Chris Linthwaite - President, Chief Executive Officer Vikram Jog - Chief Financial Officer Agnes Lee - Vice President, Investor Relations.

Good afternoon. My name is Selene, and I will be your conference operator today. At this time I would like to welcome everyone to the Fluidigm, Second Quarter 2019 Financial Results. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Agnes Lee. Please go ahead..

Thank you. Good afternoon, everyone. Welcome to the Fluidigm, Second Quarter 2019 Earnings Conference Call. At the close of the market today, Fluidigm released its financial results for the quarter ended June 30, 2019.

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 include statements about anticipated launches and customer adoption of new products; anticipated sales trends for the second half of 2019 and guidance for revenue, operating expenses and cash flow for the second quarter of 2019.

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, 2018, as well as 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 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 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..

Mass Cytometry adoption is robust. We saw broad, global customer adoption of the technology, including significant placements in Germany and Austria. The APAC region delivered growth with particular strength in China and Korea. Competitive dynamics in all regions remain consistent with our prior commentary.

Mass Cytometry consumables strengthened as many customers return to buying patterns from Q4, against a larger installed base. In absolute terms, we had fantastic growth in Mass Cytometry consumables. The Americas lagged other regions that in Mass Cytometry, primarily due to timing of orders.

However, it is worth mentioning that first half growth in Mass Cytometry products exceeded 35%. During the quarter, our overall Mass Cytometry funnel expanded and we added a new cancer center to our customer base, which takes us above the 50% penetration level.

Mass Cytometry is now integrated into 50 clinical trials, including four trials using Hyperion. One Hyperion supported trial is a Phase 2 perspective, which is especially exciting. We crossed the 850 publication threshold in the period, including 15 Hyperion publications year-to-date and more than 30 overall.

We anticipate a continuation of this trend in the second half. We also announced multiple product introductions to sustain our competitive advantages in Mass Cytometry. Our Microfluidics business underperformed relative to our expectations.

Clearly Mass Cytometry is thriving, but our efforts to generate new growth in Microfluidics have so far been insufficient to offset legacy customer dynamics, but we are very excited about new developments in the Microfluidics franchise.

This morning we issued a Press Release announcing the introduction of RNA-Seq Library Prep on Microfluidics, part of the next phase of our content strategy. I will walk you through the potential for the RNA-Seq product a little later, particularly the market potential, because we just see it as a very big opportunity.

Finally, earlier this afternoon we announced the appointment of an exceptional commercial leader for the Americas religion, a role that has been opened since our prior Chief Commercial Officer retired at the end of Q1. Jonathan Day started with us this week and fits well with our long term, multi-omics growth strategy.

Turning to details on the Q2 performance. Overall we had a good quarter, delivering 7% top-line growth over Q2, 2018 with total revenue of $28.2 million. However, we acknowledge this performance was at the lower end of our expectations, as well as the consensus midpoint.

The weaknesses or weakness in Microfluidics was the primary headwind and was offset by Mass Cytometry. Mass Cytometry powered the overall performance with strong sales of instrument systems, Helios and Hyperion with the majority of units delivered to new users of the technology, the continuation of a promising trend.

We secured placements across all regions in pharma-bio and translational research centers. Mass Cytometry consumables grew in strong double digits on a year-over-year basis. Total consumables growth delivered above our pull-through in Q2 2018, but lower than our 2019 pull-through guidance.

Most important, we saw resumption of purchases from many accounts who appear to have stocked up in advance of our 2019 price increase. We anticipate continued strength and pull-through for the second half on a larger installed base.

We experienced notable uptake of our Maxpar immune profiling assay, which was launched at the end of March and there has been extraordinary customer feedback on this product, particularly for clinical trial research that requires high data quality and push-button analytics.

I will touch on this topic again a little later, since our progress is really exciting and a unique feature of the Helios platform. We believe this product configuration, especially for new users, one locked tremendous growth in clinical trials participation for Mass Cytometry in 2020 and beyond.

We’ve asked for patients while we reposition our Microfluidics business for sustained growth. When we started, we were lacking a major new catalyst for growth, namely a new product pipeline with big revenue potential.

We believe we are starting to see our efforts bearing fruit and we are very excited about the powerful RNA-Seq Library Prep Solution match to our unique juvenile [ph] platform.

Overall for Microfluidics and Mass Cytometry Consumables, we are optimistic for a strong growth trajectory due to continued growth of our active installed base of Mass Cytometry Instruments, accelerating adoption of our Maxpar direct immune profiling assays in new clinical trials, as well as deployment of the panel for patients screening in areas such as cell therapy and organ transplantation.

Growth in revenue per Mass Cytometry panel by virtue of the seven new metals we will ship this quarter and commercialization of the three new imaging panel configurations we’ve announced, plus the release of 25 new preconjugated antibodies, a significant expansion of content.

Increasing adoption over Microfluidics oncology panels launched in Q2, coupled with RNA-Seq Library Prep orders will contribute. Let’s turn to our discussion of our revenue performance by geographic regions. First we saw double digit growth in two of the three regions compared to the second quarter of 2018.

EMEA led the pack this quarter delivering 23% growth. In fact this performance represented record net revenue for the European team, the team executed across multiple platforms, placing new systems and generating consumables growth.

We reached an exciting milestone for Mass Cytometry, surpassing a 50% penetration of European based cancer research centers, 30 of 55 institutions or hospitals we track in that region, including a growing number of multi-system cumulative installations.

In particular, we made major progress in our German speaking territory, an area where we believe we have a significant opportunity to complement our strong adoption in the U.K., U.S., China and Japan. We added three new cancer centers recruiting new users for the technology in one of the larger global markets where we are underpenetrated.

We also placed additional units in the U.K. and Nordic at biopharma accounts. We are pleased with this execution and believe that the second half of the year should generate more positive results as we exit the normal summer slowdown of customer activity, particularly new system purchases.

Adoption of the direct immune profiling solution in Europe was excellent. Overall system pull-through form Mass Cytometry exceeded our projections in the UK which has the largest installed base in the region. Rounding out our commentary for Europe is the progress in Microfluidics.

We continue to experience excellent growth at one European based customer with a novel application well matched to our technology value proposition, offsetting headwinds from some European agriculture oriented accounts. Asia Pacific perform well in the quarter with double digit growth.

Revenues were up 22% in that region as a whole power in particular but performance in China. Our APAC performance in the first half of the year has been exceptional.

As I mentioned last quarter, the underlying health care research market for China remains robust, translational hospital research centers, novel direct to consumer enterprises and CROs are fueling demand for Mass Cytometry and Microfluidics Solutions.

In Japan, after an incredible Q1 performance, we are seeing new programs on the horizon that could drive accelerating growth. The Japanese government is considering a major five year public-private IO or immuno-oncology biomarker program that will kick-off in Q4.

We are well positioned to participate in this program, which will include funds for incremental systems and consumable orders. We will share more news as these plans are finalized. Finally, the Americas declined 11%. Speaking plainly, we were surprised and disappointed by this performance. We have focused our management tension and energy in this area.

The key takeaway is we do not see a structural problem and Microfluidics is the challenge area. A few Mass Cytometry Systems pushed out into the second half of the year, some linked to funding delays, but that funnel is on the whole very deep. Our Microfluidics business was weak, but the drivers were not new.

The RNA-Seq product configuration is a great fit for the larger genomics scores, which could include new gen replacements. Notably Mass Cytometry Consumables growth was excellent in terms of absolute revenue.

Our new products are being adopted, particularly the products associated with the National Immuno Therapy Network, as well as our Direct Immune Panel. We believe our Mass Cytometry Consumable sales are poised for acceleration and we think the Americas will be a big second half story, with the major step-up in Q4.

We saw a similar pattern last year linked to the release of year-end operating funds at many organizations. Another minute or two on our progress in clinical trials penetration.

Our strategy in essence has been to one, secure initial placement in key translational research centers; two, leverage our field application scientists to support validation; and three, demonstrate reproducibility data.

As evidenced, at the Influential AACR Conference last quarter, a leading scientist at the Mayo Clinic published data demonstrating reproducibility on our Helios platform, supporting its viability for clinical trial integration. This is a unique capability enabled by our technology.

Our direct immune profiling panel kit is custom designed for this application, demonstrating consistent lot-to-lot characterization coupled with push-button analysis. Just add blood to our dry-down solution and data can be generated in as little as five minutes. For multi-hospital networks such as the Mayo Clinic, we could become a standard platform.

We are beginning to cross the chasm from academic early adopters to the next wave of users. At the June CyTOF meeting in Vancouver, Fluidigm was profiled in over 70 presentations and posters. Of note, several leading translational clinical researchers led a workshop on using CyTOF for clinical studies.

A Stanford Medicine Researcher presented data on predictive clinical outcomes from CyTOF data sets. We generate new leads for suspension, imaging Mass Cytometry and our kits. Finally as I discussed last quarter, we are seeing an acceleration of publications on Mass Cytometry.

At this point we have over 850 publications across our Mass Cytometry franchise. Within the first six months of this year, there’ve been 170 publications using Helios with concentration-immunology, immune-function, immuno-oncology and infectious disease.

There have also been 34 peer-review publications for imaging- Mass Cytometry since commercial launch. An important pillar of future growth is innovation. At our Mass Cytometry user group meeting in June, we announced the introduction of seven new metals to expand the plex of Mass Cytometry for suspension.

With a 135 channels available on Helios, we have room to scale for the future. We also announced the introduction of three new panels for Imaging Mass Cytometry.

These new panels can be mixed and matched to profile tumor infiltrating lymphocytes, immune cell activation states and tissue architecture, a single cell level or combined into a single 18 marker panel.

We enable further customization with room for an additional 10 markers to support specific translational and clinical research studies, all in a single scan. As mentioned earlier, I want to return to our RNA-Seq Library Prep launch.

Market studies indicate the overall RNA-Seq market is greater than 1.2 billion and growing at an annual growth rate of 15%. Library preparation in front of sequencing is a critical element of the workflow that we estimate at roughly $300 million.

Customers range in size and category from high-throughput pharmaceutical and translational sequencing labs to smaller genomics scores at academic and government facilities. The market is fragmented and there are no competitors that combine an automated platform with three agents for an integrated solution.

Re-agent costs and long hands on time requirements consume four to five hours of a researcher’s day and low value added activities.

Fluidigm’s Automated Microfluidics Solution can provide a significant cost advantage, perhaps as much as two to three times less expensive than other offerings, reducing costs per sample and unlocking the potential for more sequencing and therefore a more throughput. Initial interest in our product configuration has been outstanding.

We will be metered in the scale of our launch to ensure maximum customer satisfaction, but the potential is very significant. We are convinced that reigniting robust Microfluidic growth in 2020 and beyond is exactly what investors expect from this franchise. Finally, I’m thrilled to announce the appointment of a new board member.

Bill Colston, that aligns with our ambitions to lead the immuno-market. Bill’s an accomplished scientist in life science entrepreneur, will matched to our growth factors. He is President and a Member of the Board of Directors for iCarbonX, a biomarker discovery and data-sciences pioneer.

He is the founder and CEO of HealthTell and the scientific founder and former CEO of QuantaLife, which was a pioneer in digital PCR and was acquired by Bio-Rad earlier this decade. He has over 30 years of experience applying multi-omics, machine learning and a range of other disciplines to support healthcare decisions and a global network.

He’s an ideal addition to our Board and we will partner to accelerate deployment of Fluidigm’s long term strategy, especially along the technical and applications vector. I couldn’t be more excited. I’ll now turn the call over to Vikram, our CFO for a complete review of our financial results. .

Thanks Chris and good afternoon everyone. Total revenue was $28.2 million in Q2 2019, an increase of 7% year-over-year. For the first half of 2019 revenue grew 13% compared to 2018. Changes in foreign exchange rates negatively impacted our revenue by approximately 1 percentage point for both the second quarter and year-to-date period respectively.

Mass Cytometry revenue of $17.5 million increased 28% year-over-year. We had strong sales of both Helios and Hyperion Imaging Systems in the second quarter, with most of our placements to new customers. About a third of our instrument placements represented incremental units to existing customers.

Mass Cytometry consumables and service revenue delivered strong double-digit year-over-year growth in the second quarter, with solid uptick of our Maxpar direct immune profiling assay that was launched at the end of March 2019. Consumables pull-through tracked above the prior year quarter, but below our 2019 guidance of $73,000 to $78,000.

We expect pull-through to be close to our guidance range by the fourth quarter of 2019 as customer’s ramp up usage of their instruments. Microfluidics revenue of $10.7 million decreased 16% year-over-year and 6% sequentially in the second quarter, driven by weakness at key high throughput accounts.

As a reminder, a significant portion of our Microfluidics Consumables revenue is tied to a small number of customers. We continue to expect quarter-over-quarter variability in Microfluidics revenue, as we execute in our strategy to focus on new key accounts and grow the business with new applications.

Looking at pull-through, BioMark/EP1 and accessory Juno pull-through were lower than our guidance range this quarter due to weakness in key accounts sales. From a regional perspective, in the second quarter we recorded strong year-over-year revenue growth in Asia Pacific and the EMEA with weakness in the Americus.

Specifically by region, EMEA and APAC grew 23% and 22% respectively, primarily driven by Mass Cytometry Instruments and Consumables. The Americas declined 11% driven by Mass Cytometry Instruments and weakness in Microfluidics, partially offset by our Mass Cytometry Consumables.

Notably Mass Cytometry consumables pull-through was significantly higher than our overall guidance range of $73,000 to $78,000. Mass Cytometry Instrument weakness this quarter was primarily due to funding delays and related extension of sales cycles.

Moving on now to our operating performance; GAAP gross margin was 54.5% in the second quarter of 2019 compared to 51.4% in the year ago period and 56.4% in the first quarter of 2019. Non-GAAP gross margin was 66.4% in the second quarter of 2019, compared to 64.8% in the year ago period and 67.7% in the first quarter of 2019.

The year-over-year increase in gross margin was primarily due to higher instrument manufacturing capacity utilization, partially offset by lower instrument pricing. The sequential decrease in gross margins was primarily due to product mix and instrument pricing, offset by higher instrument manufacturing capacity utilization.

In the case of GAAP margin, the year-over-year increase was coupled with fixed amortization over higher revenue, while the sequential decrease was coupled with fixed amortization over lower revenue.

Operating expenses in the second quarter increased approximately 14% year-over-year to $30 million on a GAAP basis and increased 12% year-over-year to $26.4 million on a non-GAAP basis. The non-GAAP increase was attributable to headcount related expenses, R&D project costs and certain costs related to a new facility.

In addition, the increase GAAP operating expenses was due to higher stock based compensation. GAAP net loss for the second was $13.8 million compared to $16.2 million for the same period last year and $25.5 million in Q1, 2019.

The year-over-year decrease in GAAP net loss was primarily due to lower interest expense and higher gross profit, partially offset by higher operating expenses. GAAP net loss in the first quarter of 2019 included a debt extinguishment loss of $9 million.

The non-GAAP net loss for the second quarter was $7.1 million compared to $6.8 million for the year ago period. The lower net loss compared to the prior year quarter was primarily driven by higher gross profit, partially offset by higher operating expenses.

Please note, reconciliation tables between our GAAP and non-GAAP measures are provided at the end of our earnings press release that we issued earlier today. Moving on now to the balance sheet and cash flow. Accounts receivable were $19.3 million at the end of the second quarter, in line with the end of the first quarter of 2019.

DSO was 62 days at the end of the second quarter compared to 58 days at the end of the first quarter. Total cash outflow in the quarter was $4.4 million, including cash proceeds of $800,000 from stock option exercises.

Cash, cash equivalents, restricted cash and short-term investments were $70.9 million at the end of the second quarter compared to $75.1 million at the end of the first quarter 2019. At the end of Q2 2019 the borrowing base under our asset base revolving credit facility was $12.5 million. Moving on now to guidance for the third quarter of 2019.

Total revenue is projected to be between $27 million and $30 million. GAAP operating expenses are projected to between $30 million to $31 million.

Non-GAAP operating expenses are projected to be $26 million to $27 million, excluding stock-based compensation of approximately $3.5 million and depreciation and amortization expense of approximately $1 million.

Total cash outflow is projected to be between $7 million and $9 million, including our semi-annual interest payment of $700,000 and working capital investments to support revenue growth. And with that, I will turn the call back to Chris for closing remarks. .

Thank you, Vikram. We had strong execution with double-digit growth in the first half of 2019. There has been solid performance in instrument placements and we see headroom for growth around the world. Early adoption has been strong with the Maxpar direct immune profiling assays.

We’ve announced new product introductions for all of our major platforms with more to come. As a major market participant in immuno- research, we are advancing our core technology, building content and providing complete work flows with matched informatics.

We are the clear market leader in multiplexed cellular analysis and multiplexed image analysis of tissue, with demonstrated global adoption and a focus on translational and clinical research. Our innovations are complemented by an excellent operations and quality organization.

From a commercial perspective, Colin McCracken, our Chief Commercial Officer has implemented enhanced operating mechanisms within our commercial operations and move quickly to recruit a leader for the overall Americas region to support faster growth. I personally would like to welcome Jonathan Day to the Americas leadership role.

Jonathan brings more than 20 years of commercial leadership in life-science tools, expanding research and regulated markets.

He honed his skills at Agena, where he was Vice President of Americans and led commercial programs and positions of increasing responsibility at Thermo Fisher Scientific, as well as significant commercial and sales roles at Affymetrix and Arcturus Bioscience, all organizations with commercial and genomics excellence.

Jonathan will guide us through the next phase of leading the Americas reason for success. We’ve worked together before and achieved some great things. He is known to many of our team members and we anticipate Jonathan will integrate quickly, while adding his unique skills and network to help us drive scale.

He is masked with are incredibly talented Mass Cytometry leader and they will make a powerful team. You can tell I’m excited for the future. From a shareholder perspective, I remain confident that our mix of innovation, revenue growth, financial discipline and operational excellence will drive tremendous value in the second half of 2019 and beyond.

And I would like to thank our over 500 employees for their contribution to this past quarter, as we executed on a robust product pipeline and equally ambitious set of reagent manufacturing transfers.

We have never been in a better position to prosper in the years ahead, providing customers with novel tools to drive new insights in health and disease, identify meaningful biomarkers and accelerate therapeutic development. With that, I’d like to open the line for questions..

[Operator Instructions] The first question comes from the line of Sung Ji Nam with BTIG. Your line is open. .

Hi, thanks for taking the question.

Maybe starting out with the launch of the seven new metal markers Chris for the Mass Cytometry platform, do you have a sense of you know what’s the average number of markers used by your customer base, and recognizing that depends on the applications, I’m just trying to figure out if your customers are utilizing the multiplex capability at its max, and if an addition of seven markers or additional markers could kind of also provide maybe another inflection point for the customer adoption.

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Hi Sung Ji, thanks for the questions. Absolutely! Seven metals I think is an important additional milestone for us. The most users are in the high 30s for us or low 40s, so this is a significant increase on a percentage basis on the number of channels we’ll be opening up.

So we do believe over time as we get this into their hands that this will open up a certainly more revenue opportunity per test, as well as accommodate additional markers that they’d like to introduce into their panels. .

Okay, great, and then Chris you talked about you know having their research synergies across your Mass Cytometry and Microfluidics Platforms.

I was curious if you still see significant opportunities there and potential drivers of further stabilizations for the Microfluidics business, you know especially for platforms like the BioMark?.

Yes, so I actually missed the very first part, it kind of broke for a second for me.

What was the very beginning of your question again Sung Ji?.

Oh! I was just saying that in the past you guys have talked about research synergies across the Mass Cytometry Platform, as well as your products on the Microfluidics side and was curious if you continue to see significant opportunities in the future in terms of some of your Mass Cytometry customers potentially also adding on the BioMark systems for example for their research purposes.

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You know we don’t have, I wouldn’t say a huge trend in this area where we have PO’s in which we have customers that are adding systems across our entire network, as you are probably, I know you are very familiar. So we have IO matched panel that's a gene expression panel. For instance that sits on our BioMark platform.

And then we offer Mass Cytometry panels, either customization or you can use our direct immune monitoring and then you can also do imaging work. In addition we have customers who use via partner Olink do protein Bio-Market detection on all three platforms.

The most common synergy relates to the use of Bio-Marks in multiple areas, so they would look at our Bio-Mark platform using in the Olink technology or built on top of our platform they would have imaging programs and they have programs related to the suspension work, and you have examples – I think you have heard the talk from people like Petter Brodin from Karolinska, as well as Amir Horowitz, they are in New York City..

Okay, great, and then lastly Vikram if I heard correctly, I think you cited a few of your key customers contributing to the microfluidics weakness this quarter.

Could you kind of provide more color in terms of what might be going on? Do you think that’s temporary or you know are they switching to other types of strategies or platforms, or do you expect that kind of potentially to return back to growth in the outer quarters. Thank you. .

Thanks for the question Sung Ji. As we’ve been saying for the last couple of quarters, our entire microfluidics business is dependent on a few number of very high throughput customers and there’s a bit of both going on.

There is migration to other technologies, but also there is buying behavior and particularly in the European ag-bio sector, which we have referred to in previous quarters. There was some bulk buying in the year ago quarters and maybe five quarters ago, as well and more recently they have been reducing their inventory.

So I would say it’s a bit of both and as Chris mentioned in his remarks, would we have been lacking in the microfluidic platform is a key value proposition and an application that would really address big markets and the RNA-Seq application that we just announced earlier today, is one such application.

It’s really the first milestone in the plan to rejuvenate the microfluidic business. So that is part of the proposition here to put new applications and recruit new key accounts to replace customers that are migrating to other technologies. .

Yeah, I like to clarify just to touch on that point to maybe elaborate a little further. So in the ag-bio space in which we have a significant presence, there is an interplay between real time PCR and next generation sequencing. So it’s true this is a macro-trend that’s been going on with some migration to genotyping by sequencing.

Now we can pick up that business in our geno platform and control that migration and many people also use real-time PCR for then different crop sizes and different strategies in their breeding cycle.

So there can be some play back and forth between the two and what we have exhibit – the primary driver for us in the ad-bio space though has been the inventory buildup and then the work down of that inventory.

By far and away that’s the primary driver for us and the ag-bio space, which is why it’s been the most problematic probably for us to forecast the projections for that particular customer segment. There really hasn’t been outside of that any major technology switch.

There’s only one account that I’m aware of that is gone through a related technology of which we can participate and in fact I think we have a good position to claw back some of that business. So it’s more of a characterization that their business model has been relatively flat. It hasn’t been necessarily a transfer to another technology.

It’s been the unpredictability of their – we talked about their – some of them are CROs and so the CRO business itself has been struggling rather than our technology itself. .

Great, thank you so much. .

Thank you. .

Our next question comes from the line Dan Brennan with UBS. Your line is open..

Hey guys, this is Rob on for Dan. I know you guys don’t give a precise breakdown between Helios and Hyperion, but I was wondering if you could give us some directional commentary about how that’s placed in the quarter and also if you could provide some color about sales funnel and kind of what the indicators you could share with us. .

Yeah, so thanks Rob. So I mean I think one of the key things we got to keep putting attention on is that the Mass Cytometry portfolio has been outstanding. When you step back and look at the performance through the first half of the year, Mass Cytometry is doing north of 60%, 65% growth.

I think its 67% specifically, but it’s of north of 65% growth and we’re seeing growth across both platforms. They are almost moving relatively lockstep, so we are seeing really tremendous sustained adoption for Helios.

In particular that driver relates to things like our Maxpar direct immune profiling panel, which is doing extraordinarily well and is bringing new users on the platform. We had one of our recent user talks.

We had a profile high volume flow side – flow core that has now I think successfully increase their recruitment up until something north of 80 or so principal investigators on that platform and so they keep triggering new consumption.

So overall we’re really pleased with how unit volume on both platforms is moving up, unfortunately we don’t break out the two for you. So I think overall that’s kind of how the status is on units.

Now as far as what the funnel looks like, it’s been really strong and it’s in all three geographies, so we continue to reinforce them and we saw net growth in the first half through the Americas, we saw net growth in all three regions, we had extraordinary growth in APAC.

If you remember last quarter, Greater China and Japan had just extraordinary eye-popping numbers in the first quarter – correction, in the first quarter and in the second quarter we had Europe that did extraordinarily well and China continued to do very well. We placed new units in Korea in addition. So our funnel continues to mirror that pattern.

We are seeing really strong global funnel development across both platforms, both the imaging and suspension. .

Great. Thank you. .

You’re welcome. .

[Operator Instructions ]. Our next question comes from the line of Bill Quirk with Piper Jaffray. Your line is open. .

Great, thanks, and good afternoon. Vikram, I guess first question for you on guidance. At the midpoint for the third quarter your forecasting $28.5 million and the street’s a little over $4 million higher than that, and I appreciate that you guys don’t tend to guide beyond the quarter, but that’s a pretty big disconnect. So help us understand.

I guess I’m just struggling here with that disconnect and appreciate that there’s some order slippage and such. But can you elaborate here on kind of I guess when you guys think that you could get some of these orders that flipped into the quarter and if it’s not the third, it’s at the fourth. Again just help us get comfortable with that. Thank you. .

Yeah, I can start and maybe Chris can jump in here. So just to set things in perspective Bill, we have had five quarters of revenue growth, including four quarters of double digit revenue growth. I would like to reiterate that the Mass Cytometry franchise has grown extremely strongly as Chris pointed out.

Even in this year we have grown over 60% for the year- to-date period, and we’ve grown strongly 28% in the most recent quarter. So we are now crossing the chasm and engaging a new class of customers that have longer decision cycles.

So that is something that we have factored in and on the other hand microfluidics remains volatile, and we are conscious of the volatility of that particular product. I’d also like to point out that the issues that we are addressing are fairly localized, it’s in the Americas. The other regions, Europe and EMEA grew very strongly, even in this quarter.

But regardless, I think a from a quarter-over-quarter basis things are harder to predict given our unit pricing of our instruments, but we remain confident about the growth prospects for the business overall. .

Yeah, I think Vikram you covered most of it. The primary thing for Q3 is it’s typically not a super large instrument placement cycle. So given the swings in one, two or three systems, that’s solid. I think you are really reflecting here. I think we are seeing no real trend change in the Mass Cytometry business overall when we step back.

We’ve got uncertainty related to end of year funding for NIH, which will wrap up as you know in September, end of September and then we think Q4, given what’s setting up right now is going to be a very strong cycle for placements of instruments and order placement for overall based upon end of your money. .

And Chris, is there anything going – I don’t think there is, but obviously we do have a couple of new competitive entrance.

Is that causing your customer base to slow down their ordering patterns or the deal funnels just because they are simply kicking the tires on some of these alternatives?.

You know, as always, this is very hard in the fog of war to understand exactly what’s happening. We’ve had tremendous instrument placement cycle with Mass Cytometry. 67% growth through the first half of the year. These market entrance have been in place during that cycle and been marketing their products.

So there is not a fundamental change in the overall, competitive landscape as we see it right now. So I don’t – we can’t say that there is many new competitors that are necessarily extending out the ordering cycle.

Our ordering cycle does tend to be six to nine months and that’s been what our historic trends have been and I think it’s kind of a little – and we’re also seeing one of the changes from last year to this year, which I think is actually more – perhaps contributing more than the mix or this competitive dynamics is the mix between new users for our technology and people who are buying incremental capacity.

The new people and the technology take a little bit longer typically in the ordering cycle from the first meeting until the close and getting them up and running and we saw a shift. And as Vikram summarized in the first half, we effectively saw about two-thirds of our instrument placements were new to the technology. I think that’s fantastic.

I think that bodes exceptionally well for the set up for the business over the long term, but you know in the near term it could have some impact on the closed cycle. .

Got it, okay thanks. I appreciate the color Chris. .

Thanks Bill. .

[Operator Instructions] Next question comes from the line of Doug Schenkel from Cowen and Co. Your line is open. .

This is Adam Wieschhaus on for Doug, thanks for taking my question. I just want to clarify an earlier question about the Mass Cytometry instruments that are pushed out of Q2. Do you expect those slip Q2 orders will fall into Q3 or will take longer, and are they contractually completed at this point or they are still resting, they are not closed. .

Hi Adam, this is Chris. So I think the better way to characterize this, it's not many systems we’re talking about.

The systems that were involved have to be in government institutions and so some of them are waiting for final funding I think from the NIH as I suspect, so – and they have options for operating funds that they can use in the fourth quarter, so we see multiple shops on goals for how that may play out.

Whether it's Q3 or Q4 we're not certain, but they're certainly signaled their intent to purchase this year. .

Okay, thanks. And I just want to clarify on your guidance; I believe you indicated that you do not expect Mass Cytometry pull-through to be within the guided pull-through range in Q3. Is that correct and if so, is that due to the stalking dynamic you mentioned in your prepared remarks or is there another issue. .

So stocking is certainly the dominant narrative from the first quarter. We saw evidence as we prepare or we presented in our prepared remarks. We've seen a significant number of those accounts resume ordering patterns. When we step back Mass Cytometry consumables growth has been fantastic overall.

We’ve had a probably a larger installed base than we initially projected also, so the combination of a larger installed base and the combination of these people still starting to – they’ve been working through their stock up cycle, is probably combining I think why we think Q3 could be below that range of guidance, but Q4 looks like we’re really setting up just to be – to be right where we want to be..

But we still expect very strong year-over-year growth in Q3?.

That's correct. So we see – we think there's a continued set up for Mass Cytometry consumables. It’s only as we focus on the pull-through per system metric..

Okay, great. Now over the last few months you appointed a new CCO, CSO and just today a new VP of Commercial Operations.

Does this signal that a new operational and commercial strategy may be under way and do you expect to provide a new long term strategic plan, maybe in the next few months?.

We're super excited to add these three new talented individuals to the team. I think for all the reasons you've talked about, the Chief Commercial Officer is a purpose builder, purpose selected to drive a much a broader scale business.

Our VP for the Americas is a role that we’ve had open and it’s great to have that in place and I think his in a particular situation, Jonathan bring such a great mix of multi-omics experience; experience both in the genomics space, as well as in the protein space and so I think he's really going to help us reaccelerate our growth in the Americas overall for the two combined businesses.

And of course the Chief Science Officer reflects the thrust of where we want to head with the technology. We're looking more and more at how we can better position the company from our therapeutic areas and from application content across multiple platforms and in that case Andrew Quong is perfect for that.

And as I said also, I think this should not be under appreciated. I think the addition of an additional board member who has deep expertise in this area and has tremendous insights for us. So you are absolutely seeing a new alignment around where the company is headed..

Great, thank you Chris. .

You bet. Thanks Adam..

Your last question comes from the line of Casey Woodsing. Your line is open. .

Hi Chris, its Paul Knight calling. Can you talk about – I missed the very first part of this call, but is this Cytometry a little slower due to the academic or private sector and can you talk to the tone of either a group of buyers right now. .

I guess well it’s good and first of all Paul, not Casey. Hi Paul! Second, Mass Cytometry reinforced over 65% growth in the first half of the year and we're seeing tremendous or 68% -- 60%, sorry I had to phone a friend there for a second..

28% for the quarter..

For this quarter. Mass Cytometry back to our both bio pharma companies, as well as academic and cancer research centers, both of them are progressing, I won't say exactly in lockstep, but they are both growing very, very nicely for us.

As we highlighted in the prepared remarks which you may have a chance to hear or listen to, we both placed in new comprehensive cancer centers, new cancer centers in the United States, as well as placements in Europe. So we're seeing a good continued trend there, as well as their equivalents in areas such as China. .

And the nanoscale – you had mentioned in this press release the library prep solution on the nanoscale RNA-Seq. Is that shipping now and what's your view on second half genomics revenue.

Is it growing, is it stabilizing, where are we with the genomics part of your business in 2H?.

Well hopefully – you took away, we spent a fair amount of time talking about RNA-Seq and I think that this is just a tremendous market opportunity for us at north of $300 million and our value proposition with an integrated automated platform that is unique in the market place to have an integrated platform and the chemistry solution, the two of them coming together.

We anticipate that shipping that in this quarter, start shipping and doing the first insulations and we’ve had a tremendous inbound interests and so we’re just trying to be metered in our response as kind of how to set expectations in the third quarter.

We anticipate shipping beginning later, in later half of this particular quarter, which is why we’re not modeling a huge amount of impact in the Q3 time period. And then we got to see, set expectations correctly you know where we’ve got a lot of short interval controls and how we are going to measure the ramp-up from those centers.

But as you know as well as I knew, the scale and size of the genomics opportunity and the number of cores and areas that will fit this value proposition.

So, kind of building along with the other point we made with one of the earlier questions that we had, the balance of the genomics businesses has been more challenging for us to model and I think it’s because of that uncertainty and the signals we’re getting from our customer base make it difficult for us to kind of put the two together and say conclusively we’re calling one particular turning point.

But we sure believe that RNA-Seq is setting us up really well for the future and it’s not the only thing, but it’s the primary one that we think is a new piece of information that needs to be factored in. Some of that has the potential to totally change the dynamics of this business..

Okay, thanks. .

You’re welcome. .

There are no further questions at this time. I will now turn the call back over to Ms. Agnes Lee..

Thank you, Selene. We’d like to thank everyone for attending our call. 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 2019. Please reach out to us if there are further questions. Good afternoon everyone.

Selene, you may now close to call. .

This concludes today’s teleconference. You may now disconnect..