Karleen Oberton
Chief Financial Officer at Hologic
Thank you, Steve, and good afternoon, everyone. We are very pleased to share first quarter results that are significantly exceeded our guidance on both the top line and bottom line. Our first quarter highlights an improving base business that grew 9% organically, excluding COVID-19 revenues. As Steve mentioned, our diversified business model is paying off. Each of our franchises, excluding COVID, grew more than 8% in the quarter, broadly exceeding our long-term revenue growth target of 5% to 7%. It is also important to note that our base business strength occurred in a quarter that started with the Delta wave and ended with COVID cases surging due to Omicron.
Total revenues for the quarter of $1.47 billion showcased strength in every business and was significantly ahead of our previous guidance. EPS of $2.17 in the first quarter far surpassed our initial guidance range of $1.15 to $1.25. We also continue to generate healthy free cash flow, funding our capital deployment priorities of tuck-in M&A and share repurchases. We believe our balance sheet is a significant advantage in times of market uncertainty, which I'll touch on shortly.
Before I do that, let me provide some detail on our divisional revenue results. For a clarity on our performance, I will exclude the impact of COVID-19 where applicable. In diagnostics, global revenue of $950.4 million declined 15.2% compared to the prior year, however, excluding COVID assay sales, related ancillary Items and a small level of discontinued products, worldwide diagnostics revenue increased just over 10%. To better understand the underlying performance of our non-COVID molecular business, I will again exclude COVID-19 benefits. By doing this, base molecular revenue grew about 14% organically in the first quarter. The growth was driven by strong execution across our global portfolio, as our largest non-COVID assay chlamydia gonorrhea was above pre-pandemic levels. Our newer vaginitis panel contributed well ahead of last year's run rate. And internationally, we continue to see strong demand for our Panther instrumentation.
For perspective, our annual molecular business excluding COVID is now more than a $100 million larger than before the pandemic. As it relates to our COVID-19 results, we continue to forecast conservatively, but act aggressively behind the scenes to meet demand for our customers. In the quarter, we generated $523 million of COVID assay revenue and shipped about 26 million tests to our customers. United States represented about 60% of total COVID assay revenue, although demand was high around the world. Rounding out diagnostics, cytology and perinatal grew 5% compared to the prior year. A nice result that was also above 2019 levels.
In Breast Health, global revenue of $359.3 million grew more than 8%. This growth was driven by our Interventional business, as Steve highlighted, which was up nearly 20% in the quarter. Breast Imaging and Service also increased mid single-digits in the period, underscoring resilience in the face of COVID headwinds. Our strategy to diversify and increase recurring revenue continues to pay off.
In surgical, first quarter revenue of $134.3 million grew 8%. This solid performance was driven by a nice rebound in NovaSure from the launch of our next generation B5 System as well as momentum from new products such as Fluent and Acessa. While our surgical business was impacted by pullbacks in elective procedures, the impact was minimal in the quarter. We continue to stay close to our customers, monitoring the Omicron surge and related staffing issues, which we do expect to be a headwind in Q2. Lastly, our Skeletal business had revenue of $27.1 million, increased 10% compared to the prior year period.
Now, let's move on to the rest of the P&L for the first quarter. Gross margin of 72.1% significantly beat our forecast, driven by higher than expected COVID-19 test volumes in the period. Total operating expenses of $333.9 increased 22% in the first quarter, but were down 5% sequentially compared to Q4. We continue to reinvest for future growth with incremental spending in R&D and marketing, pulling forward initiatives, given the benefit from COVID-19. Further within our operating expenses, the inclusion of recent acquisitions accounted for spend of approximately $30 million in Q1 and we also made additional charitable donations in the quarter.
Finally, our non-GAAP tax rate in Q1 was 21.5% as expected. Putting these pieces together, operating margin came in well above our forecast at 49.4% and net margin was a very strong 37.7%. Non-GAAP net income finished at $554.7 million and non-GAAP earnings per share was $2.17, nearly 75% above the top end of our prior guidance.
Moving on. Cash flow from operations was $564 million in the first quarter, a very strong result, which was more than 100% of non-GAAP net income. These robust cash flows continue to give us tremendous financial and strategic flexibility. For example, in the quarter, we repurchased 2.3 million shares of our stock for $167 million and closed the acquisition of Bolder Surgical for $160 million. We continue to evaluate M&A that strategically fits well within our existing sales channels or is a near adjacency.
Based on our strong operational performance, we had $1.4 billion of cash on our balance sheet at the end of the first quarter and our leverage ratio was 0.6 times. Our capital structure is as strong as it has ever been, and we intent to deploy our excess cash on division-led acquisitions as well as share repurchases that improve our top and bottom line growth rates. For example, we have been buying shares under our 10b5-1 plan within our second fiscal quarter to take advantages of market volatility. Finally, ROIC was 29% on a trailing 12-month basis, an increase of 270 basis points compared to the prior year.
Before, we discuss our increased guidance for the second quarter and full year fiscal 2022, I want to mention a few key points. Although the pandemic remains highly uncertain, we believe we are well-positioned either way it may turn. Should there be future outbreaks, we will meet our customers' need and generate additional COVID testing revenue or should the pandemic subside, we expect strong performance in our base businesses. We believe we are nicely hedged against macro and market volatility.
As it relates to supply chain headwinds, these challenges have become more specific in recent weeks. Due to the lack of available chips, we expect a temporary shortage of supply that will lengthen delivery timelines from mammography capital in our Breast Health division. While we hope to mitigate these effects, for conservatism, we are estimating around $200 million of revenue will be pushed out of fiscal 2022. This includes up to $50 million headwind in our second quarter as we are proactively beginning to extend lead times of new units to preserve inventory and maintain service continuity for gantries already in the field. This headwind is purely a supply issue and not one of underlying demand, which remains strong. Despite the supply shortage, we are significantly increasing our full-year revenue outlook. Underscoring the evolution of our diversified business model, we expect our diagnostics and surgical businesses along with COVID contributions to more than offset mammography headwinds.
Now, let me move on to our specific guidance. In the second quarter of fiscal 2022, we expect very strong financial results again, with total revenue in the range of $1.25 billion to $1.3 billion. As a reminder, our Q2 revenue is usually seasonally lower than Q1. For all of fiscal 2022, we expect total revenue in the range of $4.4 billion to $4.55 billion, significantly exceeding our prior full year guidance by $600 million at the midpoint. Given the recent strength of the U.S. dollar and to aid with constant currency modeling, we are assuming foreign exchange headwinds of approximately $23 million in the second quarter of 2022 and $56 million for the full year.
In diagnostics, molecular continues to be the growth engine based on our larger Panther installed base of over 3,000 instruments globally. Further, we are seeing encouraging uptake of new assays like our vaginitis panel, as well as tremendous international expansion opportunities and a rebound in our core STI assays. As a result, for fiscal 2022, we expect our base diagnostics franchise inclusive of cytology and perinatal to grow high single-digits.
In Breast Health, our organic and inorganic investment continue to perform well. For example, Brevera is off to a great start in 2022, growing in the high-teens for the quarter. Further, recurring service revenue represents approximately 40% of total sales in Q1. Finally, in surgical, we expect MyoSure to continue to drive growth with help from better NovaSure performance. In addition, we expect new products and the recent acquisitions of Acessa and Bolder to add momentum to an already fast-growing franchise. Like base diagnostics, we expect surgical to grow our long-term organic guidance -- grow above, I'm sorry, our long-term organic guidance for fiscal 2022.
In terms of COVID assay sales, the only certainty is that no one really knows how demand will progress for the rest of the year. Therefore, as we have done for the past several quarters, we are forecasting conservatively and will act aggressively. With that in mind, we expect COVID assay sales to be at least $400 million in the second quarter of 2022 and at least $1 billion for the full year. COVID-related items including revenue from discontinued products and diagnostics are expected to be approximately $50 million in the second quarter and $190 million for the full year.
As a reminder, our organic guidance backs out of revenue from acquisitions until the first full quarter after the deal is annualized, as well as revenue from our divested Blood Screening business. We expect Blood Screening revenue of $5 million to $6 million in Q2 and $20 million to $25 million for the full year. In total, we are backing out roughly a $110 million of inorganic revenue for the year. To appreciate the underlying growth of our business, it is important to back out of organic revenue COVID assay sales, related ancillary Items and a small amount of discontinued product revenue in diagnostics. On this measure and excluding the previously mentioned supply chain headwinds in Breast Health, we expect the rest of Hologic to grow at least at the high end of our 5% to 7% long-term guidance.
Moving down the P&L. For the full year, we forecast our gross margin percentages in the mid-60s and our operating margin percentage to be in the mid-to-high-30s. Both estimates are higher than our guidance last quarter. We expect both percentages to decline sequentially throughout the year consistent with our conservative planning that most COVID demand will occur in the first half. In addition, we have incorporated additional inflationary supply chain cost into our guidance as it relates to electronics, plastics and logistics. Despite this, for the full year, both growth and operating margin should be well above pre-pandemic levels.
In terms of operating expenses, we expect spending to be up compared to 2021, but decline sequentially in the back half of the year. As we continue to highlight in quarters with higher COVID tested revenue, we will take the opportunity to invest more for future growth. Below operating income, we expect other expenses net to be a little less than $25 million a quarter for the remainder of the year. Our guidance is based on an effective tax rate of 21.5% and diluted shares outstanding of around $256 million for the full year. All this nets out to expected EPS of $1.50 to $1.60 in the second quarter, well above current consensus estimates and $4.90 to $5.20 for the full year, 36% above our guidance at the midpoint. As you update your forecast, let me remind you that macro uncertainty due to the pandemic and related supply chain challenge is still high. We would therefore encourage you to model at the middle of our ranges, which incorporate both potential upsides and downsides.
Let me wrap up by saying that Hologic posted very strong first quarter results that far exceeded expectations and guidance. We are also significantly raising our financial guidance for the year, highlighting the multiple growth drivers we have added to each of our franchises and the upside to our business from capturing demand for COVID testing. With organic investments, multiple acquisitions and additional financial flexibility for capital deployment, we are much stronger company than two years ago and well positioned to prosper in the face of various uncertainties.
With that, I will ask the operator to open the call for questions. Please limit your questions to one plus a related follow-up then return to the queue. Operator, we are ready for the first question.