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 ...

TELA Bio, Inc. (NASDAQ:TELA) Q4 2019 Earnings Conference Call March 27, 2020 8:00 AM ET Company Participants Stuart Henderson - Vice President, Corporate Development and Investor Relations Antony Koblish - Co-founder, President, Chief Executive Officer Nora Brennan - Chief Financial Officer Conference Call Participants Raj Denhoy - Jefferies & Company, Inc. Matthew O'Brien - Piper Sandler Kyle Rose - Canaccord Genuity Inc. David Turkaly - JMP Securities Operator Good morning, ladies and gentlemen, and welco ...

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, 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 juri ...