Executive Vice President and Chief Financial Officer at Becton, Dickinson and Company
Thanks, Tom. Echoing Tom's comments, our Q1 results demonstrate the strength of our business and the momentum of our strategy. We are enhancing our growth profile through the portfolio and investment actions we are taking, while also executing on margin improvement and inflationary mitigation programs to deliver our long-term margin expansion targets and double-digit earnings growth profile. To that end, I'd like to recognize our associates across supply chain for their contributions. We have an incredible team around the world. This is not only addressing the challenges that all companies are facing in today's environment, but they are excelling and driving performance.
Turning to our revenue performance. We delivered $5 billion in revenue in the first quarter, comprised a $4.8 billion in base business revenues, which had strong growth of 8.3% and 7.8% organic, which excludes the impact of acquisitions. COVID only testing revenues were $185 million, which as expected declined from $866 million last year as this was our highest revenue quarter for COVID testing last year, given higher pricing and volumes.
The year-over-year decline in total company revenues of 5.9% is entirely attributable to the decline in testing revenues. BD is uniquely positioned to deliver strong performance during these uncertain times. The breadth and diversification of the total BD portfolio, including COVID diagnostic testing, provides insulation against COVID-driven procedure fluctuations as demonstrated by the revenue performance across our segments, with BD Medical growing 6%, Life Sciences base revenues growing over 17% [Phonetic] and Interventional growing 3.8%. Total company base business growth was also strong regionally with double-digit growth in the U.S., China and Latin America.
Let me now provide some further insight into each segment's performance. Our Medical segment delivered $2.4 billion in revenues in the first quarter, growing 6% led by our medication delivery solutions and pharmaceutical systems businesses. MDS revenues increased 7.3%, reflecting strong demand for our durable core products, particularly in the U.S., driven by competitive gains in catheters and vascular care devices. Our leadership position in these markets allow us to provide a strong value proposition to our customers in terms of the breadth of our portfolio, as well as the cost and quality of our products, importantly is input costs such as resins have increased. We've been able to take appropriate price actions and accelerate cost mitigation programs, while continuing to invest in innovation to support our strong value proposition.
In MMS, revenues were down slightly, due to the difficult prior year comparison, given the high number of infusion pump placements last year in the U.S. and Europe to support COVID-related hospital needs. Excluding this impact, our MMS business reflects continued execution of our medication management strategy, which drove strong demand worldwide for our dispensing solutions. This was particularly evident in the U.S. where we saw another strong quarter of customer signings. The traction we are getting reflects the value our Pyxis platform provides our customers.
Revenue growth of 1.6% in Diabetes Care reflects our category leadership position, growth was aided by the timing of certain orders. Pharm Systems revenue grew nearly 18%, driven by continued strong demand for pre-fillable devices. Growth was also enabled by our focused execution on capacity expansion that allowed us to fulfill certain orders earlier than originally anticipated. Demand for prefilled devices continues to be aided by the fast-paced vial to prefilled device conversion for biologics, vaccines and other injectable drugs.
BD Life Sciences revenue totaled $1.5 billion in the first quarter, the decline of 24.8% year-over-year solely due to lower COVID only testing revenues previously discussed. Excluding COVID only testing, Life Sciences base revenues grew 17.2% with licensing revenue in IDS contributing about 400 basis points to the segment's base growth and about 100 basis points to the total company base revenue growth.
In IDS, base business revenues had strong growth of 20.3%, including about 600 basis points from licensing revenue. Performance was driven by our specimen management, microbiology and molecular platforms as routine lab testing returned to pre-pandemic levels. Growth in BD MAX IVD assays was also strong, reflecting the leverage we are getting on the larger installed base. Performance in our base business includes sales of our combination flu COVID assay that were in line with our expectations. Indications are the respiratory season will be a normal to low flu season.
Biosciences revenues increased 9%, driven by strong demand for research solutions, as a result of lab utilization returning to normal levels and continued research on COVID variance, contributing to Life sciences Q1 growth with the two new FACSSymphony instruments that we launched in FY '21. As the evolution of flow cytometry continues, it moves from large labs to more mid-size independent labs. We now provide a complete suite of analyzers for researchers from the benchtop A1 to the A5 SE, our first spectral analyzer that enables researchers to do even high parameter cellular analysis to gain broader insights in the pioneering new discoveries and treatments for cancer and other immune related conditions.
Our new e-commerce site also contributed to growth in Q1. BD Interventional revenues totaled $1.1 billion in the first quarter, growing 3.8%. BDI's performance reflects strong growth in surgery and UCC. Q1 performance was impacted by temporary supply chain disruptions and consistent with our Recode initiative, product line discontinuations of lower margin products in our PI and UCC businesses. While these strategic discontinuations created temporary headwind to revenue growth, it demonstrates our commitment to simplifying our portfolio and enhancing margins.
We had a strong start to the year in our surgery business with revenue growth of nearly 9%, despite some modest slowdowns towards the end of December due to omicron. Strength in the quarter was driven by double-digit growth in advanced reconstruction and repair with strength in hernia as deferrable procedures recovered and the recent acquisition of Tepha. Tepha provides us with a vertical integration strategy for our current Phasix platform, but more importantly, it provides us with exciting new opportunities to expand our horizon into new high-growth areas of tissue repair, reconstruction and regeneration.
Double-digit growth in Biosurgery and high single-digit growth in Infection Prevention was also driven by the recovery of deferrable procedures and continued market adoption of sterile BD Chloraprep. Revenues in Peripheral Intervention declined 3.1% as a result of a product recall from fiscal '21 and the previously mentioned supply disruptions and product line discontinuations that support our margin enhancement goals. However, we saw continued acceleration in our atherectomy platform in China, as we have leveraged the capabilities of our sales force. We are also experiencing positive momentum from our recent acquisition of Venclose.
Urology and Critical Care revenues grew 7.7%, driven by continued strong demand for PureWick in our acute urology portfolio. We're also seeing continued adoption of our PureWick solutions in the home as we advance our strategy to expand our addressable market and deliver transformative solutions for alternate care settings. Also contributing to growth was remediation of Q4's temporary supply disruption within acute urology.
Now moving to our P&L. We delivered adjusted net income and EPS above our expectations in Q1 with adjusted net income of $1.1 billion and adjusted diluted EPS of $3.64. We had strong execution of our margin enhancement initiatives in Q1 and delivered base business gross margin of 55.4% and operating margin of 24.3%. We remain on track to deliver our full year base margin goals with our base margin performance in Q1, ahead of our expectations for the quarter and also above our full year base margin expectations, due to our ability to realize some of our inflation mitigation and pricing initiatives sooner than we previously anticipated.
In addition, our Q1 base business operating margin also included a benefit of about 40 basis points from licensing revenues in Life Sciences that was included in our full-year plan. Excluding the licensing revenue, base gross and operating margin would have been nearly 55% and 24% respectively. Other key drivers of gross margin in Q1, include a benefit from increased volume utilizations given our strong base revenue growth and as expected favorable FX we experienced in 2021, but was recorded in inventory and benefited our GP this quarter when sold.
We did realize a negative impact from inflation in the quarter, which was broadly in line with our expectations and was partially offset by our cost improvement and inflation mitigation actions, which are occurring as planned. We are making very good progress with strong sequential improvement and our full-year base gross margin improvement goal remains on track despite continued inflationary pressures.
SSG&A was in line with expectations and increased year-over-year, driven by variable expenses, including selling and commissions and inflationary impacts, primarily in shipping that we have previously shared. The increase in SSG&A as a percent of sales is a function of lower testing sales. However, we did leverage SG&A versus our base revenue, which is contributing to our base operating margin improvement. R&D increased year-over-year, consistent with our strategy, to invest more to support our long-term growth outlook.
As anticipated and communicated on our prior earnings call, our tax rate benefited from the timing of discrete items, resulting in a lower effective tax rate in the quarter. Regarding our cash and capital allocation. Cash flows from operations totaled approximately $700 million in the first quarter. We ended Q1 with a strong cash balance of $1.9 billion and an adjusted net leverage ratio of 2.8 times. Our cash balance reflects our strategic investments in M&A during the quarter.
Our current cash and leverage position and continued focus on strong cash flows provide us the flexibility to advance our balanced capital allocation framework and support our BD 2025 growth strategy through investments in R&D, capital and M&A. During Q1, we invested in R&D at over 6% of sales to advance our innovation pipeline. We also invested over $400 million in three additional tuck-in acquisitions across our businesses that will support our strong growth profile in 2022 and beyond.
Turning to our fiscal '22 guidance assumptions. First, the macro considerations that support our guidance, while we still expect some global COVID-driven variability, our guidance assumes the continued easing of COVID-19 restrictions, the stabilization as deferrable procedures and no significant disruptions to deferrable procedure volumes.
Additionally, we see signs of continued inflationary and supply chain pressure over the balance of the year with some stabilization by the end of the year. However, we believe we have a clear path to margin recovery and we expect to offset any incremental inflation impact through various cost containment and pricing related initiatives already realized in Q1. Our guidance doesn't contemplate a more significant step increase in market-driven supply chain and inflationary disruption. A few comments on testing specific assumptions. Our base business revenue assumptions include sales of our combination flu COVID assays. We anticipate a normal to light flu season based on what we've seen so far from the CDC surveillance reports.
Moving to our updated guidance for fiscal '22. We are well positioned for strong growth across our three segments, which are delivering at or above our initial expectations and thus we are increasing our base revenue guidance. While we aren't providing segment-specific guidance, relative to our revised total company base growth outlook, we expect our Medical segment growth to be slightly below and our Life Sciences and Interventional segment growth to be slightly above total company growth.
We now expect base revenues to grow 5.75% to 6.75% on an FX-neutral basis from $18.3 billion in fiscal '21. This is an increase from our previous guidance of 5% to 6% growth and is driven by our Q1 revenue outperformance and confidence in the strength and resilience of our base portfolio and our Q1 acquisitions, which account for about 25 basis points of the increase.
For COVID only testing, we are now assuming $450 million in revenue, which is a little more than double our original expectation of $200 million. As we communicated last quarter, higher testing revenues position us well to manage through this period of uncertainty and also provide the potential to create value through reinvestment in our business. Given our increased testing revenue expectations, we currently plan to reinvest a portion of the testing profits over the balance of the year, but will ensure they are value-creating opportunities and would not invest at a level that would result in our full-year testing margins dropping below our base margins. Should those investment opportunities not materialize, as anticipated, we would allow the incremental profits to flow through.
Based on current spot rates, for illustrative purposes, currency is now estimated to be a headwind of approximately 125 basis points or about $250 million to total company revenues. This is an incremental 75 basis point headwind compared to our prior view. All in, with our base revenue, COVID only testing revenue and the illustrative currency impact, we now expect reported revenues in the range of $19.55 billion to $19.75 billion in fiscal '22, compared to $19.3 to $19.5 billion previously announced.
We still expect operating margins in our base business to improve by approximately 200 basis points over our fiscal '21 base operating margin of 21.7%. Given the planned reinvestment, we also still expect operating margin on COVID only testing to be modestly above our base business margins. A few additional items for your models. We now expect $50 million to $75 million in year-over-year improvement in interest other or an incremental $25 million benefit. We still expect an effective tax rate of 12.5% to 13.5% for the full year.
Our guidance still assume share repurchases that at a minimum offset any dilution from share-based compensations. All in, we are raising our adjusted EPS guidance to be between $12.80 and $13, which is an increase of $0.50 at the midpoint from our prior guidance of $12.30 to $12.50. This includes absorbing the negative impact of currency, which we estimate to be about $0.10. The increase reflects our strong Q1 base business performance and our expectations for increased COVID testing, net of reinvestment.
As a reminder, our fiscal '22 guidance continues to include our Diabetes business. As Tom mentioned, the embecta spin has now been approved by the Board of Directors. As we proceed towards the spin date. I want to provide a few reminders. Restated financials for RemainCo will not be made public until the completion of the spin-off. Given the higher, but declining margin profile of embecta, one should expect BD margins to be lower after the restated. However, off the restated FY '21 financials, we are still targeting about 400 basis points of base operating margin expansion through FY '25.
BD is expected to receive a distribution of approximately $1.44 billion, equivalent to multiple years of cash generated by the Diabetes Care unit. We remain excited for what's ahead for embecta in making this a successful and value-creating opportunity for everyone. As you think about phasing for the balance of the year, the following are a few key considerations as you think of our base revenue and earnings. Regarding sales, we remain confident in the durable nature of our portfolio and the strength of our underlying sales.
In Q2, we expect some impact from omicron on hospital staffing and procedures. But recall, Q2 is a relatively easy compare due to the significant COVID resurgence we experienced in Q2 of fiscal '21. As a result, we anticipate base revenue growth in Q2 to be above our full-year guidance range with the remaining quarters being equally balanced.
Regarding our margins and P&L. As I noted, Q1 had the benefit from licensing, which added about 40 basis points to operating margin, which will not repeat in Q2. While we expect improvement versus the prior year, we also previously shared that Q2 would be the quarter with the largest inflationary impact. So, given those two dynamics, you would expect a sequential step down in margin and we expect Q2 to represent the low watermark for base operating margin for the year. We remain well on track to achieve our base operating margin guidance of approximately 200 basis points improvement.
As we progressed through the second half of the fiscal year, in Q3, we expect the impact of inflation on our business to stabilize and see a modest pickup of cost improvement and price-related benefits flowing through, with Q4 being the highest benefit. As a reminder, we see our SSG&A and R&D cost relatively evenly spread through the year.
As expected, our tax rate in Q1 benefited from the timing of discrete items at the midpoint of our full year guidance range, that would imply we expect our average tax rate for the balance of the year to be about 13.7%, which is best to apply for the subsequent quarters. Regarding COVID only testing sales, we expect a vast majority of testing revenues to occur in fiscal Q2 and then trend down as I omicron subsides. In future years, we would not expect this level of COVID only testing to repeat.
In summary, we are continuing to advance our BD 2025 strategic objectives with focused execution against our key priorities. As we look forward and as reflected in our FY '22 guidance, we are well positioned for growth with excellent momentum in our base business, increased investments in our innovation pipeline, tuck-in M&A momentum, strong progress executing our balance sheet and cash flow initiatives and clear visibility to meaningful margin improvement.
Thanks for your time. Operator, we can now open the line for Q&A.