James F. Cleary
Executive Vice President and Chief Financial Officer at Cencora
Thanks, Steve. Good morning and good afternoon, everyone. Before I turn to our results, I want to join Steve in expressing my excitement on our recent announcement that we intend to change our name to Cencora in the second half of calendar 2023. By becoming Cencora, we will be able to better connect with our team members, customers and other stakeholders on a unified basis across our footprint and Cencora will better represent our role and impact as a leading healthcare solutions organization supporting pharmaceutical innovation and access.
Now turning to our first quarter results and as a reminder, my remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated. AmerisourceBergen delivered solid results in our first quarter that were mostly in line with our expectations. We finished the quarter with adjusted diluted EPS of $2.71, an increase of 5% over the prior year quarter. Adjusted EPS benefited from a lower share count as a result of our recent opportunistic share repurchases and strong fundamentals in our business helped offset previously anticipated elevated expenses in the quarter.
Our consolidated revenue was $62.8 billion up 5% driven by growth in our U.S. Healthcare Solutions segment, which was offset by foreign currency pressure on the translation of our sales in the International Healthcare Solutions segment. While the U.S. dollar weakened from the historically strong levels seen in the fourth quarter of fiscal 2022, the year-over-year comparison still created a headwind as expected, which I will discuss in more detail when reviewing segment level results.
Consolidated gross profit was $2. 1 billion, up 5% due to growth in the U.S. Healthcare Solutions segment. While each segment had better gross profit margins relative to the prior year quarter, consolidated gross profit margin was flat year-over-year as the foreign exchange impact on the higher margin International Healthcare Solutions segment was a drag on margin growth at the consolidated level. Consolidated operating expenses were $1.4 billion, up 9.8% due to higher distribution, selling and administrative expenses to support revenue growth and reflecting inflationary impacts on certain operating expenses.
As I called out on our November earnings call, we did not begin to see inflationary pressures in our business until towards the end of the March 2022 quarter. The higher expense growth rate in this year's first quarter was driven by a tougher comparison versus the prior year period. We expect the operating expense growth rate to decline sequentially in the subsequent quarters and to become a more normalized rate for the full year. Consolidated operating income was $734 million, a decrease of approximately 2% compared to the prior year quarter or up 4% on a constant currency basis. The as reported decline was driven primarily by the impact of foreign currency translation for the International Healthcare Solutions segment and was partially offset by growth in the U.S. Healthcare Solutions segment, which I'll discuss in more detail when I review segment level results.
Moving now to our net interest expense for the first quarter. Net interest expense was $46 million, down approximately 14% due to higher interest income resulting from higher cash balances and interest rates on investments. Looking ahead, our average cash balances will be lower following the opportunistic share repurchases we announced in the quarter, the successful early completion of the PharmaLex acquisition and the upcoming March 2023 debt repayment.
Our lower invested cash balances will drive our net interest expense higher in the coming quarters and result in higher interest expense versus fiscal 2022 as I called out in November.
Turning now to income taxes. Our effective income tax rate was 19.1% compared to 21.2% in the prior year quarter. The lower tax rate for the quarter was in line with our expectations and we continue to expect our full year effective tax rate to be in the range of approximately 20% to 21%. Our diluted share count was 206.3 million shares, a 2.3% decline compared to the first quarter of fiscal 2022 driven by opportunistic share repurchases over the past several months, including $700 million of repurchases completed in November and December.
Regarding our cash balance, we ended the quarter with approximately $1.7 billion of cash due to the timing of holidays around the PharmaLex acquisition close at the beginning of January. We prefunded the acquisition on December 29, which resulted in a prepaid asset on our balance sheet and lower cash balance when we closed the quarter. In the quarter, adjusted free cash flow was $584 million and we remain on track to achieve our adjusted free cash flow guidance of approximately $2 billion for the fiscal year. This completes the review of our consolidated results.
Now I'll turn to our segment results for the first quarter. U.S. Healthcare Solutions segment revenue was $56.2 billion, up approximately 6% for the quarter as we continued to see strong specialty sales and broad based solid growth in our human health distribution businesses. U.S. Healthcare Solutions segment operating income increased by approximately 1% to $572 million. Sales to specialty physicians and health systems were once again strong in the quarter as our leadership in specialty continue to position us well to deliver growth including in biosimilars where we are seeing good trends in oncology and more recently ophthalmology.
The strength in specialty and broad-based good utilization trends in human health distribution helped to offset the previously anticipated higher operating expenses as well as softness in the animal health market. As has been widely discussed in the animal health industry, there are short-term pressures in both the companion and production animal markets. From a cadence perspective, however, some of the softness in our animal health business in the quarter is related to timing and will normalize in the second quarter.
I will now turn to our International Healthcare Solutions segment. In the quarter, International Healthcare Solutions revenue was $6.6 billion, down 0.6% on a reported basis or up 17.7% on a constant currency basis. The as reported decline was driven by the impact of foreign currency translation on revenue for Alliance Healthcare as the business is more exposed to currency fluctuations. International Healthcare Solutions operating income was $161 million, down approximately 10% on a reported basis, driven by the impact of foreign currency translation on income for Alliance Healthcare and the divestiture of ProPharma Specialty, which represented approximately 3% of segment operating income in the first quarter of fiscal 2022.
When looking at the segment on a constant currency basis, it delivered 11% operating income growth driven by solid underlying fundamentals and favorable manufacturer price adjustments this quarter in one of our developing market countries. From a cadence perspective last year, this price adjustment occurred in our second fiscal quarter. This price adjustment activity offset the negative impact of the decline in the value of the local currency. That completes the review of our segment level results.
I will now discuss our updated fiscal 2023 guidance expectations. As a reminder, we do not provide forward-looking guidance on a GAAP basis, so the following metrics are provided on an adjusted non-GAAP basis. I will also provide certain guidance metrics on a constant currency basis. Full details of our fiscal 2023 guidance can be found on pages 8 and 9 of our earnings presentation on our Investor Relations website. I'll begin with EPS. We are raising our full year diluted EPS guidance to a range of $11.50 to $11.75, up from our prior range of $11.30 to $11.60, representing growth of 4% to 7% on an as reported basis or 6% to 9% on a constant currency basis.
Our increased EPS guidance range is primarily a result of our opportunistic share repurchases in the first quarter, which results in our updated guidance on full year diluted average share count. We now expect our share count to be approximately 206 million shares, down from our previous range of 207 million to 209 million shares. Our increased EPS guidance range is also a result of the higher as reported operating income and International Healthcare Solutions, partially offset by the reduced contribution from COVID in the U.S.
Next, I would like to provide a brief update on COVID-19 treatment distribution contributions. In the first quarter, COVID-19 treatments contributed $0.12 to our consolidated EPS compared to $0.14 in the first quarter of last year with about $0.09 in the U.S. and $0.03 in our international segment. Given trends we have seen to-date, we now expect the full year contribution from COVID-19 treatment distribution to be in the range of $0.25 to $0.30, down from our previous range of $0.30 to $0.35 that we provided in November.
For the rest of the year, the majority of the expected COVID contribution is in the U.S. segment with just a few more pennies of contribution expected in the international segment for the year. To reflect the lower expected contribution from COVID treatment distribution, we are lowering the bottom end of our US healthcare solutions as reported operating income guidance. We now expect the segment to deliver as reported growth in the range of 1% to 4% growth widened from the prior range of 2% to 4% growth. Our guidance for the U.S. Healthcare Solutions segment excluding COVID contributions remains unchanged at 5% to 7% growth in fiscal 2023.
Now moving to the International Healthcare Solutions updated segment level operating income assumptions. We are raising our as reported operating income guidance for the International Healthcare Solutions segment to a range of a decline of 3% to growth of 1% from our previous range of a decline of 7% to a decline of 3%, driven by the general weakening of the U.S. dollar and the incremental contribution from PharmaLex. The accretive and strategic deal is another example of how we create incremental value through capital deployment and we are excited to welcome the PharmaLex team to AmerisourceBergen.
PharmaLex's leading solutions build upon our existing capabilities and will allow us to deepen our partnerships with pharma manufacturers as we provide support throughout the cycle from clinical development to regulatory support and access strategies to providing logistics services. For additional operating income guidance measures for the International Healthcare Solutions segment, I would refer you to our investor presentation deck. These guidance measures also were increased driven by the general weakening of the U.S. dollar and the incremental contribution from PharmaLex.
In summary, regarding the updates we have made to guidance, there is no change in our guidance for as reported consolidated adjusted operating income and we are raising our adjusted EPS guidance for the full year, all while lowering our expectations for COVID contributions. Before I turn to my closing remarks, I would like to briefly discuss a few highlights about how we are working to ensure a resilient supply chain and mitigate our impact on climate change. As a crucial member of the global pharmaceutical supply chain, we play a key role in ensuring the safe and reliable supply of medications. We take this role seriously and have robust plans and teams in place to support supply chain resiliency.
In fiscal 2022, we advanced these efforts and expanded the scope of our physical risk assessment process to reflect our expanded footprint since we last conducted a physical risk assessment in 2020. In 2022, we included nearly 400 sites across 24 countries, up from 100 sites. The updated assessment will inform our business continuity planning process to help ensure the continuity of supply in the event of extreme weather or natural disasters. While we prepare for and adapt our business to address the impacts of a change in climate, we continue to look at ways we can reduce our carbon footprint and be good environmental stewards.
As part of these efforts, in May 2022, we submitted a near-term target to reduce our greenhouse gas emissions to the science-based targets initiative for validation. In January, we learned the science-based targets initiative approved our near-term science-based emissions reduction target. In addition to the items Steve and I have discussed today, our recently published ESG report contains additional information on how we are living our purpose and creating healthier futures through our ESG initiatives. The report aligns with a number of leading ESG reporting standards and frameworks and key data points have been externally assured. I would encourage you to review the report in its entirety on its dedicated microsite at esg.amerisourcebergen.com.
In closing, our updated fiscal 2023 guidance reflects our continued strategic use of capital to create value for our stakeholders through a combination of returning capital to shareholders and investing in our business to further our value proposition for our partners powered by the continued resilience and growth of our business. As we progress through 2023, we remain focused on executing on our long-term strategy and through our foundation and pharmaceutical distribution and complementary higher margin, high growth businesses, we are well positioned to create long-term sustainable growth.
Now I will turn the call over to the operator to open the line for questions. Operator?
