Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories
Thank you, Andy. Now I would like to review the results of the first quarter. Net sales for the first quarter of 2022 were $700.1 million, which is a 3.7% decline on a reported basis versus $726.8 million in Q1 of 2021.
On a currency-neutral basis, sales decreased 0.8%. The first quarter decline in revenue was as result of lower COVID-related sales this year. We estimate that COVID-related sales were about $45 million in the quarter, which reflects an elevated level in demand.
Looking ahead, we continue to anticipate a significant tapering in COVID-related sales compared to the last two years. Core year-over-year revenue growth, which excludes COVID related sales, increased 6.5% on a currency-neutral basis.
On a geographic basis, we experienced currency-neutral year-over-year core revenue growth across all three regions while COVID-related year-over-year sales declined globally. We note that the key markets were nearly at full recovery prior to the lockdowns in China during the final days of March.
As Andy mentioned earlier, we continue to carry an elevated order backlog as a result of supply chain constraints. Overall, we still anticipate supply chain constraints for the Life Science group to ease starting midyear and for the Diagnostics group to ease towards the end of this year.
Sales of the Life Science group in the first quarter of 2022 were $347.2 million compared to $366.5 million in Q1 2021, which is a 5.3% decline on a reported basis and a 2.5% decline on a currency-neutral basis. Excluding COVID-related sales, the underlying Life Science year-over-year currency-neutral core revenue growth was 12.9%.
The year-over-year growth was driven by Process Media and Droplet Digital PCR. Process Media, which can fluctuate on a quarterly basis, saw strong year-over-year double-digit growth versus the same quarter last year.
Excluding Process Media sales, the underlying Life Science business declined 9.6% on a currency-neutral basis versus Q1 of 2021 due to lower COVID-related sales. When also excluding COVID-related sales revenue growth was 6.2% on a currency-neutral basis. On a geographic basis, Life Science experienced currency-neutral year-over-year core revenue growth in the Americas and in Asia while Europe was about flat.
Sales of Clinical Diagnostics group in the first quarter were $351.8 million compared to $358.5 million in Q1 of 2021, which is a 1.9% decline on a reported basis and a 1.1% growth on a currency-neutral basis. Core Clinical Diagnostics, year-over-year revenue growth, which excludes COVID-related sales, increased 1.7% on a currency-neutral basis.
The Diagnostics group currency-neutral year-over-year sales increase was driven by blood-typing and clinical immunology as well as the recovery of routine testing, which is now approaching pre-COVID levels. Supply chain constraints had an impact on instrument placements within the diabetes franchise.
On a geographic basis, the Diagnostics group year-over-year currency-neutral sales grew in the Americas and Europe and declined in Asia. The reported gross margin for the first quarter of 2022 was 57.6% on a GAAP basis and compares to 55.1% in Q1 of 2021. The year-over-year gross margin improvement was mainly due to a decline in expenses associated with the European restructuring initiative in the same period last year, which was partially offset by increased logistics costs and less favorable product mix.
Amortization related to prior acquisitions recorded in cost of goods sold was $4.5 million compared to $4.6 million in Q1 of 2021.
SG&A expenses for Q1 of 2022 were $197.6 million or 28.2% of sales, compared to $225.9 million or 31.1% in Q1 of 2021. The year-over-year SG&A expenses decreased mainly due to higher expenses in the same period last year associated with the European restructuring initiative and was partially offset by higher employee related expenses. Total amortization expense related to acquisitions recorded in SG&A for the quarter was $1.8 million versus $2.4 million in Q1 of 2021.
Research and development expense in Q1 was $62.5 million or 8.9% of sales, compared to $73.9 million or 10.2% in Q1 of 2021. The year-over-year R&D expenses decreased due to higher expenses associated with the European restructuring initiative in the same period last year, partially offset by increased project spend and employee-related expenses. Q1 operating income was $143.4 million or 20.5% of sales, compared to $100.9 million or 13.9% in Q1 of 2021.
Looking below the operating line, the change in fair market value of equity securities holdings, which are substantially related to Bio-Rad's ownership of Sartorius AG shares, negatively impacted the reported results by $4.545 billion. During the quarter, interest and other income resulted in net other income of $30.7 million, compared to $16.9 million last year. Q1 of 2022 included $31.6 million of dividend income from Sartorius, compared to $19 million last year. Q1 of 2022 also included $4 million of interest expense related to the recently issued senior notes.
The effective tax rate for the first quarter of 2022 was 22.9%, compared to 24.7% for the same period in 2021. The effective tax rate in Q1 of 2022 was primarily affected by the unrealized loss in equity securities and the tax rate reported in Q1 of 2021 was primarily driven by the unrealized gains in equity securities last year. Reported net loss for the first quarter was $3.3696 billion and the diluted loss per share was $112.57, compared to $977.4 million of net income and $32.38 per share in Q1 of 2021. This decrease from last year is largely related to changes in the valuation of the Sartorius holdings.
Moving on to the non-GAAP results. Looking at the results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins, as well as other income. These items are detailed in the reconciliation table in the press release. In cost of goods sold, we have excluded $4.5 million of amortization of purchased intangibles and a small restructuring expense.
These exclusions moved the gross margin for the first quarter of 2022 to a non-GAAP gross margin of 58.3% versus 59% in Q1 of 2021. Non-GAAP SG&A in the first quarter of 2022 was 27.4% versus 25.4% in Q1 of 2021.
In SG&A on a non-GAAP basis, we have excluded an in vitro diagnostic registration fee in Europe for previously approved products of $2.8 million, amortization of purchased intangibles of $1.8 million, legal related expenses of $1.2 million and a small restructuring related expense.
Non-GAAP R&D expense in the first quarter of 2022 was 8.9% versus 7.9% in Q1 of 2021. In R&D, on a non-GAAP basis, we have excluded a small restructuring benefit. The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 20.5% on a GAAP basis to 22% on a non-GAAP basis. This non-GAAP operating margin compares to a non-GAAP operating margin in Q1 of 2021 of 25.8%. We have also excluded certain items below the operating line, which are the decrease in value of the Sartorius equity securities and loan receivable holdings of $4.545 billion, and about a $1 million loss associated with venture investments.
The non-GAAP effective tax rate for the first quarter of 2022 was 19.6% compared to 23.6% for the same period last year. The lower rate in 2022 was driven by the geographical mix of earnings as well as benefit associated with preferential tax rate related to export sales.
And finally, non-GAAP net income for the first quarter of 2022 was $149.1 million or $4.94 diluted earnings per share compared to $157.4 million and $5.21 per share in Q1 of 2021.
Moving on to the balance sheet. Total cash and short-term investments at the end of Q1 were $2.079 billion compared to $875 million at the end of 2021. The change in cash and short-term investments from the fourth quarter was primarily due to proceeds from the recent $1.2 billion senior notes offering.
During the first quarter, we did not purchase any shares of our stock and we had a total of $223 million available for potential share buybacks. For the first quarter of 2022, net cash generated from operating activities was $46 million, which compares to $114 million in Q1 of 2021.
The decrease in operating cash flows was driven mainly by the change in working capital. The adjusted EBITDA for the first quarter of 2022 was $211.1 million or 30.2% of sales and excluding the Sartorius dividend was 25.6%. The adjusted EBITDA in Q1 of 2021 was $232 million or 31.9% of sales, and excluding the Sartorius dividend was 29.3%. Net capital expenditures for the first quarter of 2022 were $28.9 million and depreciation and amortization for the first quarter was $32 million.
Moving on to the guidance, we maintain our full year currency-neutral revenue growth guidance to be between 1% and 2% or 8.5% to 9.5%, when excluding COVID sales. Taking into account the current supply chain challenges we anticipate full year core growth for the Diagnostics group to be between 2% and 3% versus our prior guidance of 3% to 4%.
For the Life Science group, we now expect 2022 core growth to be at the high end of our prior guidance between 16% and 18%. Given the higher Sartorius dividend declared in the first quarter, we are increasing our adjusted EBITDA guidance accordingly. We now project full year adjusted EBITDA to be between 24% and 24.3% versus our prior guidance of 23.5% and 23.8%.
That concludes our prepared remarks and we will now open the line to take your questions. Operator?
