Nathan Winters
Chief Financial Officer at Zebra Technologies
Thank you, Anders. Let's start with the P&L on Slide six. In Q2, adjusted net sales increased 6.4%, including the impact of currency and acquisitions and 6.9% on an organic basis as we secured a greater supply of certain products than we had anticipated. Our Asset Intelligence & Tracking segment, including printing and supplies increased 9.7%, driven by a strong recovery in printing as we secured critical components to better satisfy record levels of customer demand. Enterprise Visibility & Mobility segment sales increased 5.6%, with solid growth in both data capture and mobile computing solutions. We realized particularly strong growth in RFID solutions as well as ruggedized tablets in Q2.
We also continue to drive solid growth across services and software with strong service attach rates and attractive software offerings. We realized strong growth in three of our four regions. EMEA sales increased 17%, driven by particularly strong growth in mobile computing and printing inclusive of the impact of exiting Russia in March. Asia Pacific sales grew 14%, with particular strength in India. Latin America sales increased 16%, with exceptional growth in Mexico. And in North America, sales decreased 2% due to supply constraints. We also cycled particularly strong mobile computing sales volumes in Q2 of last year. Adjusted gross margin declined 200 basis points to 46%, due to higher premium supply chain costs and China import tariff recovery in the prior year period, partially offset by higher service and software margin.
Adjusted operating expenses as a percent of sales improved 60 basis points. Second quarter adjusted EBITDA margin was 21.9%, a 170 basis point decrease from the prior year period. Non-GAAP earnings per diluted share was $4.61, a 0.9% year-over-year increase, helped by lower share count and lower taxes. Note that in the quarter, we entered into a settlement agreement resulting in a $372 million onetime non-GAAP charge, which will be paid out over eight quarterly installments. Turning now to the balance sheet and cash flow highlights on slide seven. For the first half of 2022, we generated $123 million of free cash flow which was lower than the last year, primarily due to a higher use of working capital as sales volumes shifted to later in the period due to the China lockdowns, higher incentive compensation payments given our exceptional 2021 performance, and the initial $45 million quarterly installment payment related to the settlement I just mentioned.
From a balance sheet perspective, as previously announced, we have significantly increased our available borrowing capacity to align with our growing business to optimize our capital structure. Our new credit facility provides us ample flexibility for organic and inorganic investment, including the recent acquisition of Matrox Imaging as well as share repurchases through our recently announced $1 billion incremental authorization. We made $300 million of share repurchases in Q2 and from a debt leverage perspective, we ended the quarter at a comfortable 1.7 times net debt to adjusted EBITDA leverage ratio. On slide eight, we highlight that premium supply chain costs have sequentially improved from peak levels.
Our team has been successfully working all avenues, including product redesigns and negotiating long-term supply agreements for critical components, which has enabled us to reduce our purchases in the spot market. We have been seeing steady improvement in the supply chain environment, which we continue to closely monitor. In Q2, we incurred incremental premium supply chain costs of $56 million as compared to the pre-pandemic baseline which was favorable to what we had anticipated in our prior outlook. In total, Q2 transitory items had a combined unfavorable gross margin impact of $35 million year-over-year. And in Q3 are expected to be approximately $45 million, which is a neutral year-on-year impact net of pricing.
Let's now turn to our outlook. We entered the second half of the year with a strong order backlog and healthy sales pipeline, supported by broad-based demand for our solutions. We have been experiencing a steady improvement in manufacturing output. However, our sales growth continues to be limited by extended lead times and availability of certain component parts. Our organic growth has also been impacted by approximately one to two points after stopping shipments to Russia in March. For Q3, we are limiting our sales growth to a range of 2% to 4% due to actions to reduce expedited airfreight costs and shift our printer products to ocean shipments, which will improve both Q4 growth and profitability.
We are also assuming a two-point additive impact from recently acquired businesses and a three-point negative impact from foreign currency translation. As a reminder, approximately 25% of our global sales are denominated in euros. We anticipate Q3 adjusted EBITDA margin to be approximately 22%, which is an increase from both prior year and prior quarter. Non-GAAP diluted EPS is expected to be in the range of $4.35 to $4.65. For the full year 2022, we are reaffirming our outlook with a sales growth range between 4% and 6%, inclusive of the impact of exiting Russia. We are also assuming a 150 basis point additive impact from recently acquired businesses and a 225 basis point negative impact from foreign currency translation.
We now anticipate full year 2022 adjusted EBITDA margin of approximately 22%, the low end of our prior guide, primarily due to the significantly stronger U.S. dollar. Profit margins are expected to improve in the second half of the year as we continue to shift to lower-cost freight options and prudently manage operating expenses and investments. We now expect our free cash flow to be at least $650 million for the year, which we have reduced primarily due to the approximately $150 million of settlement-related payments. Please reference additional modeling assumptions shown on slide nine.
With that, I will turn the call back to Anders to discuss how we are advancing our Enterprise Asset Intelligence vision.
