Chris DelOrefice
Executive Vice President and Chief Financial Officer at Becton, Dickinson and Company
Thanks, Tom, and good morning, everyone. As Tom noted, we executed well against our performance goals in Q1. Q1 revenue growth was largely as we expected. And I'm pleased to share we exceeded both our margin and earnings goals and delivered strong cash flow that positions us well to support our double-digit free cash flow growth goal.
I'll now provide some insight into our revenue performance in the quarter. Additional detail can be found in today's earnings announcement and presentation. Q1 revenue was $4.7 billion with organic growth of 2.4% that was driven by high-single-digit organic growth in BD Interventional and solid growth in BD Medical with China market dynamics playing out as expected, partially offset by a decline in BD Life Sciences which was impacted by the comparison to the prior year respiratory season. As expected, China and respiratory were the primary drivers of Q1 revenue growth under-indexing our full year goal. The respiratory season alone impacted total company growth by about 150 basis points. Regionally, organic growth was driven by the U.S., EMEA and Latin America, partially offset by the expected decline in China. Total Q1 revenue growth of 1.6% reflects the divestiture of our surgical instruments platform.
Turning to the segment performance. BD Medical revenue totaled $2.2 billion in the quarter, growing 2.4%, driven by growth in medication management solutions and pharmaceutical systems. Mid-single-digit growth in MMS was led by strong performance in Dispensing, driven by innovations in our BD Pyxis portfolio that are improving nursing workflows and efficiencies. In our Infusion business, we are pleased with our strong progress, bringing the BD Alaris Infusion System back to the market and continue to expect Alaris to ramp over the course of the year. Infusion also reflects strong demand for IV sets.
Performance in Pharmacy Automation reflects the comparison to an outsized quarter in the prior year and the timing of planned capital installations. Growth of 3.4% in Pharmaceutical Systems was in line with our expectations and was led by strong double-digit growth in pre-filled devices for biologics, and as expected, was partially offset by customer inventory dynamics, including a slowdown in demand for anticoagulants.
Growth in Medication Delivery Solutions was about flat and slightly ahead of our expectations. Our Vascular Access Management strategy continues to drive strong performance, particularly in Catheter Solutions. As expected, MDS growth was impacted by market dynamics in China, including volume-based procurement, which continues to play out within our expectations.
BD Life Sciences revenue of $1.3 billion declined 2.5%, which reflects a decline in IDS as a result of a tough comparison in the respiratory season worth nearly 500 basis points. It was partially offset by strong growth in biosciences. Performance in IDS reflects the tough comparison in respiratory testing that was partially offset by high-single-digit growth in our Microbiology platforms and double-digit growth in Molecular IVD assays on both our BD MAX and BD COR platforms.
Biosciences grew 5.7% as expected despite a strong comparison in the prior year. BDB performance was driven by strong mid-single-digit growth in our research and clinical platforms that reflects double-digit growth in Research Instruments, driven by strong demand for our recently launched BD FACSDiscover S8 Cell Sorter and double-digit growth in Clinical Reagents as we continue to leverage our growing installed base of FACSLyric and FACSDuet solutions.
BD Interventional revenues totaled $1.2 billion in the quarter, growing 4.7% and 8.4% organic, which excludes the impact of the Surgical Instruments divestiture. BDI organic growth was led by Surgery and UCC. In Surgery, double-digit organic growth was led by continued market adoption of our leading Phasix resorbable hernia products in our advanced repair and reconstruction portfolio and strong demand for our ChloraPrep infection prevention solution.
High-single-digit growth in urology was led by strong double-digit growth in our PureWick chronic incontinence solutions with continued strong demand in both the acute care and home care settings. Mid-single-digit growth in PI was in line with our expectations and reflects growth across the portfolio. It was partially offset by the expected timing of distributor orders.
In our Peripheral Vascular Disease platform, we continue to drive market penetration with our Rotarex Atherectomy System and our Venous portfolio. Performance in our Oncology business was driven by growth in biopsy, including strong market acceptance of our recently launched BD Trek Powered Bone Biopsy system.
Now moving to our P&L. Adjusted gross margin of 51.1% and adjusted operating margin of 20.2% were ahead of our expectations due to good execution on our margin improvement goals across our portfolio of simplification initiatives and strong SSG&A expense leverage. R&D spend was in line with our expectations. In addition, as we previously shared, a discrete tax item that was contemplated in our full year tax rate was realized in Q1. As a result of these items, we exceeded our Q1 operating income and our adjusted diluted EPS expectations, resulting in an EPS of $2.68.
Regarding our cash and capital allocation, Q1 cash flows from operations totaled over $850 million. This reflects continued improvements around working capital, including good management of inventory levels, continued discipline around capex investments and leveraging our fixed asset base as a result of the benefit from our simplification programs and BD Excellence operating system.
We remain focused on free cash flow conversion and expect another step improvement in FY '24. As we execute against our BD 2025 Strategy, we also remain well positioned to achieve our long-term cash conversion target of around 90%. Beyond our investments in growth, we returned $775 million in capital to shareholders, including dividends and $500 million in share repurchases. We ended Q1 with a cash balance of $1.2 billion and a net leverage ratio of 2.7 times.
Moving to our updated guidance for fiscal '24. For your convenience, the detailed assumptions underlying our guidance can also be found in our presentation. Based on our Q1 performance, including the strong momentum in many parts of our business and progression of our margin improvement initiatives, we raised the midpoint of our FY '24 organic revenue growth guidance and raised our adjusted EPS guidance, increasing the midpoint by $0.09. The increase to adjusted EPS reflects Q1 operational outperformance and a small improvement in FX. As a result, we now expect to deliver organic revenue growth of 5.5% to 6.25%, which increases our midpoint to slightly above 5.8%. We now expect adjusted diluted EPS, including the impact of currency to be in a range of $12.82 to $13.06, which reflects about $12.94 at the midpoint.
Regarding foreign currency, based on current spot rates, for illustrative purposes, currency has improved modestly and for the full year is now estimated to be a headwind of approximately 25 basis points to total company revenues and approximately 360 basis points to adjusted EPS growth on a full year basis.
As you think of phasing over the balance of fiscal '24, the following are some considerations. First, we continue to expect organic sales growth to be higher than our full year range in the second half, partially driven by the expected ramp in Alaris along with the easing of prior year comparisons, such as China.
Second, our updated guidance reflects an improved margin cadence over the balance of the year. Specific to Q2, adjusted gross margin is in line with our prior expectation and continues to reflect significant sequential improvement given the lessening impacts from inflation, prior year inventory reductions and FX. We now expect Q2 adjusted operating margin to expand by 25 to 50 basis points year-over-year, driven by our continued margin improvement efforts and continued leverage in SSG&A.
Third, the discrete tax item realized in Q1 was largely a shift from Q2 and results in revised phasing of our full year effective tax rate. Based on this timing dynamic, we currently expect our Q2 tax rate to be nearly 17%. We expect strong operating performance to offset the tax phasing impact. And as a result, there are no changes to our expectations for Q2 adjusted earnings per share.
Lastly, we remain confident in delivering about 50 basis points of adjusted operating margin improvement for the year. As a reminder, the first half inventory impact is transitory and behind us as we exit Q2. And as FX and inflation moderate at a meaningful rate through the back half, coupled with a continuation of the first half margin improvement, we expect to deliver from our strong simplification portfolio, we can naturally achieve our second half margin goals.
In summary, based on the strength of our portfolio and new innovation, we have clear line of sight to deliver our FY '24 revenue guide, which at the midpoint is above our 5.5% plus target and results in a three year CAGR of nearly 7% growth. I'm pleased with the continued strong execution by our talented organization to start the year, which supported over delivering on our margin and operating income goals and increasing our earnings outlook. With a strong quarter of cash flow, we remain well positioned to deliver another year of double-digit free cash flow growth, which increases our capacity to support additional value-creating opportunities, including M&A. We remain well positioned to continue to deliver against our BD 2025 Strategy and financial targets.
With that, let's start the Q&A session. Operator, can you assemble our queue?
