Good day ladies and gentlemen and welcome to the Fluidigm's Third 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 call is being recorded. I would now like to introduce your host for today's conference, Agnes Lee, Vice President, Investor Relations. You may begin.

Thank you. Good afternoon everyone. Welcome to the Fluidigm's third quarter 2018 earnings conference call. At the close of the market today, Fluidigm released its financial results for the quarter ended September 30, 2018. I'd also like to let everyone know that our outdated investor presentation with updated financial information has also been posted to the Investors section of our company website. 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 CEO; and Vikram Jog, our CFO. 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 market expansion and funding trends, expected growth in sales and product applications, anticipated benefits of strategic initiatives and collaborations, increasing market adoption of our products, revenues, operating expenses, and cash flow for the fourth quarter of 2018 and other anticipated trends and financial performance. 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 31st, 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 maybe 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 in the reconciliation between these presentations. Reconciliations between GAAP and non-GAAP operating results are presented in the 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, Agnes. Good afternoon everyone and thank you for joining our third quarter 2018 earnings call. As detailed in our press release this afternoon, in Q3, we had strong 17% revenue growth, powered by mass cytometry. Over the last few quarters, revenue has accelerated as customers adopt our premier tools to provide deeper insights into immune function. This quarter, we saw robust instrument placements around the world with exceptional strength in our Hyperion Imaging System. We are seeing evidence of market expansion with a couple of seminal publications, including our first mass cytometry publication in a prestigious clinical journal. We will update you on our progress today. As has been our norm, I'd 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 third quarter was $29 million, an increase of 17% from the year ago period. Our third quarter results included considerable strength in mass cytometry in both instruments and consumables, but with a decline in our microfluidic genomics business. This quarter, there were robust instrument placements across translational research and cancer centers, with acceleration in Hyperion Imaging Systems and Helios Systems. We are seeing a significant pipeline of prospects over the coming quarters, contributing to a larger funnel compared to last year at this time. Mass cytometry consumables growth is ramping with notable adoption of our Maxpar Human Immune Monitoring Panel as well as other consumable products, including repeat purchases from early adopters, who were scaling their usage. We are seeing an uptick in global research efforts and commensurate technology adoption around the world, with well over 500 publications profiling…

Thanks Chris and good afternoon everyone. Total revenue of $29 million in Q3 2018, increased 17% year-over-year. Foreign exchange rates had minimal impact this quarter, consistent with our guidance last quarter. Mass cytometry revenue comprising instruments, consumables and service, increased 50% year-over-year and 31% sequentially. We had strong sales of Helios instruments and especially notable sales of Hyperion Imaging Systems this quarter. Mass cytometry consumables and service revenue also delivered robust year-over-year growth in the third quarter, reflecting increasing utilization of our installed base. Consumables pull-through track above the high end of our 2018 guidance of $60,000 to $65,000. Microfluidic genomics revenue comprising instruments, consumables and service, decreased 13%, both year-over-year and sequentially in the third quarter. The year-over-year decrease was driven by both products and service and the sequential decrease was driven by lower consumables. A significant portion of our consumables revenue is tied to a small number of customers. During this quarter, we were impacted by inventory management in some of our key accounts and then a patent reduction in testing volumes at other key accounts. In addition, we have identified some customers that may be lost business. As a result, pull-through from our microfluidic genomics platforms was lower than our guidance range this quarter. To counteract these headwinds, we have been launching new accounts and launching new products, however, the of market adoption is unpredictable and this may create quarter-over-quarter variability in microfluidic genomics revenue, as we execute on our strategy to expand our customer base through our new applications and workflows. Rounding out our pull-through performance in the quarter. C1 pull-through remained significantly below our projected range. From a regional perspective, in the third quarter, we recorded strong year-over-year revenue growth across all our main geographies, with 19% growth in the United States and 34% in…

Thank you, Vikram. Before I close, I'm delighted to welcome a new member to our Board of Directors, Laura Clague. Laura serves as CFO at Retrophin and previously was CFO at Amylin Pharmaceuticals. Laura is a wonderful addition to our board with her long career as a CFO and here significant experience in the pharma and biotech space. Her expertise and insights will be available addition to the Fluidigm team, particularly as we pursue increased penetration in pharma customers. In closing, Fluidigm is emerging as a leader in the multi-omic revolution in pharma, biotech and translational research. This quarter, we hit key milestones with strong adoption of mass cytometry instruments. Our technology was included in the key publications this quarter for foundational 10,000 Immunome Project and a seminal research published in The New England Journal of Medicine. From a shareholder perspective, I'm confident that our strategy will increase value. Our accelerating revenue growth, impactful innovation and improved operating experience is a winning combination. In the near term, we will drive incremental instrument placements. And longer term, we'll deliver recurring revenue streams in these expanded markets. In conclusion, I'd like to thank our 500 employees for their contributions this quarter. The collective efforts of this team have led us to being names as a finalist in the life science industry awards category of company to watch in 2019. We will find out the results next week. We have really come a long way in the last two years. I look forward to sharing more about our progress in the months ahead as we execute on our Fluidigm 2020 strategy to be a leading provider of indispensable tools to power health care insights. With that, I'd like to open the line for questions.

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

Thank you. Hi guys. This is Dan on for Bill today.

Hi Dan.

Hey. So what's changed in mass cytometry this quarter to deliver this magnitude of outperformance and was there anything strange in order book or timing related?

I'm not sure how to characterize the strange, but I guess, the answer to the first part, the primary point, which is I don't think we talked about in the first half of the year. I think we're pretty adamant in our search and that it was going to be a strong second half story with regards to mass cytometry. And it's really been powered by the twin applications of suspension-based CyTOF technology and imaging-based technology. We saw growth in both categories that are really accelerating the overall growth profile of that particular technology in business line for us. And we talk about imaging, we're approaching the one-year anniversary of the launch of the technology and I think that's also something that's taken some time to build funding. Storyline's in place. And certainly, as you see these publications grow, it's becoming -- I think, pretty clear that this is a must-have technology, and therefore, people are finding opportunities in their budget to buy them.

Okay, great. How are you thinking about the competitive offering from 10x that they recently confirmed at ASHG Conference?

I guess can you be a little more specific around which competitive offering you're teeing on or keying on?

I got the question from, Bill. I'm sorry.

I'm sure Bill [Indiscernible]. Okay.

Yes, sorry about that. That's all I got. Thanks.

Thank you. And our next question comes from the line of Doug Schenkel with Cowen and Company. Your line is now open.

Hi guys, this is Adam Wieschhaus on for Doug.

Hey Adam.

You noted the imaging system was the key driver to mass cytometry revenue growth. Could you provide maybe some additional color on its growth impact in the quarter, for example, how many -- what percent of mass cytometry systems are being driven by the imager or is it increased consumable utilization among existing mass cytometry customers? And maybe one more on that, is there still a heavy educational component required with customers to demonstrate its incremental utility?

All right. That's a fair amount of impact there. So, first, Adam, I'd say that we will, unfortunately, not be breaking out the details of the instrument placements by category type, but I can assure you at least that, that we had growth of, of course, in the absolute number the quantum of number of system placements as well as growth in both categories for us. Now, as far as the consumption dynamics are concerned, because as you probably recall, early on, we were a little reticent to provide increase in range of guidance for mass cytometry pull-through, and part of that's because there's always a factor. We're not sure of the dynamics as how imaging consumption will play out. It's a newer category, a newer product line for us. So far, we have not seen significant change in the consumption dynamics between the two categories, and that's, I think, overall helping the full number to exceed our expectations. In addition, we had -- I think it's really strong launch of content and that content is powering better utilization of systems. And that creates a virtuous cycle that combined with these software releases in which we have better utilization of the system, faster utilization of the system, easier interpretation of the results and that's leading through mix of capacity expansion opportunities and new customers, who are, I think, that feel the water is safe to jump in. And so I think, that's a continuation of a long-term trend for us in which we're seeing a combination of capacity expansion as well as adding new customers that are new to the technology. And that's actually true in both categories. We saw capacity expansion also in the imaging space for prior preexisting customers.

That's very helpful. Thanks Chris. And just on the mass cytometry overall market, you know it did well both in the U.S. and internationally. And I think, you've characterized U.S. opportunity in terms of penetrating the NCI-designated cancer centers. Is there an equivalent target or cancer center equivalent broadly OUS or how you think about targeting the broader OUS market with mass cytometry?

That's an excellent question. Yes, Adam, it is true in each of the regions; there are analogs to the U.S. strategy or the U.S. deployment in the health care and research. And what we talked about, I think, I intimate a little of bit in the prepared remarks. In Europe, it largely works in consortium-based networks, and those consortia configuring reconfigure based upon on the types of questions that are being asked on the countries that are not providing, et cetera. And in this case, that's definitely a part of our target strategy is to ensure that we have good preparation in that key consortia to map those consortia relationships and to ensure that we're getting good market penetration of our technology, at least, in the hands of one consortia member, if not more times those consortia collaborators feat multiple nodes or networks. So, yes, it's a very important part of our strategy. We've been developing target accounts, and going after those targeted accounts based upon our strategy in Europe. In Asia-Pacific, we're providing, I think, a similar strategy in Japan and we're earlier days in the balance of Asia.

Okay, great. Thank you.

You got it. Thanks Adam.

Thank you. And our next question comes from the line of Paul Knight with Janney Montgomery. Your line is now open.

Hi Chris, congratulations on the topline. Can you talk about the DNA side of the business, the genomics side of the business? Specifically, how is the BioMark HD performing in the quarter, if you could dig through that a little bit? Thank you.

No problem, Paul. Thanks. So, I'd just comments a little bit. On the BioMark itself, it's true that mix of the two, we've had more challenges and headwinds in a single-cell space, and BioMark has been a stronger line item for us. And BioMark, though, is in our prepared comments, I think we gave some color that it's really a mix of -- over the course of the year; we're up in single -- high single-digits for performance across the whole business in the [Indiscernible] consumable space. In the quarter, we were down, and it's a mix of really three storylines, I think Vikram kind of walked you through it. It kind of a high level. And largely, as we relatively concentrated customer base, we've been expanding broadening our customer base through new partnerships, such as the partnerships with Ascendas Genomics. And launching new content to expand utilization and to drive new purchases of the system, and that's taking some time to diversify our customer base. In the meanwhile, we're therefore a little more vulnerable to the swings of various customers, especially in the larger more concentrated customer segments. And so I think it came down -- it appears to have come down to a combination of inventory burn down by a couple of accounts, the timing of those disorders. And the second part was related to some maybe perhaps some changes in a subsection of the customers and their competitiveness in their particular markets, maybe temporal, I'm not sure. We have some information about that as we've been drilling down in the fourth quarter and billing our internal forecasts for the fourth quarter. And then there are some small accounts that we appear to have lost in the time period and we've offset that. And for instance, in China, that we've had an incredible number of new accounts added this past year. And so we are broadening our customer base, but the full consumption and pull-through isn't at the same levels as some of the business that was leaving. So, we'll see over the next few quarters if our overall long-term strategy can -- if this is just a blip on the radar screen or something a little more of a significant trend, but right now, I don't see a major source of concern or -- we're very adamant about the focus on our strategy. On the BioMark, and we have a number of customers that are really having lights out, great growth. So, it's just a mix right now.

Okay. And then on the consumable growth of 3% in the quarter, I know some of it's related to the genomics part of the business, but mass cytometry does -- and will burn a lot of consumables. Are you seeing a pickup on the mass cytometry consumable rate in the quarter and in the business?

That's absolutely, true. It's really kind of a tale of two cities, and mass cytometry has been really spectacular. I believe we'll see how the adjustment comes. We'll give new guidance in the next quarter with our annual updates with regards to pull-through ranges to expect for the system. But I believe that this trend is going to continue to occur, and we're seeing a lot more headroom in terms of pull-through on the mass cytometry systems, and we're much less sensitive to the mix between imaging and suspension than we perhaps some models earlier on at the beginning of the year. So, I think that bodes well for the long-term consumption dynamics. We obviously don't break those out at this exact moment right now, but we both have seen good sequential growth and fantastic year-over-year growth in that category.

Okay. Thanks.

Thank you. [Operator Instructions] And I'm not showing any further questions at this time. I would now like to turn the call back over to Agnes Lee for closing remarks.

Great. Thank you, Ashley. We like to thank you, everyone, for attending our call today. A replay of this call will be available on the Investors section of our website. This concludes the call. We look forward to the next update following the close of the fourth quarter of 2018. Please reach out if you have further questions. Good afternoon, everyone. Ashley, you can close the call now.

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