Kevin Nowlan
Executive Vice President and Chief Financial Officer at BorgWarner
Thank you, Fred, and good morning, everyone. Before I dive into the financials, I'd like to provide a brief overview of our first quarter results. First, we reported double-digit organic revenue growth driven by outgrowth in Europe and North America and higher industry production despite weaker production in China during the quarter. Second, our margin performance reflected a planned increase in eProduct related R&D investment and net inflation headwinds, both of which we had indicated would be margin headwinds during last quarter's earnings call. Despite this, we believe we remain on track for our expected full year performance. Let's turn to slide nine for a look at our year-over-year revenue walk for Q1.
Last year's Q1 revenue was just under $3.9 billion. You can see that the strengthening U.S. dollar drove a year-over-year decrease in revenue of over 4% or approximately $162 million. Then you can see the increase in our organic revenue, about 12% year-over-year. That compares to an approximately 7% increase in weighted average market production. Finally, the acquisitions of Santroll and Rhombus added $22 million to revenue year-over-year. The sum of all this was just under $4.2 billion of revenue in Q1. Turning to slide 10. You can see our earnings and cash flow performance for the quarter. Our first quarter adjusted operating income was $396 million, equating to a 9.5% margin.
That compares to adjusted operating income of $389 million or 10.0% from a year ago. On a comparable basis, excluding the impact of foreign exchange and the impact of M&A, adjusted operating income increased $32 million on $446 million of higher sales. This performance includes a planned eProduct R&D increase of $26 million and about $28 million of net commodity and other material cost inflation headwinds. As we mentioned on last quarter's call, we anticipated Q1 to have a higher level of material inflation headwinds as we're still in the process of negotiating with our customers, the extent to which cost recovery mechanisms from 2022 carry into 2023. We expect to largely complete these discussions over the next couple of quarters, which is one of the reasons we thought we would have a lower margin in Q1 relative to the remaining quarters of 2023. Excluding these higher costs, both eR&D and net material inflation, we converted at approximately 19% on our additional sales.
Our adjusted EPS improved by $0.04 in the first quarter compared to a year ago, driven by the increase in our adjusted operating income and a lower year-over-year share count resulting from the 240 million of share repurchases we executed last year. And finally, free cash flow. Our free cash flow was a $290 million usage during the first quarter due to higher capital spending to support our growth in eProducts, increased working capital during the quarter, and the annual payout of the company's incentive compensation for the prior year's performance, which we normally make in Q1. You'll note that the rate of capital spending during the first quarter was ahead of the pace implied by our full year guidance.
However, this was in line with our internal planning as we're putting in place the capital that we believe is necessary to support the ramp-up in our eProduct revenue. Let's now turn to slide 11, where you can see our perspective on global industry production for 2023. We expect our global weighted light and commercial vehicle markets to be flat to up 3% this year, which is unchanged compared to our prior guidance. However, within this overall outlook, our regional expectations are mixed. Specifically, in North America, we're planning our weighted markets to be up about 1% to 5%. In Europe, we expect our blended market to be roughly flat to up 2%, which is a bit higher than our previous forecast based on the stronger start of the year.
And in China, we expect the overall market to be down approximately 3% to up 2%, which is slightly worse than our previous expectation due in large part to the weaker-than-anticipated production we saw during the first quarter. Now let's take a look at our full year outlook on slide 12. First, it's important to note that our guidance now assumes an expected full year tailwind from stronger foreign currencies of $55 million. This is an improvement of $340 million in revenue versus our prior guidance. Second, as I previously mentioned, we expect our end markets to be flat to up 3% for the year, which contributes to the organic net sales change you see on the slide.
But more important than the modest growth in end markets, we expect our revenue to continue to grow in excess of industry production, driven by our expectations for a modest increase in inflationary cost recovery from our customers and various expected new business launches, especially in our eProducts portfolio. As it relates to eProduct revenue, we are expecting to deliver between $2.3 billion and $2.6 billion in 2023, which is up significantly from the approximately $1.5 billion we generated in 2022. Finally, the Santroll, Rhombus and SSE acquisitions are expected to add $70 million to 2023 revenue. Based on these expectations, we're projecting total 2023 revenue in the range of $17.1 billion to $17.9 billion, which equates to organic growth of approximately 7.5% to 12.5%.
This is higher than our previous revenue guidance of $16.7 billion to $17.5 billion due to foreign currencies, the impact of the recently completed acquisition of SSE and our slightly higher customer recovery expectations. Switching to margin. We continue to expect our full year adjusted operating margin to be in the range of 10.0% to 10.4% compared to our 2022 margin of 10.1%. As it relates to R&D, our full year 2023 guidance continues to anticipate a $60 million to $70 million increase in eProduct-related R&D investment. With our ongoing success securing new electrified business wins, we're continuing to lean forward by investing more in R&D to support our eProduct portfolio.
Excluding the impact of this increase in eProduct-related R&D, our 2023 margin outlook contemplates the business delivering full year incrementals in the mid-teens, inclusive of net inflationary headwinds of around $65 million. Based on this revenue and margin outlook, we're expecting full year adjusted EPS in the range of $4.60 to $5.15 per diluted share. Turning to free cash flow. We continue to expect that we'll deliver free cash flow in the range of $550 million to $650 million for the full year. As a reminder, this cash flow outlook includes onetime cash cost of approximately $150 million related to the planned spinoff of our fuel systems and aftermarket businesses.
Excluding this onetime cost, our free cash flow guidance would be $700 million to $800 million which is only slightly lower than the record free cash flow of $846 million we generated in 2022. That's our 2023 outlook. Turning to slide 13. And you can see our new segment disclosure for ePropulsion. In an effort to increase transparency into our eProduct profitability, we've made the decision, starting with the first quarter to break our previous ePropulsion and Drivetrain segment into two separate external reporting segments: ePropulsion and Drivetrain in battery systems. Our ePropulsion segment includes multiple eProducts, including inverters, eMotors, eGearDrive, iDMs and other power electronics, such as onboard chargers.
We expect these eProducts to account for roughly 2/3 of the segment's revenue in 2023. In addition, the ePropulsion segment is expected to account for approximately 2/3 of BorgWarner's total eProduct revenue in 2023. As you can see, the business reported a negative operating margin in the first quarter, but it's expected to have a slightly positive margin by the fourth quarter. We believe a significant driver of this improved margin outlook will be the conversion on the growth in eProduct revenue as quarterly segment revenue is expected to grow to $750 million to $850 million by the fourth quarter compared to $487 million of revenue in Q1.
And as you can see, the expected growth in eProduct R&D isn't expected to keep pace with the growth in revenue and gross profit in the coming quarters. The result is an increasing operating margin for the ePropulsion segment. Importantly, we expect profitability to continue to improve as we look forward beyond 2023. We believe this is a very good illustration of the profitability trajectory of our eProducts more generally. That's because we expect that as each eProduct starts to see acceleration in revenue growth, the conversion on that growth starts to overcome the upfront cost of R&D and other investments, thereby leading to profitability. So let me summarize my financial remarks.
Overall, our first quarter results were broadly in line with our prior outlook. We outgrew the market with growth driven by various eProducts and foundational products, and our incremental margin performance, excluding planned eR&D investment and net inflation was strong. In addition, we continue to take steps to increase the financial transparency of our eProduct businesses. As we look ahead in 2023, we continue to expect to deliver strong revenue outperformance compared to industry production, to complete the work to successfully spin out PHINIA, which we now expect to happen by the end of the third quarter and to continue to make the necessary investments to support the profitable growth of our eProduct portfolio.
With that, I'd like to turn the call back over to Pat.
