Good day and thank you for standing by. Welcome to the Fluidigm First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Peter DeNardo with Investor Relations. Thank you. Go ahead.

Thank you, Mike. Good afternoon, everyone. Welcome to Fluidigm's First Quarter 2021 Earnings Conference Call. At the close of market today, Fluidigm released its financial results for the first quarter ended March 31, 2021. During this call, we will review our results and provide commentary on our financial and operational performance, market trends, strategic initiatives and our response to the COVID-19 pandemic. Presenting for Fluidigm today will be Chris Linthwaite, 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 include statements about expected financial performance, including guidance related to revenues, product-line performance, EBITDA, margins, operating expenses and investment plans as well as statements about COVID-19 testing opportunities, planned product releases, collaborations and partnerships, funding sources, market and revenue growth expectations, trends in diagnostics and other clinical markets and Fluidigm's strategic plan to access and grow those markets. 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 models is contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as well as our other filings with the SEC. The forward-looking statements on 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 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 expenses are presented in the table accompanying our earnings release, which can be found in the Investor Relations section of our website. I will now turn the call over to Chris, our President and CEO.

Thank you, Peter, and good afternoon. In the first quarter, we delivered on our financial projections and made incremental progress on our Vision 2025 objectives. Amazingly, this last quarter marked the 1-year anniversary of the global pandemic. While we are mindful of the terrible impact that the pandemic has had on all of us, we are proud of our modest role in helping advance SARS-CoV-2 research and diagnostic testing. Over the last year, we have redeployed the near-term financial benefits of more than $40 million of government investment, plus the proceeds from selling more than 4 million diagnostic tests worldwide to build a foundation for longer-term growth in our core markets and our emerging diagnostics portfolio. Over the last 90 days, we, along with most industry participants, have seen a rapid deceleration in COVID testing demand and some improvement to core business. As a result, we are revising our guide for FY 2021, including a shift in our projected revenue mix to reflect the latest market conditions. Vikram will share more details during his portion of the business update. Today, I will provide a brief overview of new developments in key areas of the business, review some key strategic highlights from the quarter and touch on our product innovation pipeline. On this last point, we are excited to - a much deeper dive into the mass cytometry franchise during our upcoming virtual investor event on May 24, which will include a discussion of Vision 2025, including our strategy, innovation pipeline and markets, and include presentations from select external experts, who will discuss the role mass cytometry plays today, and how it may shape the future of healthcare decision-making tomorrow. We also plan to host a later event focused on our microfluidics business. Before I turn the call over to Vikram…

Thanks, Chris, and good afternoon, everyone. Before turning to our first quarter 2021 financial results, I would like to note that we have posted updated supplemental financial information in addition to our investor presentation on our website. I'll begin by focusing on financial and geographic highlights for the quarter and end with updates to 2021 guidance. As Chris has outlined, in Q1, we delivered on our financial projections and continued our focus on executing on Vision 2025 to deliver sustainable revenue growth. During the quarter, COVID-19 revenue declined sequentially and was below our expectations as testing volumes declined both overall, and for our commercial lab customers. Our sales remained concentrated in university labs and, consequently, ASP remained at the low end of our historical range. Revenues from our base business, which excludes COVID-19-related revenue was higher than expected, primarily in our microfluidics franchise, but also for mass cytometry. Total revenue in the quarter was $32.8 million, an increase of 19% compared to Q1 2020. Product and service revenue of $31 million was at the top end of our guided range of $29 million to $31 million and reflected 28% growth year-over-year. Microfluidics product and service revenue of $17 million increased $7.8 million or 85% year-over-year, primarily driven by COVID-19 revenues, primarily consumables, which contributed $6.5 million of revenue during the quarter. We sold 1.1 million COVID-19 test kits in the quarter, down from the 1.25 million kits that we reported in Q4 2020. At quarter end, 23 biomarker instruments were generating COVID testing results, down from 30 at the end of Q4 2020 as a few of our commercial lab customers discontinued COVID testing. This was partially offset by new customers that commenced testing in Q1. Our base microfluidics business, excluding COVID-19 related revenue grew $1.6 million or 19% versus…

[Operator Instructions] You first question comes from Dan Brennan from UBS.

Hey, guys. Thanks for taking the questions. Maybe to start off, could you just walk us through in terms of your full-year guide on the base mass cytometry business and the base microfluidics business, and so you're basically saying you expect mass cytometry to be ahead of the underlying 16% to 17% of microfluidics to be below it. Just give some color around visibility on that, and you're assuming for new products, because I think, Chris, during your prepared remarks you talked about some demand already that you're seeing from some of the early access stuff, so maybe you can tease it out a little bit for us.

Sure, hi, Dan. Good to hear from you. Maybe, Vikram, you want to go ahead and take that?

Yeah, sure. I can take percentages. As we mentioned, we are not specifying it to a degree of specificity beyond saying that we expect the overall growth rate in mass cytometry to be higher than the 17% that's implied 16% to 17%, that's implied. I would say that it would be in the low to mid-single-digit percentage point higher than the overall growth rate.

Got it. And then, we can just [indiscernible] maybe just talk a little bit on the quarter itself. So I think you talked about the mass cytometry business was down year-over-year, but it be it your [indiscernible]. Chris, I think in the prepared remarks, you talked about some lingering impact from labs maybe not being open. Just give us some color around what transpired in the quarter? Any color on the order book or demand trend, because you are coming off, like, obviously, a very easy comp in 2020. So just give us a sense of that funnel.

Sure.

Yeah, I can - yeah, Chris, go ahead.

Okay, go ahead. You can go first, if you like, go ahead.

Yeah, no, I was just going to say that business overall performed better. I think some of the drag on the business we had already talked about when we gave the guidance. It was more related to, I would say, second degree effects of COVID. So for example, we had a tax permit issue in China that's still ongoing. We mentioned that in our prepared remarks today. And there were some funding issues in other geographies, et cetera. But overall, we performed better than we expected across the business in instruments, consumables and service in the first quarter.

Yeah, and I'll just kind of maybe address the second part of that, Dan. So as Vikram did highlight, I think we'd highlighted where - and most of the things that Vikram just described were all mass cytometry specific. So the tax permitting issues, the Canadian - or the Canadian both lab access and the funding releases in the province national level and some contribution from restricted lab access that continues to occur in certain sections of lockdowns in Canada. So I'll kind of shift to really kind of the leads overall. So what we saw and we talked a little bit about this through the course of last year is our business in the capital equipment, generally speaking, has been a 9- to 12-month leads to close cycle. And we certainly saw a degradation of the leads during the time period of the Q2 immediate shutdown last year. I'd say probably started in - back-half of the first quarter, squarely impacted us in Q2. And then Q3, and continuing through the year, we shifted to digital mediums, the digital conferences and Zooms that we're all tired of going to all the time, but that really, we had to stand up a whole new competency and going through the conferences and more traditional lead generation activities. And so that's, we've seen a steady improvement as all of those new channels have come online and continue to see strength through the first quarter of this year. We're really just been careful about is this was a new normal. So these are leads that are coming through different channels that we'd experienced in the past. What will be the quality of those leads? And what will be the close rates that we've traditionally had from identification a lead or inquiry and qualification through to close, be consistent with our historic experience or not? So we're running that experiment in real time. So far through the first quarter, we took a pretty conservative view on that. It appears to be that it's improving, and they're showing strong quality leads and we're seeing close rates. So we just want to - that's informing part of our incremental confidence in the mass cytometry capital equipment piece, in particular plus the information that we shared about the new products.

And in terms of the new products, obviously, we're going to hear about them more coming up. But again, in terms of maybe some of the - you talked about some of the early, I guess, customers and the interest and the features that you're building. But implicit in the guidance right now, Chris or Vikram, have you baked in a benefit from expected order or trends or demand from these yet-to-be unveiled products?

Yes, that has been baked in.

To a small degree or to a big degree? Can you speak to any, I don't know, any granular quantification, but just any relative degree?

Well, we haven't quantified that as with any new products. We have been careful to temper our expectations with the launch. We believe that, that's been appropriately factored in. But we haven't quantified the exact amount.

Got it. And then, you talked about - I don't want some of the partnerships particularly in the microfluidics side, you talked about Olink and a few others. Just can you speak to what's assumed from some of these partnership opportunities implicit in your 2020 - is there potential that some of these partnerships could be material this year? Or is it more going to be a multi-year opportunity for them to grow into something more meaningful?

Maybe I'll take the first part of that. I know you directed it to Vikram. We have not broken out, so we're not going to break out here the contribution of partnerships versus other core business or other business lines for the measurement period for the guide for so far for the 2021 period. But what we tried to do, I think the qualitative response or certainly my section was to highlight a number of these partnerships, one in the transplant space, which is already contributing now, and we anticipate contributing more in the back half of the year. We talked about the relationship with Olink and so people have had the benefit now seeing kind of their initial projections. So these are things that should contribute. Ultimately, they control the timing and the channel relationship. So what we have in hand is contracts for delivery of the next-generation systems and some forecast from them. So all of these things, we actually will see contributions to these partnerships this year, and we do anticipate that they're going to become increasingly a bigger contributor over the course of those coming years.

And maybe just a few more. Just back to the mass cytometry, so the tax permitting issue in China and the restricted access in Canada, restricted access that's just typical pandemic opening up, but the tax permitting issue in China, maybe I missed it. How meaningful a drag is that? And is that expected to get better in your Q2 guidance or is that baked in later in the year? Just any way to help us think about that?

Yeah, we shared a little color on that in the last, the prior call, which is easy to overlook, and I'll welcome Vikram to add any additional comments. There was, so it impacts all the academic and governments, and it particularly hits capital equipment in China. So for that segment, they file through the provincial level and the national for a tax credit, and there's quite a significant import tax for against western goods and higher capital equipment. That had expired after many years. I think you'll see in the space, other parties have been impacted by this also. It was modeled that it would be restored by the end of the first quarter. That has, so far, entering the second quarter, we still have not seen it fully resolved. So part of it is important to see how things come out of Golden Week, this particular week to see if those provinces start moving forward. We, again, anticipate it's a temporal issue. But since it's one that's completely out of our control we've taken on appropriate conservative view on it.

And maybe last one, so I'm hogging up, just on COVID. Can you speak to the relative conservatism or not implicit in your new guidance? Like how do you feel about what you've assumed now? Do you feel like you've been appropriately conservative from the trends you're seeing and the trends you expect?

I think the only thing I can safely say is that none of us can model anything related to COVID right? And then certainty it's been incredible all of last year and it continues this year. We count on the - we don't conduct the test directly ourselves. We work off of the forecast that come from our testing partners and there's an overlay of public policy. And then the uncertainty on vaccination rates and even vaccine or testing fatigue that at least is something, I think, to talk about in this country. So that's on the negative side of the ledger. On the positive side, it depends on, look, we all want this thing to be done as quickly as possible. It is the belief that the uncertainty of the variance and the role that variant testing will eventually play in this process. So COVID testing as we know it today, we do believe, will evolve into other categories, and respiratory into things related to potentially to variant identification. That's something we think we have a lot to say on the variance because of the unique architecture of our chip. But just for conservatism, we felt it was appropriate to continue - we broke out in our - after the attempt in the earnings press release to kind of breakout COVID, you've got the numbers, specifically for the first quarter. We've given some color for the second quarter. So you can see that we are modeling at this point that it's going to continue to decline and approximately relatively rapidly on sequential quarters. And if we're over aired on that, then that will be something that we'll put back in.

Great. Thanks for taking my questions.

Yeah. Thanks, Dan.

Your next question comes from Sung Ji Nam from BTIG.

Hi, thanks for taking the questions. Just a few questions on the microfluidic side. Chris, you mentioned there are some customers that - I don't know if I misheard it, but there are some customers that are discontinuing COVID testing. And I was kind of curious, are they redeploying the biomark for other purposes? Or kind of how - just if you could talk about that in terms of the capacity that's out there?

Yeah. For sure. That's a very good question. So that's why the penetration of these clinical labs kind of broadly has been a theme that we believe is important, because it establishes beachheads for us for additional categories to move into. Some of the lower-hanging fruit is likely in the laboratory developed testing space, supporting other assays they're running today, or they anticipate 1 of the stand-up new offerings. So I do believe that's going to be a trend that we want to capitalize them, we want to take advantage of these beachheads. It really just depends on - it's a very lab specific. So some cases, they're going back to their core businesses. In some cases, we're part of the technology stack they use in their core business already today. Others are looking at new categories that they perceive to be more durable and are developing offerings for new categories that they perceive to be more durable. So it's something we want to keep a close eye on because we think it's - we don't want to lose these beachheads, and we would need to take advantage of the penetration we've gained over the last 4 quarters - 3.5 quarters of activities related to COVID. So I don't know if there's a trend there. As we see more trending information that provides, I think, hopefully meaningful insights for the business for the future forecast, then we'll share that with you.

Got you. Thank you. And then on the next-gen Biomark that integrates the Juno system and the HD system, do you anticipate that to drive - potentially drive your replacement of your installed base, current installed base of Biomark systems?

I think, it's - it will be our workhorse platform of the future that I feel very confident projecting at this stage. The rate of - and that's part of what we'll discuss probably in more depth when we come to the focused earnings day and get closer - the focused investor event, and we get closer to the actual launch, then we can talk about the positioning of HD the long-term, the tail for support of that platform or the positioning of that platform versus the new platform. I think, it's important to kind of continue to reflect the chips are really the core technology for us. The instrument is going to be really great, we think. And has the chips to open up a whole wide range of sample type, sample substrates, the number of assays that will be run, the amount of testing volume that will queue in a given test or a given batch run. So we imagine flexing continue to flex different combinations of chips to take advantage of that core platform. The replacement cycle is something I can only speculate on at this stage as far as the replacements from HD. As we said, kind of the next-generation chip with this single - or this integrated sample-to-answer cartridge is really important, because we're going to make sure it's retro compatible to the Biomark. It is retro compatible to the Biomark HD as well as this next-generation platform. So it may or may not drive a replacement cycle immediately. I think that's something we'll have to wait and see. It's been a lot of years since we've had a new system in the PCR space.

Got you. And just a clarification, do you foresee this kind of really targeting the clinical diagnostic market more so than the research market?

Yeah. I think, that's a really good redirection. I'm glad you asked that too. Because that is really what we're focused on this platform being the platform, the future for us with the design history files, with the clinic in mind. We do envision this, this will be a Dx product. We'll have RUO applications for it. And so it can be used for developers in both modalities. But it's the Dx future that we're primarily focused on, and I'm sure we'll pick-up some research business with it also along the way.

Got you. And then just lastly for me. Great to hear about your partnership with Olink. Obviously, it sounds very unique in that you're building a purpose-built system for them. Just kind of curious, are there a lot of opportunities out there in your view of this type of relationship, or do you think this is a pretty unique partnership that you have?

In the proteomics space, I think it's probably a unique partnership with regards to our microfluidics platform, and proteomics applications, specifically. And Olink, I think, they're a great partner, and we really look forward to helping them be successful in every way we possibly can. There's - is a great example, this plus the transplant example, this next-generation platform, which why we really want to talk about it and the sample-to-answer chip that goes with it, is because we can envision a whole spectrum of partnership relationships that can emerge from this platform. So there's a lot of predicates in our industry between white-labeled or OEM versions of the platform versus Fluidigm branded product, the ability to customize elements of the software that are specific for applications; and then 1 that's designed or 1 version that can be used for general purposes and contract testing labs that will offer a broad menu of assays that they may develop themselves. So I think this gives us a lot of flexibility in the types of partnership models that will embrace in the future. And that's why we're just really excited about getting these underlying enabling technologies out as quickly as possible into developers' hands.

Great. Thanks so much for taking the questions.

Thank you, Sung Ji.

That was our last question at this time. I will turn the call over to Chris Linthwaite for closing remarks.

All right. Thank you very much. Apologies for kind of the communications and signal stuff today. 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. We look forward to the next update following the close of the second quarter 2021. Please out - reach out to us if there are any further questions. Good afternoon, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.