Dave Regnery
Chair and Chief Executive Officer at Trane Technologies
Thanks, Zac, and everyone, for joining us on today's call. Let's turn to Slide number 3. Before we dive into the quarterly results, I want to frame up the bigger picture, the strategy that enables Trane Technologies to deliver differentiated financial performance and shareholder returns.
First and foremost, we are driven by purpose. We love what we do because we are forging new ground for a better, healthier world. Our people take pride in knowing their work makes a real difference for our customers, for our communities and for the world.
Our purpose-driven strategy is aligned to mega trends that are only getting stronger. We see the impact of climate change every day, including more frequent and intense weather events, like the heat waves we're experiencing in many parts of the world. These climate events have serious and far-reaching impacts on the economy, the environment and human health. We must act now to mitigate those impacts and ensure the health of our planet for the next generation.
Trane Technologies is proud to be leading our industry with bold sustainability commitments and action to back it up. Our innovation is accelerating decarbonization of commercial buildings, homes and transport.
Our customers recognize our innovation and our expertise, and we are their partner of choice in achieving sustainability goals while improving performance and efficiency. Demand has never been higher.
Our purpose-driven strategy, relentless innovation and strong customer focus enables us to deliver superior growth profile through cycles. This, in turn, helps us drive strong margin and powerful free cash flow to deploy through our balanced capital allocation strategy. The end result is strong value creation across the board for our team, our customers, our shareholders and for the planet.
Moving to Slide number 4. Q2 was another strong quarter for us. Our global teams faced diversity and leveraged our high-performance business operating system to deliver record results. Our innovation leadership is at the apex of secular mega trends on energy efficiency and decarbonization, which is enabling us to win customers at an unprecedented pace. Our booking levels remained extremely high, reflecting strong share gains in virtually every area of our business.
In the second quarter, organic bookings were up 7%, reaching the highest level in the company's history at $4.6 billion. As a result, backlog also eclipsed prior records, rising to $6.5 billion, up 43% year-over-year and more than twice historical norms.
On a 2-year stack, enterprise bookings were up 37% in Q2. This adds to a 2-year stack of up 37% in Q1. Our global commercial HVAC business is up 40% on a 2-year stack. The absolute booking levels we've delivered over the past 1.5 years have been broad-based across our portfolio.
Last quarter, I discussed the natural tendency to focus on bookings growth trends, but growth trends may be misleading when the absolute number moves step functions higher than any historical reference period, as they did in 2021. I encourage investors to consider absolute bookings and backlog in addition to bookings growth to get a fuller picture.
Even with our robust organic revenue growth of 11% in Q2, absolute bookings exceeded revenues with a strong book-to-bill of 111% and our backlog grew more than $300 million sequentially from Q1 to Q2. These results are even stronger when you consider that we are constraining bookings in our transport refrigeration business to help mitigate inflationary risks.
Absolute bookings levels and backlog provide us good visibility into future revenues, particularly in our non-residential businesses. Our non-residential businesses represent roughly 80% of our total revenue and closer to 90% of our total backlog and tends to be longer cycle.
Strong execution of our business operating system has enabled us to stay ahead of persistent inflation and deliver over 10 points of price and positive price versus inflation again in the second quarter. This is a core competency for us and increasingly important given higher cost to serve customers across the value chain.
I'm especially proud of our team's performance, given two temporary plant closures we overcame in the quarter. We discussed the China COVID lockdowns on our first quarter call, and our expectation to make this up in the second half, which is still the case. Our teams managed to minimize the revenue impact to approximately $60 million, better than the $80 million to $100 million range we anticipated at the time the lockdowns occurred.
We also overcame a tornado that temporarily knocked out production at one of our North America transport refrigeration facilities in the quarter. The revenue impact to the quarter was also approximately $60 million. We expect to recoup the full impact in the second half of the year. We exited the quarter with both plants fully back up and running.
Our performance through the first half of the year has been stronger than we originally anticipated. Booking levels have remained robust. Backlog is significantly higher. Inflation has been persistent, but our pricing execution has more than kept pace. Supply chains remained tight, but we have seen some improvement and believe we have line of sight to further improvement in the second half of the year. All in, we're confident in raising our adjusted EPS guidance range to $7.05 to $7.15.
When you consider that our guidance includes an additional $0.06 headwind from FX, partially offset by a $0.01 tailwind from M&A, we're effectively raising our operational guidance by $0.10.
The secular megatrends underpinning our strategy are only growing stronger. Execution of our high-performance business operating system and our unwavering focus on putting customers first remain at the core of everything we do. Our balance sheet, liquidity position and ability to deliver strong free cash flow provides a robust financial foundation and good optionality for capital deployment. We are exceptionally well positioned to not only navigate near-term macro challenges but to thrive as conditions improve.
Please turn to Slide number 5. As I discussed on the prior slide, we delivered the strongest booking quarter in our history in Q2, and the bookings growth was broad-based. Demand in our Americas Commercial HVAC business continues to top records and bookings were up mid-teens. 2-year stack bookings were up approximately 45%. Backlog is extremely strong, up over 70% year-over-year. Commercial HVAC revenues were strong, up high single digits, with growth across equipment and services.
In residential HVAC, bookings were down mid-single digits versus a high 30s prior year comp. Absolute booking levels were resilient with 101% book-to-bill despite strong revenue growth.
Transport Americas bookings were healthy, up low teens, despite the fact that we are constrained bookings to mitigate inflationary risks. Non-constrained demand will be much stronger, but customers understand the dynamics are working closely with us on slots. Revenues were down low single digits against a tough prior year comp, up nearly 70%, and were impacted by the extreme weather event, I referenced earlier. This effectively shifted revenue from Q2 to the second half, mainly to Q4.
Turning to EMEA. We continue to see strong demand for our innovative products and services that help reduce energy intensity and greenhouse gas emissions for our customers. EMEA commercial HVAC orders continue to be strong, up low teens, and revenues were up high single digits. As expected, transport bookings were down, in part due to tough prior year comps, and similar to our Americas transport business, we continue to constrain bookings through our order book to help mitigate inflationary risks. Revenues were up low teens, outpacing end markets.
Our Asia Pacific team delivered commercial HVAC bookings growth in the high teens and revenues were down due to COVID lockdowns in China, as discussed.
Now I'd like to turn the call over to Chris. Chris?
