TELA Bio, Inc. (NASDAQ:TELA) Q2 2023 Earnings Call Transcript

Roberto Cuca: Sure. So OviTex grew 43% year-over-year. PRS grew 31% year-over-year. A lot of that, though, that lower growth number from PRS had to do with last year’s second quarter. So second quarter revenues for PRS last year were $3.4 million, which was the highest PRS quarter of the year just for ins and outs reasons. So it was a tough comp on the growth perspective. So we do expect that notwithstanding that, that it’s likely that PRS will return to being a larger grower certainly for the year overall and likely for the second half.

Frank Takkinen: Well, okay. And then last one Sorry, go ahead, Tony.

Tony Koblish: Said both are going to be strong, just to put a point on it.

Frank Takkinen: Perfect. And then last one for me. On the gross margin, good to see that hit 70%. How should we be thinking about gross margin profile for the back half of the year?

Roberto Cuca: So as we pointed out, gross margin will bump around depending on how we order. So when we build inventory, when we buy any inventory, actually, we take a charge or reserve for that purchased inventory in the quarter in which we buy it for all potential exploration or destruction of the product subsequent to that quarter. So the two quarters of this year have been a little bit smoother as far as the amount of inventory that we ordered as between them, but we do expect some bumping up and down. So it’s going to be somewhere between the 66% that we saw in the first quarter and the 70% that we achieved in the second quarter.

Frank Takkinen: Okay. Sounds good. Thanks for taking the questions and congrats on all the progress.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Matt O’Brien of Piper Sandler. Your line is open.

Unidentified Analyst: Hey, this is Phil on for Matt. Congrats on the great quarter. And thanks for taking our questions. For starters, I guess as it relates to guidance, can you help us understand the decision to keep the range this wide? I think it implies growth of 47% to about 70% in the back half. So just help us understand what gets you to the top and bottom of that range?

Roberto Cuca: Sure. So it is a wider range for half the year, but there is still some uncertainty around the COVID-19 and its impact on the quarters. And frankly, the steps up that we’ll be taking in the third and fourth quarter is to achieve that 60% to 65% range reasonably large, and you could see some lagging over from the third to the fourth quarter or some acceleration for the fourth to the third. So to give ourselves room, we’ve just kept it at the same range.

Unidentified Analyst: That’s helpful. And I guess a multi-partner here on GPO. As I think about HealthTrust and how COVID impacted your ability to penetrate into that account during that first contract with them versus where you currently are with that account now, where do you think penetration currently stands? And where do you think it can get to? Is that going to be a meaningful tailwind still just on that first GPO? And then any color on the third GPO, which I believe started April 1.

Tony Koblish: Phil, I would say we’re very early days in terms of penetration, even with HealthTrust, right? So during the COVID period, we probably only had, I don’t know, 16, 18 months of implementation time, given the ups and downs with the pandemic. And we still got to about 30% and 35%, 36% of revenue coming out of HealthTrust. HealthTrust is made up of a whole bunch of systems known as shareholders. We have really only implemented partially into the HCA component of HealthTrust. There are many other shareholders and systems under HealthTrust that we haven’t really touched yet. So I think with a four year run there’s a heck of a lot of ceiling for us to work with there, not just in HCA component of HealthTrust but in all the others as well, whether it’s tenant, stewards, all the rest of the bigs, that are a part of HealthTrust.