Preparation of financial statements requires management to make estimates and assumptions, with the most significant judgments applied to fair value of stock-based awards and inventory recoverability. Actual results may differ, and the impact of the COVID-19 pandemic introduces further uncertainty to these estimates - Significant judgments are employed in estimates used to determine the **fair value of stock-based awards** and **recoverability of inventory**[35](index=35&type=chunk) - Actual results may differ significantly from these estimates as future events and their effects cannot be determined with precision[35](index=35&type=chunk) - The full extent of the **COVID-19 pandemic's impact** on the Company's business, results of operations, and financial condition is highly uncertain, and estimates may change in future periods[36](index=36&type=chunk) [Revenue Recognition](index=12&type=section&id=Revenue%20Recognition) Revenue is recognized under ASC Topic 606 when control of the promised good transfers to the customer, either upon shipment or when consigned product is used in a surgical procedure. Revenue is recorded at the estimated net sales price, accounting for variable consideration like rebates - Revenue is recognized under **ASC Topic 606** when the customer obtains control of the promised good[37](index=37&type=chunk) - **Control transfers** at the time the product is shipped or delivered, or when consigned product is used in a surgical procedure[38](index=38&type=chunk) - Revenue is recognized at the **estimated net sales price**, including estimates of variable consideration such as contractual rebates[39](index=39&type=chunk) Revenue Disaggregated by Product (in thousands) | Product | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :-------- | :-------------------------------- | :-------------------------------- | | OviTex | $4,667 | $3,239 | | OviTex PRS | $1,210 | $487 | | Total revenue | $5,877 | $3,726 | [Fair value of financial instruments](index=14&type=section&id=Fair%20value%20of%20financial%20instruments) The company classifies fair value measurements into three levels based on input observability. As of March 31, 2021, and December 31, 2020, cash equivalents (money market funds and government agency securities) were classified as Level 1, indicating unadjusted quoted prices in active markets - Fair value measurements are classified into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than active market prices), or **Level 3** (unobservable inputs)[45](index=45&type=chunk) Fair Value Measurement at Reporting Date (in thousands) | Category | March 31, 2021 (Level 1) | December 31, 2020 (Level 1) | | :-------------------------------- | :----------------------- | :-------------------------- | | Cash equivalents – money market fund | $28,393 | $72,889 | | Cash equivalents – government agency securities | $35,000 | — | - The fair value of the related-party **OrbiMed Credit Facility** is impractical to determine[43](index=43&type=chunk) [Net loss per share](index=14&type=section&id=Net%20loss%20per%20share) Basic and diluted net loss per common share are calculated by dividing net loss by weighted-average common shares outstanding. When the company is in a net loss position, basic and diluted EPS are the same, and potentially dilutive securities are excluded as they would be antidilutive - Basic and diluted net loss per common share are the same when the Company is in a **net loss position**[45](index=45&type=chunk) Potentially Dilutive Securities Excluded from Diluted EPS | Category | Three months ended March 31, 2021 (shares) | Three months ended March 31, 2020 (shares) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Stock options (including shares subject to repurchase) | 1,634,458 | 1,482,819 | | Restricted stock units | 185,877 | — | | Common stock warrants | 88,556 | 88,556 | | Total | 1,908,891 | 1,571,375 | [Recently Issued Accounting Pronouncements](index=15&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) As an emerging growth company, TELA Bio has elected to use the extended transition period for new accounting standards. The company plans to adopt ASU No. 2016-02 (Leases) on January 1, 2022, and is evaluating its impact. ASU No. 2019-12 (Simplifying the Accounting for Income Taxes) was adopted and had no impact - As an **emerging growth company**, the Company elected to use the **extended transition period** for complying with new or revised accounting standards[49](index=49&type=chunk) - Plans to adopt **ASU No. 2016-02, Leases**, on **January 1, 2022**, and is currently evaluating its expected impact[50](index=50&type=chunk) - The adoption of **ASU No. 2019-12, Simplifying the Accounting for Income Taxes**, did not have any impact on the Company's consolidated financial statements[51](index=51&type=chunk) [(4) Accrued Expenses and Other Current Liabilities](index=15&type=section&id=4.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities decreased from $5.953 million at December 31, 2020, to $4.673 million at March 31, 2021, primarily due to a reduction in compensation and related benefits Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Compensation and related benefits | $2,234 | $3,666 | | Third-party and professional fees | $1,740 | $1,626 | | Total | $4,673 | $5,953 | [(5) Long-term Debt](index=17&type=section&id=5.%20Long-term%20Debt) Long-term debt primarily consists of the $30.0 million OrbiMed Term Loan, a related-party credit facility maturing in November 2023, bearing interest at 9.75% as of March 31, 2021. The company did not borrow the second tranche and is subject to an end-of-term charge and various covenants Long-term Debt (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | OrbiMed Term Loan (related party) | $30,000 | $30,000 | | Long-term debt with related party | $30,982 | $30,827 | - Entered into the OrbiMed Credit Facility for up to **$35.0 million** in term loans in November 2018, borrowing **$30.0 million** (Tranche 1). Tranche 2 (**$5.0 million**) was not borrowed[55](index=55&type=chunk) - The **OrbiMed Term Loan** matures on **November 16, 2023**, and bears interest at 7.75% plus the greater of one-month LIBOR or 2.0%, resulting in a **9.75%** rate at March 31, 2021[57](index=57&type=chunk) - The facility includes a first priority security interest in assets (excluding IP), a negative pledge on IP, customary events of default, and requires a minimum cash balance of **$2.0 million**[56](index=56&type=chunk) [(6) Stockholders' Equity](index=17&type=section&id=6.%20Stockholders'%20Equity) As of March 31, 2021, the company had 14,440,412 shares of common stock outstanding. In December 2020, an at-the-market offering program was established to sell up to $50.0 million of common stock, though no sales were made under this agreement during the first quarter of 2021 - As of May 3, 2021, the registrant had **14,440,412 shares** of Common Stock, $0.001 par value per share, outstanding[4](index=4&type=chunk) - In December 2020, the Company entered into an Equity Distribution Agreement to establish an at-the-market offering program to sell up to **$50.0 million** of common stock[58](index=58&type=chunk) - No sales were made under the Equity Agreement during the three months ended March 31, 2021[60](index=60&type=chunk) [Warrants](index=19&type=section&id=Warrants) The company had 88,556 common stock warrants outstanding at March 31, 2021, with an exercise price of $28.65 and expiration dates in 2027 or 2028 Common Stock Warrants Outstanding at March 31, 2021 | Category | Outstanding (shares) | Exercise price | Expiration dates | | :------------------------------------ | :---------- | :------------- | :--------------- | | Common stock warrants issued to MidCap | 8,379 | $28.65 | 2028 | | Common stock warrants issued to note payable holders | 15,712 | $28.65 | 2027 | | Common stock warrants issued to convertible promissory note holders | 64,465 | $28.65 | 2027 | | Total | 88,556 | | | [(7) Stock-Based Compensation](index=19&type=section&id=7.%20Stock-Based%20Compensation) The company recorded $0.7 million in stock-based compensation expense for the three months ended March 31, 2021, an increase from $0.4 million in the prior year. Awards are granted under the Amended and Restated 2019 Equity Incentive Plan, with 873,688 shares available for future issuances Stock-Based Compensation Expense (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sales and marketing | $184 | $161 | | General and administrative | $366 | $209 | | Research and development | $144 | $79 | | Total stock‑based compensation | $694 | $449 | - New awards can only be granted under the Amended and Restated 2019 Equity Incentive Plan, with **873,688 shares** available for future issuances at March 31, 2021[62](index=62&type=chunk) - The Company measures employee and nonemployee stock-based awards at grant-date fair value and records compensation expense ratably over the vesting period[63](index=63&type=chunk) [Stock Options](index=20&type=section&id=Stock%20Options) Stock option activity for Q1 2021 included granting 180,575 options and 41,339 cancellations/forfeitures, resulting in 1,634,322 options outstanding at March 31, 2021, with a weighted-average exercise price of $11.50. Unrecognized compensation expense for stock options was $5.8 million, to be recognized over approximately 2.6 years Stock Option Activity Summary at March 31, 2021 | Metric | Number of shares | Weighted average exercise price per share | | :------------------------------------ | :--------------- | :-------------------------------------- | | Outstanding at January 1, 2021 | 1,498,208 | $10.87 | | Granted | 180,575 | $16.99 | | Exercised | (3,122) | $11.46 | | Canceled/forfeited | (41,339) | $12.72 | | Outstanding at March 31, 2021 | 1,634,322 | $11.50 | - At March 31, 2021, the aggregate intrinsic value of outstanding options was **$6.1 million**, and exercisable options was **$4.4 million**[66](index=66&type=chunk) - Total unrecognized compensation expense related to unvested stock option awards was **$5.8 million**, expected to be recognized over approximately **2.6 years**[68](index=68&type=chunk) [Estimating Fair Value of Stock Options](index=20&type=section&id=Estimating%20Fair%20Value%20of%20Stock%20Options) The fair value of stock options is estimated using the Black-Scholes model with assumptions for expected term (simplified method), expected volatility (industry peers), risk-free interest rate (U.S. Treasury), and zero expected dividend yield - The fair value of each grant of stock options was determined using methods and assumptions including expected term, expected volatility, risk-free interest rate, and expected dividend[69](index=69&type=chunk) Weighted Average Assumptions for Stock Option Fair Value (Q1 2021) | Assumption | Value (Three months ended March 31, 2021) | | :-------------------- | :---------------------------------------- | | Expected dividend yield | — | | Expected volatility | 64.3 % | | Risk‑free interest rate | 0.82 % | | Expected term (in years) | 6.25 | - Expected term is estimated using the **simplified method**; expected volatility is based on **industry peers**; risk-free rate is based on **U.S. Treasury** instruments; and **no dividends** are expected[70](index=70&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Restricted Stock Units](index=22&type=section&id=Restricted%20Stock%20Units) The company granted 186,732 restricted stock units (RSUs) during Q1 2021, with 185,877 outstanding at March 31, 2021. The weighted-average grant-date fair value was $16.63, and unrecognized compensation expense was $2.2 million, to be recognized over approximately 3.9 years Restricted Stock Units Activity at March 31, 2021 | Metric | Number of shares | | :------------------------------------ | :--------------- | | Outstanding at January 1, 2021 | — | | Granted | 186,732 | | Canceled/forfeited | (855) | | Outstanding at March 31, 2021 | 185,877 | - Weighted average grant-date fair value per restricted stock unit granted was **$16.63** during the three months ended March 31, 2021[75](index=75&type=chunk) - Total unrecognized compensation expense related to restricted stock units was **$2.2 million**, expected to be recognized over approximately **3.9 years**[75](index=75&type=chunk) [(8) Related-Party Transactions](index=22&type=section&id=8.%20Related-Party%20Transactions) The company has a senior secured term loan facility with OrbiMed, a related party affiliated with a significant stockholder, entered into on November 16, 2018. Further details are provided in Note 5 - On **November 16, 2018**, the Company entered into a senior secured term loan facility with **OrbiMed**[76](index=76&type=chunk) - OrbiMed is an entity affiliated with an owner of a material amount of the Company's outstanding voting securities, making it a related party[76](index=76&type=chunk) - The terms of the debt and related components are described in more detail in **Note 5**[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on TELA Bio's financial condition and results of operations for the three months ended March 31, 2021, discussing the business overview, the impact of COVID-19, components of financial results, detailed comparison of performance, and liquidity and capital resources [Overview](index=23&type=section&id=Overview) TELA Bio is a commercial-stage medical technology company focused on innovative tissue reinforcement materials for soft tissue reconstruction, including OviTex for hernia repair and abdominal wall reconstruction, and OviTex PRS for plastic and reconstructive surgery. The company commercialized OviTex in July 2016 and OviTex PRS in June 2020, expanding its direct sales force and investing in R&D for product enhancements - TELA Bio is a commercial-stage medical technology company focused on designing, developing, and marketing innovative tissue reinforcement materials for soft tissue reconstruction[78](index=78&type=chunk) - Products include **OviTex Reinforced Tissue Matrix** for hernia repair and abdominal wall reconstruction, and **OviTex PRS Reinforced Tissue Matrix** for plastic and reconstructive surgery[79](index=79&type=chunk)[82](index=82&type=chunk) - OviTex commercialization began in **July 2016**, now used by over 330 hospital accounts; OviTex PRS commercial launch expanded in **June 2020**[80](index=80&type=chunk)[82](index=82&type=chunk) - The company markets products through a single direct sales force, predominantly in the United States, with **46 sales territories** as of March 31, 2021[83](index=83&type=chunk) - Investing in research and development to develop additional versions of OviTex and OviTex PRS product lines, including self-adhering technology and new packaging[84](index=84&type=chunk) - Products are manufactured by Aroa, with a fixed cost equal to **27% of net sales** of licensed products[85](index=85&type=chunk) [Business Update Regarding COVID-19](index=25&type=section&id=Business%20Update%20Regarding%20COVID-19) The COVID-19 pandemic continued to impact the company's business in Q1 2021, causing surgery deferrals and increased demand volatility. While manufacturing and supply chain from New Zealand remained largely uninterrupted, sales and marketing adapted to virtual programs. Significant uncertainty remains regarding future revenue growth and product development due to the evolving pandemic - Revenue in **Q1 2021** was impacted by COVID-19 resurgences and lower surgical procedural volumes, though not to the levels seen in early 2020[87](index=87&type=chunk) - Sales team adapted to virtual selling programs, including virtual sales calls, peer-to-peer discussions, webinars, and training, due to evolving hospital access[88](index=88&type=chunk) - Manufacturing and supply chain from Aroa in **New Zealand** has largely been uninterrupted due to effective COVID-19 mitigation efforts there[89](index=89&type=chunk) - Considerable **uncertainty** and lack of visibility regarding near-term revenue growth prospects and product development plans due to the rapidly evolving environment and continued uncertainties from the COVID-19 pandemic[90](index=90&type=chunk) [Components of Our Results of Operations](index=28&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section outlines the key components of the company's financial results, including revenue recognition policies, cost of revenue (primarily licensed product costs and inventory adjustments), amortization of intangible assets, gross profit, and operating expenses (sales & marketing, G&A, R&D), as well as interest and other income/expense [Revenue](index=28&type=section&id=Revenue_Components) Substantially all revenue comes from direct sales of products to U.S. hospital accounts, recognized when control transfers (shipment or surgical use). Recent growth is driven by an expanding customer base, though COVID-19's long-term effect remains uncertain - Substantially all revenue consists of direct sales of products to **U.S. hospital accounts**[91](index=91&type=chunk) - Revenue is recognized when **control transfers**, generally upon product shipment or utilization in a surgical procedure for consignment agreements[91](index=91&type=chunk) - Recent revenue growth is driven by an expanding customer base, but the long-term effect of the **COVID-19** pandemic on revenue generation is unclear[91](index=91&type=chunk) [Cost of Revenue](index=28&type=section&id=Cost%20of%20Revenue_Components) Cost of revenue primarily includes costs of licensed products purchased from Aroa (fixed at 27% of net sales), excess and obsolete inventory adjustments, and shipping costs. These costs are expected to increase with sales volume, but COVID-19 could impact demand and lead to further inventory charges - Cost of revenue primarily consists of costs of licensed products, charges related to excess and obsolete inventory adjustments, and shipping costs[92](index=92&type=chunk) - Products are purchased from Aroa at a fixed cost equal to **27% of net sales** of licensed products[92](index=92&type=chunk) - Cost of revenue is expected to increase in absolute dollars as sales volume grows, but **COVID-19** could lead to additional excess and obsolete inventory charges[92](index=92&type=chunk) [Amortization of Intangible Assets](index=28&type=section&id=Amortization%20of%20Intangible%20Assets_Components) Amortization of intangible assets relates to capitalized milestone payments made or probable to be paid to Aroa for license fees or commercialization rights, recognized over the remaining useful life of the intellectual property after economic benefit is established - Amortization of intangible assets relates to **capitalized milestone amounts** paid or probable to be paid to Aroa[93](index=93&type=chunk) - These amounts are for **license fees** or **commercialization rights** after future economic benefit has been established for a product[93](index=93&type=chunk) - Amortized over the remaining **useful life** of the intellectual property[93](index=93&type=chunk) [Gross Profit and Gross Margin](index=28&type=section&id=Gross%20Profit%20and%20Gross%20Margin_Components) Gross profit is calculated by subtracting cost of revenue and amortization from revenue. Gross margin is influenced by sales volume and inventory obsolescence costs, and is expected to increase as revenue grows - Gross profit is calculated by subtracting cost of revenue and amortization of intangible assets from revenue[94](index=94&type=chunk) - Gross margin percentage is calculated as gross profit divided by revenue[94](index=94&type=chunk) - Gross profit is affected by **sales volume** and **excess and inventory obsolescence costs**, and is expected to increase with revenue growth[94](index=94&type=chunk) [Sales and Marketing Expenses](index=28&type=section&id=Sales%20and%20Marketing%20Expenses_Components) Sales and marketing expenses include salaries, benefits, commissions, stock-based compensation, post-market clinical studies, conferences, and promotional activities. These expenses are expected to increase in absolute dollars with commercial expansion but decrease as a percentage of revenue as sales grow, though COVID-19's impact on expansion plans is uncertain - Sales and marketing expenses consist of market research, commercial activities, salaries, related benefits, sales commissions, and stock-based compensation[95](index=95&type=chunk) - Other significant expenses include post-market clinical studies, conferences, trade shows, promotional activities, travel, and training[95](index=95&type=chunk) - Expected to increase in absolute dollars with **commercial organization expansion** but decrease as a percentage of revenue as revenue grows, though **COVID-19's** long-term effect on expansion plans is unclear[96](index=96&type=chunk) [General and Administrative Expenses](index=28&type=section&id=General%20and%20Administrative%20Expenses_Components) General and administrative expenses primarily cover salaries, benefits (including stock-based compensation) for executive, finance, IT, and administrative functions, along with professional service fees and facility costs. These expenses are projected to increase in absolute dollars to support growth initiatives but decrease as a percentage of revenue over time, with COVID-19's impact on expansion plans remaining uncertain - General and administrative expenses primarily consist of salaries and related benefits, including stock-based compensation for executive, finance, information technology, and administrative functions[98](index=98&type=chunk) - Also include professional service fees for legal, accounting, consulting, investor and public relations, insurance costs, and facility-related costs[99](index=99&type=chunk) - Expected to increase in absolute dollars with **growth initiatives** and headcount expansion but decrease as a percentage of revenue as revenue grows, with **COVID-19's** long-term effect on expansion plans being unclear[100](index=100&type=chunk) [Research and Development Expenses](index=30&type=section&id=Research%20and%20Development%20Expenses_Components) R&D expenses include product research, engineering, development, regulatory compliance, clinical development, salaries, consulting, preclinical studies, and manufacturing partner costs. These costs are expensed as incurred and are expected to increase in absolute dollars for new and enhanced products, with their percentage of revenue varying based on development initiatives - Research and development expenses consist primarily of product research, engineering, product development, regulatory compliance, and clinical development[101](index=101&type=chunk) - Includes salaries, related benefits, stock-based compensation, consulting services, preclinical studies, manufacturing partner costs, laboratory materials, and allocated facilities costs[101](index=101&type=chunk) - Expected to increase in absolute dollars for **new product development** and **enhancements**, with the percentage of revenue varying over time[102](index=102&type=chunk) [Interest Expense](index=30&type=section&id=Interest%20Expense_Components) Interest expense comprises cash interest from credit facilities and non-cash interest from the amortization of final payment fees and deferred financing costs related to indebtedness - **Interest expense** consists of cash interest under credit facilities[103](index=103&type=chunk) - Includes **non-cash interest** attributable to the **amortization of final payment fees** and **deferred financing costs** related to indebtedness[103](index=103&type=chunk) [Other Income](index=30&type=section&id=Other%20Income_Components) Other income primarily includes interest earned on cash and cash equivalents, foreign currency exchange gains and losses, and miscellaneous tax expenses - Other income consists primarily of **income earned** on cash and cash equivalents[104](index=104&type=chunk) - Includes **foreign currency exchange gains and losses** and miscellaneous tax expenses[104](index=104&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the three months ended March 31, 2021, versus the same period in 2020, highlighting significant revenue growth but also increased operating expenses and net loss [Comparison of the Three Months Ended March 31, 2021 and 2020](index=31&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202021%20and%202020) A direct comparison of key financial metrics for the three months ended March 31, 2021, and 2020, showing substantial revenue growth alongside increases in cost of revenue, operating expenses, and net loss Financial Performance Comparison (in thousands, except percentages) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Dollar Change | Percentage Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------ | :---------------- | | Revenue | $5,877 | $3,726 | $2,151 | 58% | | Cost of revenue (excluding amortization) | $2,336 | $1,450 | $886 | 61% | | Amortization of intangible assets | $76 | $76 | — | — | | Gross profit | $3,465 | $2,200 | $1,265 | 58% | | Gross margin | 59% | 59% | — | — | | Sales and marketing | $6,299 | $5,269 | $1,030 | 20% | | General and administrative | $2,756 | $2,518 | $238 | 9% | | Research and development | $1,679 | $912 | $767 | 84% | | Total operating expenses | $10,734 | $8,699 | $2,035 | 23% | | Loss from operations | $(7,269) | $(6,499) | $(770) | 12% | | Interest expense | $(889) | $(879) | $(10) | 1% | | Other income | $22 | $158 | $(136) | (86%) | | Total other expense | $(867) | $(721) | $(146) | 20% | | Net loss | $(8,136) | $(7,220) | $(916) | 13% | [Revenue](index=31&type=section&id=Revenue_Results) Revenue increased by $2.2 million (58%) to $5.9 million in Q1 2021, driven by a 37% increase in OviTex unit sales (1,486 units) and a 148.5% increase in OviTex PRS unit sales (270 units), reflecting commercial organization expansion and increased penetration - Revenue increased by **$2.2 million**, or **58%**, to **$5.9 million** for the three months ended March 31, 2021, from $3.7 million in the prior year[107](index=107&type=chunk) - Increase primarily driven by a **37% increase** in OviTex unit sales (**1,486 units** in Q1 2021 vs. 1,081 units in Q1 2020)[107](index=107&type=chunk) - OviTex PRS unit sales increased significantly from 101 units in Q1 2020 to **270 units** in Q1 2021[107](index=107&type=chunk) [Cost of Revenue](index=31&type=section&id=Cost%20of%20Revenue_Results) Cost of revenue (excluding amortization) increased by $0.9 million (61%) to $2.3 million in Q1 2021, primarily due to higher product purchases to support increased sales volume and a $0.2 million increase in excess and obsolete inventory adjustment - Cost of revenue (excluding amortization of intangible assets) increased by **$0.9 million**, or **61%**, to **$2.3 million** for Q1 2021[108](index=108&type=chunk) - The increase was primarily the result of an increase in products purchased to support higher unit sales[108](index=108&type=chunk) - Included a **$0.2 million** increase in excess and obsolete inventory adjustment[108](index=108&type=chunk) [Amortization of Intangible Assets](index=31&type=section&id=Amortization%20of%20Intangible%20Assets_Results) Amortization of intangible assets remained constant at $76,000 for both the three months ended March 31, 2021, and 2020 - Amortization of intangible assets was **$76,000** for both the three months ended March 31, 2021 and 2020[109](index=109&type=chunk) [Gross Margin](index=31&type=section&id=Gross%20Margin_Results) Gross margin remained stable at 59% for both the three months ended March 31, 2021, and 2020 - Gross margin was **59%** for both the three months ended March 31, 2021 and 2020[110](index=110&type=chunk) [Sales and Marketing](index=31&type=section&id=Sales%20and%20Marketing_Results) Sales and marketing expenses increased by $1.0 million (20%) to $6.3 million in Q1 2021, mainly due to higher salary, benefits, and commission costs from expanding commercialization activities and headcount, partially offset by reduced travel and consulting expenses - Sales and marketing expenses increased by **$1.0 million**, or **20%**, to **$6.3 million** for Q1 2021[112](index=112&type=chunk) - The increase was primarily due to higher salary, benefits, and commission costs from an expansion of commercialization activities and headcount[113](index=113&type=chunk) - Partially offset by lower travel and consulting expenses[113](index=113&type=chunk) [General and Administrative](index=33&type=section&id=General%20and%20Administrative_Results) General and administrative expenses rose by $0.2 million (9%) to $2.8 million in Q1 2021, driven by higher salary and benefits ($0.2 million) and increased non-cash stock-based compensation ($0.2 million), partially offset by lower bad debt expense - General and administrative expenses increased by **$0.2 million**, or **9%**, to **$2.8 million** for Q1 2021[114](index=114&type=chunk) - The increase was primarily due to higher salary and benefits (**$0.2 million**) and higher non-cash stock-based compensation expense (**$0.2 million**)[114](index=114&type=chunk) - Partially offset by lower bad debt expense[114](index=114&type=chunk) [Research and Development](index=33&type=section&id=Research%20and%20Development_Results) Research and development expenses significantly increased by $0.8 million (84%) to $1.7 million in Q1 2021, attributed to higher product development costs, increased salary and benefits, and greater testing and analysis expenses - Research and development expenses increased by **$0.8 million**, or **84%**, to **$1.7 million** for Q1 2021[115](index=115&type=chunk) - The increase was primarily due to increased product development costs, higher salary and benefits, and increased testing and analysis expenses[115](index=115&type=chunk) [Interest Expense](index=33&type=section&id=Interest%20Expense_Results) Interest expense remained relatively flat at $0.9 million for both the three months ended March 31, 2021, and 2020 - Interest expense remained relatively flat at **$0.9 million** for both the three months ended March 31, 2021 and 2020[116](index=116&type=chunk) [Other Income](index=33&type=section&id=Other%20Income_Results) Other income decreased by $0.1 million (86%) to $22,000 in Q1 2021, primarily due to lower interest income compared to the prior year - Other income decreased **$0.1 million**, or **86%**, to **$22,000** for Q1 2021[117](index=117&type=chunk) - The decrease was primarily due to lower interest income[117](index=117&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses TELA Bio's financial liquidity, capital resources, and cash flow activities, highlighting its accumulated deficit, reliance on existing cash and an at-the-market offering program, and the potential need for additional financing, along with details on its long-term debt and contractual obligations [Overview](index=33&type=section&id=Overview_Liquidity) As of March 31, 2021, the company had $65.8 million in cash and cash equivalents and an accumulated deficit of $204.8 million. It expects continued operating losses and relies on existing cash and an at-the-market offering program for future capital, with potential for dilution or restrictive debt covenants if additional financing is needed - As of March 31, 2021, the Company had cash and cash equivalents of **$65.8 million** and an accumulated deficit of **$204.8 million**[118](index=118&type=chunk) - Incurred operating losses since inception and anticipates continued losses in the near term[119](index=119&type=chunk) - Existing cash resources and short-term investments are believed sufficient to meet capital requirements for at least the next 12 months[120](index=120&type=chunk) - Established an at-the-market offering program for up to **$50.0 million** of common stock, but no sales were made in Q1 2021[120](index=120&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows_Liquidity) The company experienced a net decrease in cash and cash equivalents of $8.6 million in Q1 2021, primarily driven by cash used in operating activities, contrasting with a smaller decrease in Q1 2020 which included cash provided by investing activities Cash Flow Summary (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash used in operating activities | $(8,585) | $(7,307) | | Cash (used in) provided by investing activities | $(22) | $3,932 | | Cash provided by (used in) financing activities | $36 | $(514) | | Net decrease in cash and cash equivalents | $(8,565) | $(3,891) | [Operating Activities](index=35&type=section&id=Operating%20Activities_Liquidity) Cash used in operating activities increased to $8.6 million in Q1 2021 from $7.3 million in Q1 2020, primarily due to the net loss and changes in operating assets and liabilities, including increases in inventory and decreases in accrued expenses - Used **$8.6 million** of cash in operating activities during Q1 2021, resulting from a net loss of **$8.1 million** and a **$2.0 million** change in operating assets and liabilities, offset by **$1.6 million** in non-cash charges[123](index=123&type=chunk) - Non-cash charges in Q1 2021 included **$0.7 million** stock-based compensation and **$0.6 million** inventory excess and obsolescence[123](index=123&type=chunk) - Used **$7.3 million** of cash in operating activities during Q1 2020, resulting from a net loss of **$7.2 million** and a **$1.2 million** change in operating assets and liabilities, offset by **$1.1 million** in non-cash charges[124](index=124&type=chunk) [Investing Activities](index=35&type=section&id=Investing%20Activities_Liquidity) Investing activities shifted from providing $3.9 million cash in Q1 2020 (from short-term investment sales) to using $22,000 in Q1 2021 for property and equipment purchases - Cash used by investing activities was **$22,000** in Q1 2021, consisting of purchases of property and equipment[125](index=125&type=chunk) - Cash provided by investing activities was **$3.9 million** in Q1 2020, primarily from the proceeds from the sale and maturity of short-term investments[125](index=125&type=chunk) [Financing Activities](index=35&type=section&id=Financing%20Activities_Liquidity) Financing activities provided $36,000 in Q1 2021 from stock option exercises, a shift from using $0.5 million in Q1 2020 primarily for initial public offering costs - Cash provided by financing activities was **$36,000** in Q1 2021, consisting of proceeds received from the exercise of stock options[126](index=126&type=chunk) - Cash used by financing activities was **$0.5 million** in Q1 2020, consisting primarily of payments made for offering costs from the initial public offering[126](index=126&type=chunk) [Indebtedness](index=35&type=section&id=Indebtedness) The company has a $30.0 million OrbiMed Term Loan, maturing in November 2023, with an interest rate of 7.75% plus LIBOR (or 2.0% floor). It requires monthly interest payments, a principal payment at maturity, an exit fee, and adherence to various covenants, including a $2.0 million minimum cash balance - The Company has a **$30.0 million OrbiMed Term Loan** (Tranche 1) outstanding, maturing on **November 16, 2023**[127](index=127&type=chunk)[131](index=131&type=chunk) - The loan bears interest at a rate equal to **7.75%** plus the greater of one-month LIBOR or **2.0%**[131](index=131&type=chunk) - Requires 60 monthly interest payments, with the entire principal payment due at maturity, and includes an exit fee of **10%** of principal borrowings[131](index=131&type=chunk) - The OrbiMed Credit Facility contains customary events of default and requires maintaining a minimum cash balance of **$2.0 million**[128](index=128&type=chunk)[130](index=130&type=chunk) [Contractual Obligations and Commitments](index=37&type=section&id=Contractual%20Obligations%20and%20Commitments) As of March 31, 2021, there were no significant changes to the company's commitments and future minimum contractual obligations from those reported in its Annual Report - As of March 31, 2021, there were **no significant changes** to the Company's commitments and future minimum contractual obligations as set forth in its Annual Report[132](index=132&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) The critical accounting policies and significant judgments and estimates have not materially changed from those disclosed in the company's Annual Report - The Critical Accounting Policies and Significant Judgments and Estimates included in the Annual Report have **not materially changed**[133](index=133&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) The company did not have any material off-balance sheet arrangements during the periods presented and does not currently have any - The Company did not have, and does not currently have, any **off-balance sheet arrangements** during the periods presented[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risks primarily relate to credit risk from cash equivalents and accounts receivable, and interest rate risk on its floating-rate OrbiMed Credit Facility. Inflationary factors could also adversely affect operating results, though no material impact has been observed to date. The company has immaterial foreign currency exposure and no hedging activities - Financial instruments subject to concentrations of **credit risk** include cash equivalents (highly-rated money market funds and agency securities) and accounts receivable (no collateral required)[135](index=135&type=chunk)[136](index=136&type=chunk) - The **OrbiMed Credit Facility** bears a floating **interest rate risk** (7.75% plus the greater of one-month LIBOR or 2.0%); a **1.0%** increase in interest rates would not increase annual interest payments as LIBOR was below 1.0% at March 31, 2021[137](index=137&type=chunk) - **Inflationary factors** may adversely affect operating results if costs increase more than selling prices, though no material impact has been observed to date[138](index=138&type=chunk) - The Company does not currently have any material exposure to **foreign currency fluctuations** and does not engage in **hedging activities**[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting, concluding that controls were effective and no material changes occurred [Evaluation of Disclosure Controls and Procedures](index=39&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely - Management, with CEO and CFO participation, evaluated disclosure controls and procedures as of March 31, 2021[141](index=141&type=chunk) - Concluded that disclosure controls and procedures are **effective** to provide **reasonable assurance** that required information is recorded, processed, summarized, and reported within specified time periods[141](index=141&type=chunk) [Changes in Internal Control Over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no changes in internal control over financial reporting during the period covered by this Quarterly Report that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - **No change** in internal control over financial reporting occurred during the period covered by this Quarterly Report that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[142](index=142&type=chunk) [PART II OTHER INFORMATION](index=39&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers other information including legal proceedings, risk factors, equity sales, and exhibits for the reporting period [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings - The Company is **not currently subject to any material legal proceedings**[144](index=144&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's 2020 Annual Report - There have been **no material changes** in the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020[145](index=145&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the absence of recent unregistered sales of equity securities and details the use of proceeds from the company's November 2019 IPO, confirming that $30.4 million has been used for working capital, sales and marketing expansion, and R&D, consistent with the original plan [Recent Sales of Unregistered Securities](index=39&type=section&id=Recent%20Sales%20of%20Unregistered%20Securities) The company had no recent sales of unregistered securities - **No recent sales** of unregistered securities[146](index=146&type=chunk) [Use of Proceeds](index=39&type=section&id=Use%20of%20Proceeds) The company completed its IPO in November 2019, raising approximately $50.6 million net proceeds. As of March 31, 2021, $30.4 million of these proceeds have been used for working capital, sales and marketing expansion, and R&D, consistent with the planned use - The IPO of common stock became effective on **November 7, 2019**, and the Company completed the sale of 4,398,700 shares for approximately $57.2 million, receiving net proceeds of approximately **$50.6 million**[147](index=147&type=chunk)[148](index=148&type=chunk) - As of March 31, 2021, approximately **$30.4 million** of the net proceeds from the IPO have been used for working capital and general corporate purposes[151](index=151&type=chunk) - Uses include hiring additional sales and marketing personnel, expanding marketing activities for OviTex and OviTex PRS, and funding product development and research and development activities[151](index=151&type=chunk) - There has been **no material change** in the planned use of proceeds from the IPO[151](index=151&type=chunk) [Purchase of Equity Securities](index=41&type=section&id=Purchase%20of%20Equity%20Securities) The company made no purchases of equity securities - **No purchases** of equity securities[152](index=152&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - **No defaults** upon senior securities[154](index=154&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[155](index=155&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company - **Not applicable**[156](index=156&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) and XBRL instance and taxonomy documents - Includes **Certification of Chief Executive Officer and Chief Financial Officer** pursuant to Rules 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350 (**Sections 302 and 906 of Sarbanes-Oxley Act of 2002**)[159](index=159&type=chunk) - Includes **XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents**[159](index=159&type=chunk) [Signatures](index=43&type=section&id=Signatures) The report is duly signed on May 14, 2021, by Antony Koblish, President and Chief Executive Officer, and Nora Brennan, Chief Financial Officer, pursuant to the requirements of the Securities Exchange Act of 1934 - The report was signed on **May 14, 2021**[163](index=163&type=chunk) - Signed by **Antony Koblish**, President and Chief Executive Officer[163](index=163&type=chunk) - Signed by **Nora Brennan**, Chief Financial Officer[163](index=163&type=chunk)

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 ...