Dr. Udit Batra
President and Chief Executive Officer at Waters
Thank you, Caspar and good morning, everyone. So this morning, I'll start by giving you color on our first quarter results as well as our updated guidance then I will cover some of our recent product launches including Alliance iS and I will also provide an update on Wyatt. Our first quarter results were below our expectations with revenue growth of 3% on a constant currency basis versus our expected 4% to 6% growth. This was largely driven by weaker-than-expected demand for instruments in biotech and pharma, which I will cover in a moment. As you know, we had an extraordinary Q1 last year with 16% constant currency growth, even though our first quarter this year was slower than expected, it still represents a very healthy 2-year stack growth of approximately 9.4%. We also saw overall - good overall strength in our recurring revenues, which continued to grow in the high single digits as well as mass spec and DA, both of which grew double digits.
Our end markets remain resilient and our leadership team continues to drive strong commercial execution. We have further strengthened our revitalized portfolio with a steady stream of innovative new products. Finally, we've added M&A to our growth strategy with our pending acquisition of Wyatt and we continue to invest organically in our high growth adjacencies which are also on track and are gaining momentum. Reviewing our first quarter results in more detail, our performance was impacted by a combination of three factors. First, China was weaker than anticipated as pharma customers scaled back purchases. Second, while we have limited exposure to pre-commercial biotech, we have seen it pronounced scaled back in demand from these customers as they have significantly reduced spending to conserve capital. And third, several of our large to medium size pharma customers delayed timing of instrument orders due to macroeconomic caution. Each of these dynamics occurred late in the quarter and led to instruments declining 3% after they grew over 25% in the first quarter of last year. By end market, the impact was to our pharma business, which declined 4% overall. This was offset by strength in the academic and government segment, which grew 45%, and industrial, which grew 3%, while our recurring revenues remained strong across service and chemistry.
As a result of this lower- than expected volume, our non-GAAP earnings per fully diluted shares also came below our expectations at $2.49 for the first quarter. On a GAAP basis, our earnings per fully diluted share was $2.38. As we look ahead, we are assuming that spending among pharma customers in China will remain scaled back for the balance of the year. And while our exposure to pre-commercial biotech is low, we also believe that the slowdown in this space is likely to persist for the remainder of the year, as a result we are lowering our 2023 guide due to these two factors. We now expect our full year organic constant currency growth to be in the range of 3% to 5%. We believe that large to medium pharma side budgets remain in place, we expect spending among these customers to catch up and be stronger in the second half of the year after delayed spending in the first half. Despite our revised revenue guide, our full year EPS guidance and free cash flow generation expectations remain unchanged. We intend to proactively manage our spend and working capital and Amol will cover this in more detail.
Even with short term market challenges, our sources for growth remain intact. Our end markets are robust with almost 80% of our business exposed to durable growth areas. This includes demand for QA/QC testing of commercialized medicines, increased scrutiny of PFAs in food and water and the testing of batteries used in applications such as electric vehicles. Our team has developed a strong commercial discipline that is supported by best in class innovative new products that address evolving customer unmet needs. We're also seeing high single digit growth in our recurring revenues, which are over 50% of our annual sales. Chemistry growth is supported by strong end market - end market activity, growth in biologic applications with our MaxPeak Premier columns and our e-commerce initiative.
For service, we're seeing strong pull through from our instrument sales and increased service plan attachment is supporting the growth. We expect service plan attachment for our instruments to increase by another 100 basis points this year, building on the 350 basis point expansion since 2019. Our revitalized portfolio has been further strengthened with the recent launch of Alliance iS which is our next generation intelligent HPLC system. We believe it is the most significant innovation to hit pharma QA/QC in the past decade and it provides a major leap forward in-lab productivity. Not only is the instrument easy to use with its large touchscreen interface but can eliminate common user errors by up to 40%, it does this by guiding users between steps with highly - with a intuitive interface. It intelligently conducted a number of real-time system checks before a sample is run. This helps - ensures that the instrument is configured correctly for the method that is being tested. Before now errors such as incorrect solvent or the wrong column being used which I usually discovered after the sample has been run with results in waste of time and a waste of sample.
Given the strength of the Alliance brand and the significant new features that this - that this instrument offers, we had a strong reception at its launch. Since quality testing is such a critical component of pharmaceutical manufacturing, customer interest has been strong, including from Janssen Pharmaceuticals who noted that Alliance iS feels like the future is here and has already made plans to replace a large number of its LCs with this instrument. We now have not one but two new industry leading platforms for QA/QC applications in pharma, Arc HPLC and it's biocompatible equivalent Arc Premier and now higher-end Alliance iS, which sits at the top of the range.
Last month, we also launched our Xevo TQ absolute mass spec into clinical applications. Not only is this the most sensitive Triple Quad on the market for PFAs detection, where it has seen strong traction in food and environmental testing, but now within clinical it is up to five times more sensitive than other competing instrument in the segment. This sensitivity enables clinical labs to detect and measure trace level analytes at lower detection levels than was previously possible. It also enables clinical labs to expand their test menu to include multiplex panels. Meanwhile, our TA instruments business launched a new microcalorimeter for battery testing essential for electric vehicle, energy storage and electronics applications. This provides customers with a significant upgrade, as it accelerates validation of battery, safety, quality and performance testing by up to 75%, which while collecting up to six times more data than other calorimeters.
Lastly, we also recently launched a new system monitoring software product on Waters Connect first for us and unique to the industry. Developed in consultation with QA/QC scientist, it enables real-time monitoring of all chromatography instruments controlled by our Empower software. It helps increase productivity of QA/QC labs by allowing customers to analyze there instrument fleet at anytime from anywhere to monitor uptime usage levels and real time system availability. Each of these new products have been developed in close collaboration with our customers to address their most pressing unmet needs. They further support the strength of our revitalized portfolio.
Earlier this year, we announced our intent to acquire Wyatt Technology, the recognized leader in light scattering, but more than 80% of its revenue [Indecipherable] large molecule applications, Wyatt expands Waters' portfolio and - and increases our exposure to faster growth areas within biologics. It also increases our ability to build a business in bioanalytical characterization, which is a 1.8 billion US dollar total addressable market with a 10% to 12% projected annual growth rate. We remain on track to close in the second quarter of this year. We also expect the transition to deliver immediate growth and adjusted operating - operating margin accretion.
Now, I will pass the call over to Amol to continue covering our first quarter financial results and give additional commentary on our guidance. Amol?
