ALLURION TECHNOLOGIES, INC. (ALUR)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 revenue was $5.4M, down sharply year-over-year due to France recall and macro headwinds; gross margin compressed to 58% from 77% YoY, while loss from operations improved to -$12.3M on lower OpEx .
• Full-year 2024 revenue guidance cut again to $30–$35M (from $40–$45M in Q2 and $60–$65M in Q1), with procedure volumes now expected to be flat YoY; a global restructuring aims to reduce operating expenses by ~50% in 2025 and reach adjusted EBITDA profitability by late 2025 .
• AI product revenue (Virtual Care Suite) grew 82% YoY in Q3 as U.S. GLP-1 patients were onboarded; management plans broader deployment of Coach Iris across use cases in 2025 .
• Near-term catalysts: AUDACITY trial top-line readout by year-end and PMA submission module completion into early 2025; remediation plan completed for France, with optimism on resuming commercialization pending regulator feedback .

What Went Well and What Went Wrong

• What Went Well

  • AI product momentum: “AI product revenue in the third quarter from the Virtual Care Suite (VCS) grew by 82% versus prior year…first patients in the United States treated with GLP-1s were on-boarded” .
  • Regional demand resilience: Middle East procedure volumes +20% YoY; parts of Latin America showed macro recovery; management views GLP-1s as a long-term tailwind as churn drives second-line therapy demand .
  • Regulatory progress: Last AUDACITY patient exited; first three PMA modules submitted with positive FDA interactions so far; fourth module with clinical data targeted early next year .

• What Went Wrong

  • France disruption: Temporary suspension of sales, plus a $1.2M revenue reduction from product recall, drove Q3 revenue down to $5.4M (vs $18.2M YoY); gross margin fell to 58% .
  • Destocking and credit risk management: Lower reorder rates and reduced sales to certain accounts pressured revenue; management cited macro headwinds and U.K. compounded/counterfeit GLP-1s .
  • Guidance reset: FY24 revenue cut twice (from $60–$65M to $40–$45M, then to $30–$35M) and volume outlook now flat, signaling slower H2 trajectory and operational overhaul needs .

Financial Results

• Prior-year comparison: Q3 2023 revenue $18.200M and gross margin 77% vs Q3 2024 $5.367M and 58% .
• Sequential trend: Q2→Q3 revenue fell from $11.766M to $5.367M (France recall and destocking), while CFO noted gross margin would have been low 60s without France adjustments, and is expected to recover to low/mid-60s in Q4 .

KPIs and Operational Metrics

Estimates vs Actuals (Q3 2024)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We observed robust growth in procedure volume in the third quarter in regions previously impacted by GLP-1s…Our results were adversely affected by the suspension of sales in France, destocking…Overall, our performance validates the need for considerable change at Allurion…shifting…toward…more profitable and predictable B2B2C…With our new plan going into 2025, I have clarity and excitement about our path forward.” — CEO Dr. Shantanu Gaur .
• “We have also observed robust growth in our AI product revenue…we believe we can expand this business further and plan on testing Coach Iris…in different use cases in the coming months.” — CEO Dr. Gaur .
• “The last patient has exited the AUDACITY trial…we submitted the first three modules for our PMA…We expect to submit the fourth and final module…early next year.” — CEO Dr. Gaur .
• “Margin would have been in the low 60s without that France recall…Q4…in that low to mid-60 area…and…accrete back up to the mid-70s…mostly towards the end of 2025.” — CFO Christopher Geberth .
• “Expense reductions are across all departments…we have increased the number of heads in the sales department…revenue growth…more weighted towards the second half of [2025]…there’s a ramp-up period…it could take several quarters…” — CFO Geberth .
• “Our AI product revenues have grown more than 80% year-over-year…on track to double revenues…by year end…plan on testing Coach Iris…including for patients seeking GLP-1s as a first line option.” — VP Digital Health Brian Conyer .

Q&A Highlights

• PMA status and FDA interactions: Modules 1–3 filed; positive dialogue; plan to submit clinical data module after AUDACITY readout early next year .
• VCS monetization: Per-patient-per-month pricing; basic vs premium tiers; targeting GLP-1 “orphan” patients in high-volume U.S. practices; potential scale from unmet coaching/monitoring needs .
• France impact and recovery: Q3 had ~$1.2M negative revenue adjustment from recall; France historically ~15% of revenue; optimistic on resuming commercialization, timeline not provided .
• Gross margin trajectory: Q4 expected low/mid-60%; recovery toward mid-70s through 2025 as restructuring and volume normalization progress .
• Restructuring cadence and profitability: Bulk of actions in Q4 2024 with ~$3.5M charges; adjusted EBITDA profitability targeted by late 2025 .
• Regional/color: Middle East and parts of Latin America strengthening; GLP-1 churn driving second-line Allurion demand .

Estimates Context

• Wall Street consensus estimates via S&P Global were unavailable at the time of analysis; as a result, formal comparisons versus consensus for Q3 revenue and EPS could not be provided. Actuals: revenue $5.367M; diluted EPS $(0.14) .
• Given the repeated guidance cuts and France disruption, we expect analysts to lower FY24 and early FY25 revenue and margin trajectories; focus likely shifts to AUDACITY/PMA timing, VCS growth cadence, and restructuring execution .

Key Takeaways for Investors

• Q3 reset reflects transitory France recall and macro/destocking; watch for France commercialization resumption and Q4 margin stabilization in low/mid-60% as near-term proof points .
• Structural pivot to B2B2C and direct markets aims to improve predictability and unit economics; execution over “several quarters” implies 2H25 weighting for growth .
• VCS is emerging as a second growth engine with 82% YoY AI revenue growth; U.S. revenue expected from VCS in 2025 even ahead of balloon approval, providing optionality .
• AUDACITY readout and PMA progress are critical catalysts for U.S. balloon entry; combined approach with GLP-1s and second-line therapy positioning could expand TAM .
• Restructuring seeks 50% OpEx reduction in 2025 and late-2025 adjusted EBITDA profitability; monitor Q4 restructuring charge ($3.5M) and OpEx run-rate into 1H25 .
• Margin recovery path outlined to mid-70% by end-2025 hinges on normalization post-France and operational efficiency; Q4 gross margin guide is a near-term test .
• Tactical positioning: Near-term trading likely sensitive to France updates and AUDACITY data; medium-term thesis depends on VCS scale, U.S. regulatory progress, and B2B2C sales effectiveness .