Senior Vice President snd Chief Financial Officer at Catalent
Thanks, Alessandro. I'll begin this morning with a discussion on segment performance, where commentary around segment growth will be in constant currency. This is the first quarter we are reporting under our new segment structure announced back in July. In both our Q1 earnings release and slide presentation, we are providing historical revenue and EBITDA results that have been recasted as if these segments have been in place for fiscal 2021 and 2022. I will start on slide nine with the Biologics segment. Biologics net revenue in Q1 of $523 million decreased 2% compared to the first quarter of 2022. The decline is primarily the result of a settlement of take-or-pay contracts for a COVID vaccine that was not considered revenue in the quarter, but was previously expected to. We will offset the negative impact later in the fiscal year, likely in the second quarter, following the completion of an outstanding performance obligation for the client. If we were to include this amount as revenue in Q1, we would have seen growth year-over-year, fueled organically by strong demand for our non-COVID programs, particularly our cell and gene therapy offering. This strong demand more than offset the decrease in revenue from COVID-related programs. The segment's EBITDA margin of 21.5% was lower by nearly 900 basis points year-over-year from the 30.4% recorded in the first quarter of fiscal 2022. Year-over-year margin primarily contracted due to the underutilized capacity. Other factors included the remediation activity in Brussels, which is ongoing, as well as the negative carry related to the Princeton and Oxford facilities.
As shown on slide 10, our Pharma and Consumer Health segment generated net revenue of $499 million, an increase of 11% compared to the first quarter of fiscal 2022. With segment EBITDA increasing 20% over the same period last fiscal year. Both top and bottom line growth were driven inorganically from the acquisition of the Bettera business. The Bettera contributed 10 percentage points to PCHs net revenue growth and 12 percentage points to segment EBITDA growth during the quarter. As a reminder, starting in Q2, Bettera will be considered organic. The organic PCH business did see modest revenue growth, driven by a wide variety of development offerings, including clinical development supply. Partial offsets to growth came from a decline in prescription drug products and the mandatory closure of our largest PCH site located on Florida's West Coast due to Hurricane Ian. The site was closed for four days, but did not withstand any structural manage. Moving to our consolidated adjusted EBITDA on slide 11. Our first quarter adjusted EBITDA decreased 26% to $187 million or 18.3% of net revenue. On a constant currency basis, our first quarter adjusted EBITDA declined 24% compared to the first quarter of the prior year due primarily, to the year-over-year decline in COVID-related activity.
As shown on slide 12, first quarter adjusted net income was $61 million or $0.34 per diluted share compared to adjusted net income of $128 million or $0.71 per diluted share, in the first quarter a year ago. Note that our income tax rate was higher in the first quarter, than our full year expectation because of the front-loaded weighting in higher tax jurisdictions, which we expect to normalize over the remainder of the fiscal year. Slide 13, shows our debt-related ratios and capital allocation priorities. Catalent's net leverage ratio as of June 30, 2022 was 3.2 times and slightly above our long-term target of 3.0 times. On a pro forma basis, for which we assume the metrics acquisition closed on September 30, 2022 as opposed to October 3, 2022 Catalent's net leverage ratio would have been 3.6 times. This compares to net leverage of 2.9 times on June 30, 2022 and 2.1 times on September 30, 2021. Our combined balance of cash cash equivalents and marketable securities as of September 30, 2022 was $345 million compared to $538 million as of June 30, 2022. Note that free cash flow still remains negatively impacted by our strategic decision to hold increased inventory levels. When we feel the time is appropriate, and are more comfortable with the stabilization of our supply chain, we will begin to reverse course. As of September 30, 2022, our contract asset balance was $461 million, an increase of $20 million compared to June 30, 2022.
The overwhelming majority of this increase is related to some notably large development programs, particularly within our Biologics segment where revenue was recorded based on a percentage of completion versus entirely on back release, as it is for commercial programs. This difference in approach affects when we are able to invoice customers, thereby delaying cash realization and negatively affecting free cash flow. The expectation however, is that this figure will decrease throughout the fiscal year, as we make progress in shortening the cycle time. As a final point regarding our free cash flow, I note that the decrease in contract liabilities also had a negative impact. Our contract liabilities arise predominantly within our Biologics segment, and are linked to upfront cash proceeds related to our gene therapy programs. As these programs mature and the performance obligations are met, these balances will shift to recognized revenue and we have already seen this play out with several large gene therapy customers, over the last several quarters. Moving on to capital expenditures. We now expect our fiscal 2023 capex, as a percentage of revenue to be between 10% and 11%, down from our previous projection of 13% to 15%. This moderated rate of capex spend and overall more prudent approach to capital deployment, as we navigate through a challenging macroeconomic environment, better positions Catalent for free cash flow generation.
As we have previously shared, we accelerated several planned initiatives to address the pandemic and build capabilities for new modalities sooner. This has put the company today in a position to leverage these new assets and capabilities earlier than anticipated and lead to continued strong non-COVID revenue growth. Now we turn to our adjusted financial outlook for fiscal 2023 as outlined on slide 14. This new outlook assumes the challenging macroeconomic environment will persist longer than originally expected back in August, which justifies a more conservative orientation. It also reflects our acquisitions of metrics, which closed just after the end of the first quarter. We now expect full year net revenue in the range of $4.625 billion to $4.875 billion, representing a range of 4% decline at the low end and 1% increase at the high end on an as reported basis compared to fiscal 2022. FX continues to be a headwind with an incremental impact of approximately one percentage point on both revenue and adjusted EBITDA versus our previous guidance. As a reminder, the guidance we announced in August already included a negative FX impact of approximately three to four percentage points on our revenue and adjusted EBITDA growth. So after taking into account these considerations our revised expected organic constant currency net revenue growth rate in fiscal 2023 is expected to be essentially flat at the midpoint of the guidance range.
For full year adjusted EBITDA, we now expect a range of $1.22 billion to $1.30 billion, representing a decline of 5% at the low end of the range and an increase of 1% at the high end of the range compared to fiscal 2022. You are familiar with the seasonal nature of our business where revenue and EBITDA generation are each more weighted to the back half of the year, which has historically led to approximately 60% of our EBITDA to be realized in that period. In fiscal 2023 because we just started the implementation of our cost efficiency activities, we now expect adjusted EBITDA to be even more weighted to the back half of the year at approximately 63% to 64%. This also accounts for the much more pronounced year-on-year decline of COVID related revenue we expect in the second quarter versus the first quarter. There are a number of factors that continue to negatively impact margins in fiscal 2023 that we reviewed last quarter, but that will be partly offset by our cost saving actions. The factors include headwinds from COVID related volume declines, inflationary and supply chain pressures, start-up costs related to our acquisitions of Princeton and Oxford, which we are absorbing in our organic assumptions, other pockets of underutilization across the network as we bring on additional capacity and foreign exchange translations as our margin profile is higher outside of the US, while the majority of our corporate costs are domestic.
Note that swings in the euro have a greater impact on FX translation than the pound. Moving to adjusted net income. We now expect full year ANI of $567 million to $648 million, representing a range from a decline of 18% to a decline of 7% on an as-reported basis compared to fiscal 2022. The ANI decline we foresee for fiscal 2023 is being driven by several items. First, the inclusion of the new debt used to fund the Metrics acquisition, which closed in October. Second, servicing the full year of the new variable debt we raised in part from the Bettera acquisition, as well as other interest-related increases in the current rising interest rate environment. Next our expectations for our full fiscal 2023 tax rate remain unchanged from prior guidance. But as a reminder, we'll experience a higher effective tax rate in the 24% to 25% range compared to the 23.4% we saw in fiscal 2022 due to the geographic mix of earnings. And finally, increased depreciation expense due to our significantly larger asset base, which is also more heavily weighted towards the US. We continue to expect our share count to be in the range of 181 million to 183 million shares.
Operator, this concludes our prepared remarks and we'd now like to open the call for questions.