Good day, ladies and gentlemen, and welcome to the Fluidigm Fourth Quarter 2017 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Ms. Ana Petrovic. Director of IR. Ma’am you begin.

Thank you. Good afternoon, everyone. Welcome to the Fluidigm Fourth Quarter 2017 Earnings Conference Call. At the close of the market today, Fluidigm released the financial results for the fourth quarter and full year ended December 31, 2017. During this call, we will review our results and provide commentary on recent commercial activity, market trends and our strategic business initiatives. Presenting for Fluidigm today will be Chris Linthwaite, our President and Chief Executive Officer; and Vikram Jog, our Chief Financial Officer. During the call and subsequent Q&A session, we will make 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 statements regarding our business prospects and growth; expectations for business development and strategic initiatives in 2018; mass cytometry applications and benefits; consumables pull-through projections; revenues for the first quarter of 2018; and other projected financial results. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. Information on these risks and uncertainties and other information affecting our business and operating results is contained in our annual report on Form 10-K, and our most recent Form 10-Q for the quarter ended September 30, 2017, and in our other filings with the SEC. The forward-looking statements in this call are based on the information currently available to us, and Fluidigm disclaims any obligation 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 Investors section of our website. I will now turn the call over to Chris, our President and CEO.

Thank you, Ana. Good afternoon, everyone, and thank you for joining our Q4 and 2017 earnings call. As detailed in our press release today, we made excellent progress in the recent quarter and the full year in the areas we've identified as priorities in positioning Fluidigm for a return to sustainable growth. One year ago today, we told you we were taking necessary steps to change the Company's prospects for the better. We set in motion a series of changes that would transform Fluidigm. We made several commitments to change the focus and culture of Fluidigm, to foster innovation and partnerships, to increase operational efficiency and to improve financial discipline and cash management. We committed to taking bold steps to position Fluidigm as a key partner for translational research with the goal of empowering health care insights of the future. Most importantly, we said that the sum of these actions would position the company for a return to sustainable growth. Over the past four quarters, we have driven meaningful change across every aspect of our business. We achieved significant operating expense reductions for the year, forged new partnerships with industry and academia, and added cash to our balance sheet for financial flexibility. We've built a strong foundation for taking Fluidigm's technologies in mass cytometry and microfluidic genomics to larger markets, more users and expanded applications. We saw proof that our strategies in these businesses are succeeding. We posted strong year-over-year revenue growth for mass cytometry in 2017, supporting our belief that it will be the premier tool to explore the human immune system. Building upon our breakthrough, suspension-based Helios technology, which accelerated oncology and cancer, immunotherapy research, we launched the Hyperion Imaging System. In our high-throughput genomics business, we forged partnerships to develop new content and workflow solutions and continued…

Thanks, Chris, and good afternoon, everyone. Total revenue in Q4 2017 grew 11% year-over-year, driven by mass cytometry and notably high-throughput genomics products. Single-cell genomics product revenue grew modestly on a sequential basis but continued to suffer from unfavorable year-over-year comps. We also recorded strong growth in our mass cytometry service revenue. Favorable foreign exchange rates contributed about three percentage points to the year-over-year revenue growth. Full year 2017 revenue declined by 2% driven primarily by a lower single-cell genomics revenues and to a much lesser extent by a lower high-throughput genomics revenues, partially offset by increased revenues from mass cytometry products and service. Foreign exchange rates had minimal impact on full year revenue. Mass cytometry product revenue grew 26% in the quarter and 38% for the full year across both instruments and consumables. For the fourth consecutive quarter, mass cytometry consumables pull-through tracked above the high end of our 2017 guidance range of $50,000 to $60,000 per year. Genomics product revenue was relatively flat in the quarter and down 26% for the full year versus the year-ago period. Notably, Q4 revenue increased 19% sequentially. High-throughput genomics product revenue in the quarter increased both year-over-year and sequentially across both instruments and consumables. BioMark and EP1 pull-through tracked significantly above our projected range of $33,000 to $38,000 per year. From a regional perspective, in the fourth quarter, we recorded revenue growth of 41% in Europe and 29% in Asia-Pacific year-over-year driven primarily by mass cytometry products. In the United States, however, revenue declined 15% mainly due to lower sales from mass cytometry and single-cell genomics, while the 13% decline for the full year was driven by lower revenue from the single-cell genomics. Our active installed base of instruments at the end of 2017, it was approximately 1,310 compared to 1,340 at…

Thank you, Vikram. 2017 was indeed transformative for Fluidigm. We took decisive actions on many fronts, some painful for the organization, but the most, certainly necessary. These actions yielded significant operating expense reductions, new content and distribution partnerships and an improved balance sheet for greater financial flexibility. I'm particularly pleased with our improved cash management. Our actions produced the stronger, more strategically-focused company that provides a strong foundation going forward. We must translate these actions into more revenue growth in the coming quarters and years ahead. In 2018, expect us to take our technologies in mass cytometry and micro fluid genomics to larger markets and more users and to add new applications. We must build on the momentum in mass cytometry that means new content, capitalizing on Imaging Mass Cytometry. We'll pursue strategic placements in multiple customer segments, emphasizing cancer centers and pharma. We must further develop and execute on our content strategy for high-throughput genomics, continuing to target high-value accounts. And across all our businesses, we'll seek the pressure partnerships, particularly in content and distribution. The foundation we created this year, or in 2017, enables us to pivot to a longer view for our company. In the coming months, expect to hear more about what we are calling Fluidigm 2020, shorthand for where we're taking the company as we enter the second year of our transformation of the business. The natural question now is what is the destination? Where are we headed? In coming months, we will be talking more about that and about the strategic imperatives that we believe will enable us to realize our vision. With that, I'd like to open the line for questions.

Thank you. [Operator Instructions] Our first question comes from Bill Quirk with Piper Jaffray. Your line is now open.

Great. Good afternoon, everyone. This is Alex Nowak on for Bill. Regarding Q1, flat year-over-year despite comp in the single-cell headwind, you're launching Hyperion, and you're coming off a relatively good Q4. So I guess despite these positives, why are you not expecting Q1 to at least grow year-over-year?

Hi, Alex, it's Chris, nice to hear your voice. I'll chip in or I'll start, and maybe have Vikram add a few comments on it. I think there's – as you know, our instrument business, or our business is very balanced from a standpoint that we have a very high instrument portion of the mix of our revenue base, approximately still the stage about half and half between annuities or renewables, like consumables and service, and then analytical equipment sales. There's a – the first quarter is typically a step-down quarter with regards to the prior quarter, the fourth quarter period, year before. And the second, I'll remind is that as you probably recall, as we started shipping a very significant backlog of the laser ablation modules and the Hyperion system kind of in the pre-commercial space. So in the prior comp period, I think, it was north of – I think Vikram provide the exact number?

Between $3 million and $3.5 million.

Yes, $3 million and $3.5 million of instrument sales that were in part of the backlog. So I think if when you look at it on an adjusted comp bases, it is actually quite – this is a continuous of the trend line.

Okay, that’s helpful. Thanks for the remainder on the comp base there. The $2.7 million of consumable orders to one customer, I assume that's not expected to repeat going forward, that's just a onetime bulk purchase?

Yes. There is a cyclicality in the Ag-Bio business, so you are correct in a sense that we'll not necessarily repeat in the first quarter time period. I would say there was a large stocking order that we are fulfilling over a two-quarter period, some of which we took in the fourth quarter and some which will shift in the first quarter. So there was a portion of that benefit that we'll receive likely in the first quarter also. But as I said before, there's a cyclicality as they ramp up for the growing season based upon which geography you're shipping to around the hemisphere, the Northern Hemisphere or the Southern Hemisphere, so I don't expect a significant order repeat with this size of customer in this quarter.

Okay, that makes sense. And then BioMark and EP1 had a nice rebound in the quarter. Just can you provide any more color on what drove the increase and consume legalization on the systems? Was it really just a factor of making sure the existing customers were using their boxes that were already in place?

So I think you’re really talking about the pull-through, right, versus – as compared to instrument placements, right?

That’s correct, pull-through.

Well, I mean, as I kind of intimated, I want to see over a success of quarters to see if the trend plays out. I think a lot of our – a number of our BioMark placements were correlated for a period of time that really predates even me joining the company related to single-cell analysis. And what – you've seen as the value proposition is actually broader than single-cell analysis, we call it bulk genomics here, others call it the mid-density real-time PCR space. There is continued strong demand we think in that market segment. And we think we're now starting to get a better, or a more fair share of the broader market outside of the correlation of the single-cell analysis in the BioMark systems, so those before were C1s and BioMark sold together as a package. And the second part is we have been focusing on consumables and reactivating our installed base. And I think you'll probably recall that was one of the things, the opportunities that I saw when I joined the company in the fourth quarter of 2016, but I felt that there was a significant amount of opportunity for us to reinvigorate our installed base, and we've been steadily layering a new content and talking more actively about the capabilities of our microfluidic system in the BioMark, specifically. And I think the value proposition of the BioMark is as strong today as it was when the product was launched. And I think we're just now doing a little better job of focusing on it.

Okay, that’s helpful. And then just last question from me. I was on the Fluidigm Korea’s website, and I noticed that you're hiring a Director of Product Management, responsible for mass cytometry suite. So obviously, the suites, this business is one of the major growth drivers, so just curious why the new hire, and was there anything going on internally to explain why you are making that change to the team there?

Yes. There's no back story. I'm glad, if you've seen other opportunities or for any of the jobs that we are recruiting for, there's quite a number of on-the-job board, so I appreciate all your help. So on a more serious note, I think mass cytometry, we're really excited about it. We need to add even more horsepower to the team. Our ambitions are growing as we're expanding, as we talked about on the call, expanding more aggressively into the imaging space, which will complement kind of our core value proposition that's more in suspension or flow based. So we’re looking for people have backgrounds ideally in one or the other to help us shore up the team. We've been adding resources in that area, and as you can imagine there is a strong correlation with a very strong growth dynamics we're seeing in mass cytometry. As mass cytometry, and our need for more people to help us develop the next generation of products, to develop content strategies, to build on the capabilities of the system, and then to get those products out the market as quickly as possible. Q - Okay, thank Chris, thanks Vikram.

Yeah, thanks.

Thank you. And our next question comes from Doug Schenkel from Cowen. Your line is now open.

Hi guys, this is Adam Wieschhaus, on for Doug. Thanks for taking my questions. My first one was on the cyto franchise. In Q4, was a first core of the broad commercial Hyperion launch. Can you provide any more details on what percent of cyto placements were driven by that broader launch? Or any color on how important that launch was in driving mass cytometry revenue growth in Q4?

Hi, Adam. First nice to hear your voice again. So, first I’ll kind of comment, we’re not probably in a position we are going to break-out the mix between those two. But I will tell you that this system was launched, as you know, I think, it was October 26, and so it was really not even the full quarter effect is in there. And we'll see – I don't think at this stage it's going to have a – this is really built on the back of the success than the suspension portion of our portfolio, which we were really pleased with the performance in 2017. And I think we’re just extremely optimistic and contend to be a very opportunistic about the opportunities. On the imaging side, that area that was a more nascent technology as we discussed, and so we think it will take more time to grow our footprint on that particular area as we talked to a few times and I know as we talked in our meetings before. This is a significant price point, and also was a newer technology of this pathologist customer segment. And we're going to have to continue to help work on getting the funding sources aligned to convert very strong instant interest in orders.

Okay, that is it, very helpful. And then moving on to a geography question. There was another strong quarter of growth in Asia. Would you be willing to split out the contributions between Japan and China? And may be any color on if the China growth was largely driven by the Ascendas partnership, and was Japan continued to benefit from the new commercial lead there. Thank you.

What I think, I can comment on is that China has actually maintained a relatively constant percentage of our revenue, and so it's strong. It's, as you commented on, it's been a strong source of growth for us. But on a percentage basis, we’ve not seen a material change in the percentage of our business that's coming from China. What's different in the second half of 2017 compared to the first half, and really, compared to 2016 even, is that Japan has been doing just fantastic for us. And we're really optimistic about Japan, we're still heading into the flush quarter, generally speaking, for budget flesh, which is the first quarter of the new year. And we had the strong performance and really the strong execution. And I think I probably, I'm sure you recall, is we made a change in the first half of 2017, and putting a new leader in Japan, a new country leader in Japan, who will reinvigorate that sales organization, I think is really kind of tapped into the talent we had inside the company, and also added some people. And so we're seeing a nice steady growth in there and we're really pleased with our performance in Japan, and we hope to continue to build on that.

Okay, great. Thank you.

Thank you. And our next question comes from [indiscernible]. Your line is now open.

This is [indiscernible] calling from Symphony [ph]. How are you guys doing?

Good.

So two questions, the first one is – I really appreciate you guys giving quarter-over-quarter guidance. My question is at what point in the future would you be comfortable giving annual guidance?

Yes, always a fair question. I think I'm not really in a position right now. We have no current plans to provide full year guidance. But we absolutely know that 2018 is a year where we must show growth. And we really worked hard in 2017 to establish credibility. And we think at this stage, kind of providing quarterly guidance is the right approach for us, particularly given as I talked about, with Alex in the first question, given the weight of instrument sales on our total sales in any given period. So if you look – step back and you look at the kind of the trajectory over the course of the year, I think we're very comfortable this is – we need this to be a growth year that we intend to make this a growth year. But calling the shots in anyone quarter versus another is not appropriate at this time.

Sure. And then the second question I have is given your consumables growth is so strong – I mean, I know currently its up 40% for mass pack. Do you have any visibility over your margins throughout the year as you change your consumable mix?

Well, I kind of give two parts to that, so I think from a margin perspective, yes, I think we're – you're correct, the growth trajectory for that portion of our portfolio is quite significant, it's a high double-digit grower. We think in the near-term, we're going to see margin stabilizing, clearly in the backs of volume increases that's going to be positive for us. When we step back and look at the whole portfolio and we see mix shifts towards higher margin products that should augur well for the future for margin performance. So but the second part is I think we need to take even more proactive stance in how we drive operating efficiencies. So I talked in 2017 about and we talked about in the team, about generating operating leverage, we generated about 16% in savings in OpEx. But we really haven't done much yet in the manufacturing and operations. And I think there's a lot of opportunities, I looked at the first year of the turnaround, we really need to work on our commercial effectiveness, on reallocation of our R&D portfolio and really getting our commercial selling engine reignited. I think the second year, we need to start putting in 2017 is starting to go after margin improvement opportunities. We'll benefit some as you described from a margin shift or from a mix shift in the business. But we're going to take even more proactive approach. And so – and maybe Adam saw on the website, when he was looking a job postings, but also recruiting for a leader of operations for the company. And this is we are looking, this is going to be high-impact role that we look to bringing into the company, and start to look at everything, both our operational footprint, our manufacturing rooftop strategy, our distribution and supply chain, procurement leverage – the whole nine yards. So I'm really excited to meet that person and welcome to the organization and will hopefully be talking about that soon here in the first half of the year.

Thank you. And I’m showing no further questions in the queue at this time, I'd like to turn the call back over to Ana for any closing remarks.

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 first quarter of 2018. Good afternoon, everyone.

Ladies and gentlemen, this does conclude your program, and you may all disconnect. Everyone, have a great day.