Welcome to the Fluidigm First Quarter 2017 Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Ana Petrovic, Director of Corporate Development, Investor Relations. You may begin.

Thank you. Good afternoon, everyone. Welcome to the Fluidigm first quarter 2017 earnings conference call. At the close of the market today, Fluidigm released financial results for the first quarter ended March 31, 2017. During this call, we will review our results and provide commentary on recent commercial activity, market trends and our strategic business initiative. Presenting for Fluidigm today will be Chris Linthwaite, our President and Chief Executive Officer; and Vikram Jog, our Chief Financial Officer. This call is being recorded, and the audio portion will be archived in the Investors section of our website. During the call and subsequent Q&A session, we will make -- we will be making forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends and opportunities. Examples of these forward-looking statements include -- include statements regarding our business prospects and growth, the implementation and anticipated benefit of strategic initiatives and partnerships, opportunities, demand, the sales pipeline and support for our product lines, benefit of new product introduction, cash management and other financial plans and projected financial results for the second quarter of 2017. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. Information of these risks, uncertainties and other information affecting our business and operating results are contained in our annual report on Form 10-K for the year ended December 31, 2016, and our other filings with the SEC. The forward-looking statements in this call are based on information currently available to us, and Fluidigm disclaims any obligations to update these forward-looking statements except as may be required by law. During the call, we will also present some financial information on a non-GAAP basis. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company's operating results as reported under U.S. GAAP. We encourage you to carefully consider our results under GAAP as well as our supplemental non-GAAP information and the reconciliation between these presentations. Reconciliations between GAAP and non-GAAP operating results are presented in a table accompanying our earnings release, which can be found in the Events and Presentation section of our website. I will now turn the call over to Chris.

Thank you, Ana. Good afternoon, everyone, and thank you for joining our first quarter 2017 call today. In the first quarter, we met our expectations and similar to my sentiment last quarter, I'm pleased with our progress, although not satisfied. We definitely see stabilization within our business and the establishment of a foundation critical to reigniting growth. I'm energized about the road ahead and our improving prospects. Since joining in August, and after only 1 quarter as CEO guiding this business turnaround, we've made some meaningful progress as a team. Our recent accomplishments include, the resource reallocation of our research and development portfolio towards more impactful products; the shipment of several new products, including the innovative first-in-class imaging mass cytometry system, as well as immunology panels for both the Helios and BioMark systems; the realignment of our workforce to our strategy; the transformation of our commercial organization; the expansion of our board with 2 new members; the recruitment of new management talent; the implementation of meaningful financial initiatives to preserve cash. With all the changes surrounding Fluidigm over the past 2 quarters, I'd like to thank the entire Fluidigm team for remaining focused and delivering on our commitments. This is an exciting, albeit pivotal, time for us. We are truly changing our competitive mindset and our associated business model with the single-minded mission to reignite revenue growth. Now turning to the first quarter. I'll begin with an overview of our performance, followed by highlights on the quarter, a few market perspectives, an update on our strategic pillars, and then conclude with second quarter financial guidance. Starting with our first quarter financial results. Total revenue for the quarter decreased 12% to $25.5 million from $29 million in the first quarter of 2016. Instrument revenue decreased 22% to $10.7 million from $13.8…

Thanks, Chris, and good afternoon, everyone. Total revenue of $25.5 million in the first quarter was down 12% from $29 million in the year-ago period, and up 2% from $25.1 million in the fourth quarter of 2016. Instrument revenue of $10.7 million decreased 22% from $13.8 million in the year-ago period, due to decreased genomics revenue, primarily single-cell instruments, partially offset by increased mass cytometry revenue. Instrument revenue was flat compared to the fourth quarter of 2016. Consumables revenue of $10.6 million decreased 9% from $11.6 million in the year-ago period, due to lower revenue from genomics products, partially offset by increased revenue from mass cytometry reagents. Consumables revenue increased 3% from $10.3 million in the fourth quarter of 2016. Consumables pullthrough per active system in the first quarter was slightly above our projected ranges, except for the C1 system, which was slightly below its projected range. Service revenue of $4.2 million increased 18% from $3.5 million in the year-ago period, driven primarily by post warranty service contracts. Service revenue was flat compared with the fourth quarter of 2016. From a market perspective, genomics product revenue of $11.4 million decreased 38% from $18.3 million in the prior year period, and decreased 8% sequentially, driven primarily by lower revenue from single-cell genomics products. Mass cytometry product revenue of $9.9 million increased 39% from $7.1 million in the prior year period and increased 16% sequentially, driven primarily by sales of the imaging mass cytometry system and higher antibodies revenue. Notably, in the first quarter, instrument revenue benefited from the fulfillment of a substantial portion of the initial orders for Imaging Mass Cytometry Systems by early adopting customers. By customer type, research customers accounted for 61% of our product revenue of $21.3 million, and applied customers accounted for the remainder. Geographic revenues as…

[Operator Instructions]. Our first question comes from the line of Doug Schenkel from Cowen and Company.

This is Adam Wieschhaus on for Doug. I just had a few on the imaging mass cytometer launch. You noted in the call you enabled 11 customers with IMCs. Were all those placements revenue recognized in the quarter? And how do your expectations for Q2 compare to what you did in Q1?

Adam, I can go first in response -- this is Vikram. In response to your first question, yes, all of those were recognized in revenue in the first quarter.

On the second part, I think that's one of the things and we kind of pack that if necessary or as appropriate is on the Q2 impact is that we did have a bolus of these. As we talked about, we had been building into Q4 and then some in Q1, and so our plan has been to titrate these out in the market at a level and a rate in which we can support them adequately. And there's a number of details including antibody availability and software that makes us want to be very disciplined in our -- kind of a pre-big broad commercial rollout. So for Q2, what you're seeing is a kind of tempered expectations for the rate in which we'll deploy new IMC installations and recognize revenue.

Okay, that's helpful. In Europe, grew sequentially this quarter. I think last quarter had some headwinds associated with the tender process and competitive pressures and the sales force reorganization. So I was just wondering if you could provide any color as to what you attributed the growth to in this quarter compared to last quarter?

The question -- I just want to make sure we're clear Adam, so the growth is -- the focus of the question is really on Europe in particular and kind of...

Yes. The Europe growth...

Yes. I mean I think I'll put in a few things and then maybe Vikram will want to add. I think with regards to Europe for Q1, we did have a number of bids and tenders that have been in place for a year. And the granting cycle came forth and we got those orders in the period, so that was quite helpful. We did have a change in leadership that occurred at the very end of the period, and that team was less impacted by some of the reduction in force than the Americas did, so that may also have contributed to the performance in the period in Q1. Vikram, I'm not sure if there's anything you wanted to add?

No. I think nothing in particular. I think Europe benefited like the other territories from the immuno mass cytometry launch in Q1.

[Operator Instructions]. Your next question comes from the line of Bryan Brokmeier from Cantor Fitzgerald.

So I understand the sequential decline in the revenue into the second quarter, and your guidance, and how you indicated that you expect that to be coming from lower imaging sales, I just want to make sure that -- is that's the only negative impact that you're anticipating sequentially, or are there any -- are you seeing anything on other instruments or in the consumable side, so to give you cause for that lower sequential growth?

I'll open up, and then we can have maybe Vikram add a little bit. I think what we're seeing with regards to single-cell is when you look at it on a year-over-year basis, they will still be -- there was a very significant step-down year-over-year when we talked about -- within the single-cell business dropping 70% year-over-year. We will see, on a year-over-year comp, a continued decline with regards to single-cell. What I can tell you is I think it's flattening out. We still have instruments in our pipeline, anticipate closing them, but the actual rate we close, and there may be plus or minus a few instruments from variability. But I think we're essentially getting to a pretty good level right now and we should grow or at least just roughly stabilize with regards to single-cell around this level. I think the amplitude of mass cytometry and just because it's new for us and then we have a higher instrument -- relatively high instrument mix in the forecast for Q2, and the fact the ASPs for the mass cytometry systems both the Hyperion systems as well as the imaging modules are relatively high, and so they can skew our numbers quite considerably. So I think in the interest of conservatism plus the fact that we had a significant disruption in the selling organization in just the prior period in Q1 that it makes sense for us to temper our expectations for Q2. And then really start to pick up again in the second half of the year. I don't think there's anything else remarkable with regards to the rest of the instrument mix or consumables. I would like to see consumables grow in the period, but I think we're -- right now, we've got tempered expectations.

Okay. And you discussed the Advanta panel. When was the last BioMark panel that you introduced? And prior to the increased focus on the C1, what was sort of the pace of panel introductions that you had?

I think you're onto an important point, Bryan, as that historically the company had not focused on panel launches. And in fact, I think that's a key signaling that I wanted to put forward in the call is that we had historically released general purpose analytical instruments that could be adapted by our -- for our -- by our customers for their unique needs. And I think what's different and you're seeing here is that we now have some pretty clear patterns starting to form in our mind around the highest value content. And in fact, there's additional customer segments beyond the core research business that we should be positioning ourselves kind of standardizing panels and content as that's becoming clear in the marketplace, and providing convenience product assemblies and full systems and workflows for customers to start accelerating both inducing or encouraging them to buy new instruments as well as use the instruments they have in place. I think this is a very, very important piece of signaling that we're going to put in place. And I think you'll see, over the coming periods, a slow and steady, maybe not slow but at least a steady increase with regards to consumables consumption. As it's driven by the strategy, and so you should expect from us to put additional panels out in the marketplace.

Your next question comes from the line of Bill Quirk from Piper Jaffray.

This is Alex Nowak on for Bill today. How should we think about the IMC launch in the second half of the year? And do you have any indication what the funnel currently looks like? Or is it just too early there. And then just second question, what's the list price for the system?

I think I'll take them in reverse order. So at this stage, I don't think we've publicized the final list price for the system. I think that's one of the questions, as that system count -- or that close questions came up, generally speaking, a number of times in the Q4 call, if I remember correctly in the full year. But you can roughly, I guess, that it's a relatively high percentage or close to the reader itself, so that gives you just kind of a rough idea of the magnitude of the commitment for a full system if you buy both pieces together. As you know, it's also an option, you can take advantage of a Hyperion or CyTOF. Hyperion system you've already purchased and add an imaging module to it. Answering your first question with regards to the funnel size. I think we're very encouraged about the size in which it's building up. I think that though with many reasons that will trigger, some cases, customers -- prospective customers need to put forward grants for this, so the grant writing process creates some variability in the amount of time to free up this level of funding. In the biopharma accounts, these get in the budget cycles. We've started feeding that budget cycle process. And I think we'll see -- we should see opportunities pop in the second half of the year, but frankly, it could also work itself into 2018 as people put these into their budgets and then those funding cycles come through.

Okay, and then how should we view operating expenses, I guess, for the rest of the year? Should we take the number in Q1 and figure that's a normal figure? And assume it's a good run rate for the rest of the year?

Yes, so I'll recall what we had said in the last conference call. We had said we would expect to generate a savings of about $8 million. And they would be realized over the last 3 quarters of 2017. So between Q2 and Q4, we expect to realize about $8 million of savings. So as you've seen in the guidance that we put forth for Q2, there's already a reduction in operating expense when compared to Q1, which in turn was slightly lower than the sequential period in Q4.

Okay, and then just last question for me, just looking at the cash flow, you have about 4 to 5 quarters of cash left, I'm just curious, how should we think about cash management here? And any plans or I mean -- and when you look at cash, would you think on taking on more debt? Or would you prefer to tap the equity markets if you need to?

Yes, so obviously, without giving guidance any more than we have, we've signaled a reduction in cash flow again for the second quarter in a row. We had a reduction in cash flow outflow between Q4 and Q1 to the tune of about $2 million. And we are signaling another reduction between Q1 and Q2 as well, so that is a reflection again of the cost control measures that we have put in place already. So I think we recognize the cash outflow or the cash balance, obviously, is decreasing every quarter, but we have taken steps and we'll continue to take steps to pay attention to cash flow.

There are no further questions at this time. I'll turn the call back over to the presenters.

We'd like to thank everyone for attending our call. A replay of this call will be available on the Investors section of our website. This concludes the call, and we look forward to the next update following the close of the second quarter of 2017. Good afternoon, everyone.

This concludes today's conference call. Thank you for your participation. Have a wonderful day. You may now disconnect.