Barbara Bodem
Interim Chief Financial Officer at DENTSPLY SIRONA
Thank you, John. Good morning, everyone, and thank you for joining us. Today I will cover, first quarter preliminary results and then provide an update on our 2022 outlook. As a reminder, our remarks today will be based on non-GAAP financial results unless otherwise noted. Please refer to the reconciliation tables at the back of the press release and slides, both of which are posted in the Investors section of our website.
Before I begin, I would like to note how excited I am to join the company in an interim capacity, I've worked with John over the past three years as the public company's CFO, and I am now looking forward to working with the rest of the team at Dentsply Sirona as we execute against the many opportunities that are ahead of us. In the first quarter, the business delivered revenue of $965 million in line with the preliminary results we announced on April 19. In comparison to prior year, organic sales declined by 1.4% and reported sales declined by 6.1%. The decline versus last year was driven by foreign exchange, US regional performance, increasing challenges in our global supply chain and emerging COVID related softness in China.
Regions outside of the US posted healthy growth in the period along with the global implants and SureSmile businesses. While we continued to experience supply chain constraints, most notably in imaging, the demand for these products remain strong, as evidenced by our high order backlog.Also as a reminder, Q1 2021 was the period where the dental industry was continuing to replenish in certain categories from COVID particularly in consumables, providing a difficult year-over-year comparison. Similarly, our Byte business was up against tough year-over-year comps. That said, we are pleased with the sequential growth, the Byte posted in the quarter. To highlight underlying momentum, Byte unique visitor traffic hit a record high in March.
Gross profit was $547 million or 56.7% of sales. Gross margin rate declined 280 basis points year-over-year due to foreign exchange, unfavorable mix and volumes and inflationary pressure on materials and distribution costs. These headwinds were partially offset by benefits from recently launched products and price increases. SG&A expenses were $349 million or 36.2% of sales. On an absolute basis, SG&A decreased by 1%. R&D spend was $45 million, an increase of 11.1% year-over-year which reflects our continued commitment and focus on accelerating our innovation pipeline. As a reminder, last quarter we reclassified certain expenses from SG&A to R&D. This had no impact on operating margin and the prior year period adjustment was $3 million. Operating income was $153 million, down 30% versus last year. This was due to unfavorable foreign exchange rates, US performance, supply chain pressures and increased investments in R&D. As a result, operating margin was 15.9%. We attribute approximately 60% of the year-over-year decline to the transitory macro challenges of foreign exchange, inflationary pressures and the impact of COVID in China.
As a result, adjusted earnings per share was $0.52 versus $0.72 in the prior year quarter. Operating cash flow was $93 million, a 90% increase year over year mostly to fluctuations in working capital. The company has a strong balance sheet and finished the quarter with $374 million in cash on hand. During the quarter, we returned $174 million to shareholders in the form of increased dividends and $150 million of share repurchases. Now, turning to the segment performance in the quarter. Technologies & Equipment organic sales declined 0.5% and consumables decreased 2.7%. The T&E segment organic sales decline was driven by CAD/CAM while Implants posted strong growth in the quarter, with contributions from all regions.
Our CAD/CAM business declined versus last year due to lower sales in the US, while it grew outside of the US. As shared last quarter in Q1 we executed on our plan for Primemill to focus available supply on needed spare parts. Ortho slightly decreased year-over-year, as we anticipate decline in Byte given the tough comps year over year offset growth in SureSmile. As I mentioned previously, we are pleased with the momentum we are seeing in the clear aligner sequentially. The E&I business posted growth despite supply chain constraints, which primarily continued to impact sales of 3D imaging equipment.
The consumables segment organic sales decline was driven by lower sales in the US, patient volume softness attributed to COVID in certain markets, most notably in China and supply chain constraints. Endo, a strategic growth area posted growth in the quarter across all regions and we are pleased with the progress from recent product losses. The sales decline was partly offset by benefit from price increases taken in the fourth quarter of 2021.
Now, turning to financial performance by region during the first quarter. US sales were $299 million, organic sales declined by 13.5% due to the lower sales in CAD/CAM and certain consumables, supply chain constraints and tough year-over-year comps, primarily in consumables and Byte. Dealer sales were lower due to higher CAD/CAM inventory levels at the start of the quarter. Implants and Endo both posted growth in the region. European sales were $416 million with organic growth of 7% attributed to robust performance in the T&E segment with strategic growth areas including CAD/CAM, ortho and implants all posting double-digit growth. Rest of the world sales were $250 million representing organic growth of 1.4% with growth in both segments.
Resto, CAD/CAM and implants experienced healthy growth in the period. Rest of the world growth was unfavorably impacted by increased government restrictions associated with COVID variants, primarily in China as well as market disruptions in Australia as a result of flooding. Now, let me provide you an update on the financial expectations we have for the 2022 full year. Given the significance of the headwinds we experienced in Q1 and what we can reasonably estimate for the remainder of the year, we are updating our 2022 outlook.
We now expect fiscal 2022 organic sales growth to be in the 2% to 3% range. This equates to a net sales range of $4.1 billion to $4.2 billion. The dental market remains attractive and resilient despite pandemic variant outbreaks, which continue to challenge certain markets. Additionally, our robust R&D platform and pipeline are enhancing our commercial solutions to meet the most pressing needs of our end customers and channel partners. As we navigate a difficult external environment, we continue to focus on opportunities to sustain and drive expansion of margin. While we expect to see some period to period fluctuations, we estimate that for the full year, operating margin rate will be greater than 17%.
Over the last few years, this organization has delivered considerable margin expansion through simplification and portfolio optimization. We believe those initiatives will serve as a solid foundation enabling us to better navigate the acute macro challenges. Our expected 2022 adjusted earnings per share is now in the range of $2.35 to $2.55.
I would like to now touch upon the five key drivers impacting our revised outlook, they are listed on Slide 13 in the earnings presentation. First, we continue to see governmental restrictions in response to COVID variant outbreaks in China. The impact from these restrictions started mid-Q1 and has persisted through April and we are now estimating a prolonged impact further into the year. For reference, in 2021 China represented approximately 5% of the company's total sales and therefore the continuation of major disruption in the market is a notable headwind.
Additionally, we are closely monitoring this disruption's potential impact on our global supply chain. Our commercial and supply chain teams are working diligently to effectively navigate and minimize the impact to our business and customers. Another regional challenge is the disruption from the conflict between Russia and Ukraine which was not considered in our original outlook. Our revised outlook has been risk adjusted removing all sales to Ukraine for the remainder of the year and reducing sales to Russia in compliance with no sanctions.
The risk adjustment represents a modest headwind for the total company. On the supply chain, material shortages and inflationary pressures also represent significant headwinds, which we now expect to continue through the rest of the year. The component shortages impacting several parts of our business, most notably 3D imaging have been significant. However, we are encouraged by the continuation of strong end customer demand globally. Lastly, we have revised our foreign exchange assumptions based on the weakening euro which represents a larger headwind for us versus the original outlook. Our updated assumption for the euro to US dollar exchange rate for the full year is $1.08, which is lower than our previous assumption of $1.14 and the fiscal year 2021 average of $1.19. We view these five drivers as significant but transitory headwinds and our team is working diligently to navigate and minimize the impact of these challenges.
Now, let me provide some color on the quarterly cadence for the rest of the year. First, we are projecting sequential growth over the remaining periods of the year. In Q2, we anticipate sequential growth will come from normalizing dealer inventory levels as well as benefits from recent product launches and price increases. These improvements will be partially offset with softer commercial volumes in China and Ukraine. The back half of the year will further benefit from the momentum we are seeing in strategic parts of the business and the opportunities we can capitalize on through strong execution, including new product launches.
Additionally, we continue to project that our clear aligners business will grow sequentially and Byte will be a contributor to 2022 growth. As a reminder, in Q2 Byte will continue to face tough comps to the strong pandemic-driven performance in the first half of 2021. Nonetheless, it is highly additive to our overall clear aligner strategy and we are seeing the merits of the transaction come through. In closing, we are optimistic that despite a challenging environment, the renewed focus, we are now applying will benefit the trajectory of the company. Over the long term, we believe that improved execution, combined with the resilience of the dental market will allow us to continue to expand revenue and earnings. Additionally, the strength of our EBITDA generation enables a very competitive cash flow yield to our shareholders. We remain committed to returning at least 50% of our free cash flow to our shareholders through a combination of dividends and share repurchases.
With that, I will now turn the call back to John.