Good day, ladies and gentlemen, and welcome to the Fluidigm Second Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to turn the conference over Vice President of Investor Relations, Agnes Lee. You may begin.

Thank you. Good afternoon, everyone. Welcome to the Fluidigm second quarter 2018 earnings conference call. At the close of the market today, Fluidigm released the financial results for the first quarter ended June 30, 2018. During this call, we will review our results and provide commentary on recent commercial activity, market trends and our strategic business initiatives. Presenting from 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 sales and growth in our target markets, increasing customer adoption of our products, our sales pipeline, revenues for the third quarter of 2018, operating expense, cash flow and revenue trends for the year 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 for the year ended December 31, 2017, as well as in our 10-Qs and other filings with the SEC. The forward-looking statements in this call are based on 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 in 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 for joining for our second quarter 2018 earnings call. As detailed in our press release this morning, this quarter we had strong double-digit top-line results powered by exceptional mass cytometry and total consumables growth. The promise of our technology is to empower healthcare insights of the future is becoming increasingly evident. And this quarter we are seeing momentum in our instrument placements to pharma targeted cancer and translational research centers. Our strategic initiatives are firing on all cylinders with market expanding, customer adoption, new innovative product introductions, partnerships and disciplined financial management. We will update you on our progress today. I like to begin with an overview of our financial results for the quarter and then discuss markets and strategy. Then I'll turn the call over to Vikram Jog, our CFO, for a more detailed financial review before offering closing remarks and taking questions. Total revenue for the second quarter was $26.4 million, an increase of 11% from the year ago period. Our second quarter results included considerable strength in mass cytometry in both instruments and consumables. Robust instrument placements across pharma, translational research and cancer centers were highlighted by our conversion of mass cytometry opportunities into orders at leading institutions around the world. Furthermore, mass cytometry consumables growth was strong, partially driven by remarkable adoption of our Maxpar Human Immune Monitoring Panel that was launched early in the second quarter. Our high throughout genomics consumables delivered double-digit growth on a year-over-year basis. More details on the results later. Closing out the financial overview, our results this quarter also reflected operating leverage and disciplined cash management. We are ramping up our operating excellence program and I look forward to future updates on our progress. Let’s turn now to a discussion of our revenue performance in our geographic regions.…

Thanks, Chris and good afternoon, everyone. Total Revenue of $26.4 million in Q2 2018 increased 11% year-over-year. Favorable foreign exchange rates contributed about 2 percentage points to the year-over-year growth. Mass cytometry revenue comprising instruments, consumables, and service increased 32% year-over-year, and 53% sequentially driven by higher instrument revenue. As you may recall, last quarter a few mass cytometry orders were delayed and we saw those orders come through this quarter. We continue to have a robust pipeline of orders. Consumables and service revenue delivered solid year-over-year growth in the second quarter, reflecting strong utilization of our install base. Consumables pull through continues to track above the high-end of our 2018 guidance of $60,000 to $65,000. Microfluidic genomics revenue comprising instruments, consumables, and service decreased 5% year-over-year and 22% sequentially in the second quarter. The year-over-year decrease was driven by lower instrument sales, partially offset by double-digits consumables growth. On a sequential basis, microfluidic genomics product revenue was down due to both instruments and consumable sales. As a reminder, genomic sales are subject to quarterly variations in line with purchasing patterns of our high throughput customers. Biomark and EP1 consumables pull through remained above the high-end of our guidance range for the third consecutive quarter. Rounding out our pull through performance in the quarter access array and Juno pull through track slightly below are projected range and C1 pull through track significantly below our projected range. From a regional perspective in the second quarter, we recorded revenue growth of 18% in Europe and 24% in Asia Pacific year-over-year, driven primarily by increased revenue from genomics. China revenue decreased 21%, primarily due to timing of customer orders. On a year-to-date basis China was up 10%. Notably in Q2, we returned to growth in the United States, driven by higher mass cytometry…

Thanks, Vikram. Before we close the call, I have some color to provide on the announcement -- an additional announcement that we released earlier today. Steve McPhail, our Chief Commercial Officer since 2016 will be retiring early in 2019. Steve will turn 65 in February and I fully support his decision to shift his primary focus to family priorities and his special involvement in an award winning non-profit with the terrific mission called Improved Care Now that focuses on improving the quality of care for children affected with Crohn's disease and IBD. He serves on the Board of Directors there as well as the Board of Visitors at the North Carolina Children's Hospital. By giving us a long notice period, Steve provides us ample opportunity to plan for his eventual transition. We have made incredible strides in the past two years to strengthen our commercial organization. Notably adding talented leaders throughout Asia, Europe and North America. We are well positioned to navigate our way forward without compromising customer services or the sales momentum we have generated. The news is fresh. So we've just begun planning the search process for his replacement. We will be evaluating internal and external candidates who share our passion for unlocking the power of the immune system. I'm confident we will have an exceptional pool of candidates to consider. Steve is a terrific customer advocate leader and a great human being. His passion motivates us all and when the time comes to say good bye, we will share updates with you. Meanwhile, I can't overemphasize our organizational confidence that 2018 is going to be a year of growth for Fluidigm. We've reduced employee turnover, attracted new talent, strengthened our organizational capabilities, we have launched innovative products that researchers desire and we have big plans for the…

Thank you. [Operator Instructions] And our first question comes from Doug Schenkel from Cowen & Company. Your line is now open.

Hi, guys. This is Adam Wieschhaus on for Doug thanks for taking my questions. As you noted it was no solid instrument quarter for mass cytometry. And I think you mentioned last quarter that your installed base of mass cytometry customers was becoming capacity constraint. So as we think about the Helios placements that you made in Q2, do those largely go to the capacity constraint customers or they largely being placed at new customer sites. I'm just trying to get a sense for how the backlog is trending in the quarter and the outlook for utilization for that instrument. Thanks.

Thanks, Adam. Thanks for the question. So I would kind a characterize it a couple of ways. One is that we continue to see the trend of capacity constraints. And so I'd characterize which this quarter for instruments as you might have noticed is one of the best quarters for us at least in the last six quarters from my perspective in the mass cytometry since I came into the company mass cytometry. So we're seen a mix of new customers. You certainly heard in the highlights that we expanded our penetration in some of the comprehensive cancer centers in the U.S. passing that key target of 50% penetration. And we also been adding capacity, but it's largely characterized as still new instrument placements. So we're really pleased with the second half of the year. I think it continues to set up just as we described it on the previous call a quarter ago that there was a good mix of capacity constraint emerging that was feeding our long-term funnels for multi system placements in institutions and industry place at locations. I think it also sets up well for CROs, who are seeing better utilization of the investments they made in the capital equipment and the potential for expansion as well as attracting new customers. So it’s a good blend of that, and that’s why I think we’re just getting started.

Okay, thank you. And your new panel launches for the Biomark instrument are being well received by customers as evidenced by the pull through for the instrument coming in above the guidance range for the last three quarters. However, we believe that the Biomark placements have been roughly flat over that same time. So I just want to make sure the assumption was correct. And if so, do you believe that Biomark placements could start to trend upward in the near future, now that you have some pretty compelling applications for the instrument.

Yes, I’d say that we have tempered expectations on our genomic instruments. So we certainly had a little bit of lumpiness in this particular prior period in the second quarter. But we are pleased with the continued addition of capacity or new consumables are putting in place. But primarily our focus is making this a really strong consumables business. The pull through is phenomenal of Biomarks. And so what we have been really realizing is that we really kind of -- we’re getting underutilization of those systems in place, it will take a lot of fully base load those up and look for capacity expansion. Although we are placing new instruments, but primarily we are putting the focus on the recurring revenue streams and that’s why I think you have seen if you look at the mix of our revenue in this period and it’s certainly part of our strategic roadmap, which is increasing the amount of recurring revenue streams that we generate in the business across all of our platforms.

Okay, that makes sense, Chris. Thanks.

You bet. Thanks, Adam.

Thank you. And our next question comes from Bill Quirk from Piper Jaffray. Your line is now open.

Great, thanks. So Chris, I guess one question two parts to it and you kind of addressed the first part I was just hoping you could elaborate. So, first off on mass cytometry a trend that you noted with respect to the U.S. comprehensive cancer centers. If you could give us a little more details in terms of how they are using mass cyto in those centers? And then secondly and this is perhaps a longer range question, but can you help us think a little bit about interest beyond the academic medical centers in this particular translational space? Thanks.

Sure, thanks again Bill. So, I guess, we’ll kind of start on this the first one and probably will -- and we can get into it always in the future, on follow-up meetings. So I think on the comprehensive cancer centers the utilization is across the board, it’s everything from exploration across new disease states, biomarker discovery we’re seeing an increasing number of sponsored clinical trials work, in which mass cytometry is a correlate now one of the data points that’s being collected in support of those clinical trials. I think we’re just beginning the scratch to surface on our potential, if you think about more than a 1,000 immuno-oncology drugs in the pipeline at some stage and we’re in a very small fraction of those right now as a measurement correlate. So that’s another of the drivers that we’re seeing in place that are helping load up like institution. In addition as you know one of the major trends is creating immune monitoring cores, now the immune monitoring cores is a big thing, it’s a multi-omic story and we’re right in the middle of it. And what we’re doing is we are feeding both base research as well as applied, we’re also seeing some perhaps the beginning of some cannibalization of flow cytometry at lower parameters. So experiments that are being run and two or three or four experiments that are flows cytometry, flow cytometry instrument that we’re able to now offer it, case great showcase example is this human immune monitoring panel that allows you to take what might have been a serious of experiments and put them all in a single tube, pre titrated assays or antibodies against one another with a killer informatics solution against it. And so that’s what we’re really seeing as an evolution…

Got it. Thanks a lot, Chris. And then I guess another follow-up kind of along that same vein. We've seen a lot of interest recently in NGS coming out of the community hospital setting, which is obviously we don't tend to associated that with that rapid adoption of some of these multi-omics technologies. Again, this may be a much longer term question, but are you starting to see any interest coming out of the community at all, in looking at mass cytometry specifically around new disease monitoring as such?

Yes, I can't point to anything in the community hospital level at this point. But what we have seen as more and more hospitals settings around the world where we're having wins that they're seeing in that kind of -- in that truly translational space right now that we’re helping inform some of their decision making internally, and they're also running trials or doing side evaluations within the constructs of their IRBs of course, but they're looking at our technology and seeing what additional value can be generated in parallel to other samples and maybe processing. I can't say, our exposure to NGS is more modest. So I can't connect directly analog for us in the NGS space. They've had a lot of years ahead of us in this particular area where they've -- but I think they're showing the roadmap, which -- this is exactly where we want to go. By kidding things such as the Human Immune Monitoring Panel, I think this is just a proof point about a major trend that we see going forward. About, when you know the specific answers or the questions you want to ask, companies like ours can take those targets, those biomarkers you're looking for, because of the huge design space that we enable on our instrument, which is really a unique capability, we're able to package that all together, and then create gating algorithmic solutions to help clean up the data very quickly and help you lead to an answer. To answer the lead to quickly interpretable report. And by simplifying and automating the research that's' happening in these academic institutions and being published on our goal is to industrialize it in a way that we can penetrate those community hospitals in the future. And so certainly, we'd have ambitions to follow in the path of NGS. But I think right now our goal is, as we said before, is to target those cancer centers and influencers around the world. We've just been talking about the U.S. one so far. But make sure we get this critical mass, this critical networking effect in placements.

Got it, thank you very much.

You bet. Thanks again.

[Operator Instructions]. Thank you. And our next question comes from Paul Knight from Janney Montgomery. Your line is now open

Hey, Chris, congratulations on the growth. Can you talk about the genomic sequential decline from Q1 to $12.8 million, was it single cell? And then what was the positives within economics group?

Thanks, Paul. Thanks for the questions. So I'd say we have not been historically breaking out performance of the single cell business in the context of all of genomics performance. So with that kind of caveat, I'd say, it's in primarily just the lumpiness as it relates to instrument placement cycles. So if you think, if you look at this from first half instead of a quarter just a pure Q2 basis than I think we're setting up exactly where we kind of thought we would be for the first half of the year. And so it's really timing for us in the genomics instrument placements and kind of similar to what I spoken to Cowen when they asked the first question earlier. Our primary, primary focus is on consumables and in that context we're extremely thrilled with the progress that we're making in terms of consumable consumption and driving that demand in genomic specifically and that's double-digit growth for us again in the second quarter.

And on the digital PCR market, are you taking share where you think you're doing within that marketplace?

A digital PCR is a really interesting story. It probably generally is a much longer conversation. But I'd say we were first mover in the digital PCR space, Fluidigm was historically. And it was really almost ahead of its time. We created the capability or introduced the capability on our Biomark platform. But we didn't fully exploit kind of where that first -- when that market was first in its super nascent phase. Now fast forward a little bit a couple more companies that come on the scene and the world moved on and in fact digital PCR is becoming a more larger market. And our value proposition remains. And so we are seeing increasing interest on our platform for digital PCR applications. It's not been an area we’ve historically focused on. But we definitely are quite keen to figure out if there is a way that we can participate in a larger way in the digital PCR market growth, which is one of the faster probably growing segments of the overall PCR market.

Okay. And then on the mass cyto side of the business, can you talk about -- I know there is a backlog you put out, but can you talk to customer order trends, et cetera?

I guess to the extent that I can share. I’d just kind of echo what I shared at the end of the call in the wrap. We had a great quarter in Q2 in instrument placements, it was best quarter in the last six quarters, I think our best days are still ahead of us. I think we're really pleased with the way the build is forming in terms of -- I mean, it starts with happy customers from the first installs. And from the signals that we're getting, we're doing a really good job of base loading those, keeping the service contracts in place, keeping the uptime on the instruments. We're giving them new panels and consumables and reasons to use the instruments. We're seeing an acceleration in terms of publications that have come out. We added 16 publications in the imaging field alone in the second quarter. And we're up 19% in terms of publications and that's what we're looking facing on mass cytometry. So you can see the utilization, we can see that we're coming on the high end relatively high end of our guidance with regards to the consumables, annualized consumables and pull through on those systems as we expand the base. And so I think those are really positive signs about where those organization is heading. And I give out the proof point, we give out the proof point related to penetration passing that critical 50% target. And you can look at that as -- that's just the beginning of penetration. And some of those cases we do have multi-system placements, but we have a huge better market that we could possibly expand into. We're a fraction of how you might measure the flow cytometry market as we presented in our investor presentations we see this market is more than a $0.5 billion market of which we're relatively small player. So I think there is a tremendous amount of upside for us in terms of new instrument placements and in terms of consumables growth over the long-term. And I think that long-term is not here in the future. I think we're going to continue to see acceleration in this business.

Okay, thank you. And on the cash burn side, kind of without that convert fee, your were cash change of $4 million. What do you think the normalized burn rate is quarterly? Is it in that 4 to 5 range?

Yes, hi Paul, this is Vikram. Yes, so every other quarter we have about $2.8 million in cash interest. And yes, I would say you are on the right ballpark. There is some seasonality around that number between Q1 and Q4. Q4 tends to be somewhat lower than that normalized number and Q1 tends to be higher.

Okay, thanks very much.

Thank you. I'm showing no further questions. I would now like to turn the call back to Agnes Lee for closing remarks.

Thank you, Shellie. We'd like to thank everyone for attending our call today. A replay of this call will be available on the investor section of our website. This concludes the call and we look forward to the next update following the close of the third quarter of 2018. Please reach out to us if there are further questions. Good afternoon everyone. Shellie, you may now close the call.

Ladies and gentlemen thank you for participating in today's conference. This does conclude today's program. You may all disconnect, everyone have a great day.