Financial Data and Key Metrics Changes - The company achieved a strong fourth quarter performance with organic revenue growth of 4% and adjusted EPS growth of 10% [6][11] - Free cash flow remained robust, supporting strategic M&A, dividends, and share repurchases [4][5] - The company reported a record backlog of $7.8 billion, with exceptional enterprise organic bookings up 22% [6][8] Business Line Data and Key Metrics Changes - Americas Commercial HVAC bookings increased by over 35% year-over-year, contributing significantly to the overall growth [6][10] - Applied Solutions bookings surged more than 120%, achieving a record book-to-bill ratio of 200% [6][10] - EMEA HVAC bookings grew mid-teens, while residential bookings were up mid-single digits, but revenues declined mid-teens due to inventory normalization [10][11] Market Data and Key Metrics Changes - The Americas Commercial HVAC market showed strong growth, while residential markets faced challenges with a projected decline of up to 5% [10][14] - EMEA transport markets are expected to be flat to modestly lower, while Asia Pacific faced challenges, particularly in China, with double-digit declines in bookings and revenue [10][15] Company Strategy and Development Direction - The company emphasizes a purpose-driven strategy focused on sustainability and performance, positioning itself to meet growing energy demands through innovation [3][4] - Continued investment in services and digital capabilities is expected to drive growth, particularly in the commercial HVAC sector [9][18] - The acquisition of Stellar Energy is aimed at enhancing modular design capabilities and addressing supply chain constraints [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong growth for 2026, driven by exceptional bookings and a robust backlog [10][14] - The outlook for the residential market is cautious, with expectations of a gradual recovery in the second half of 2026 [14][15] - Management highlighted the importance of disciplined execution and innovation in maintaining competitive advantage [3][21] Other Important Information - The company plans to deploy between $2.8 billion and $3.3 billion in 2026, with a focus on strategic M&A and share repurchases [18][19] - The company expects to maintain a strong balance sheet and free cash flow conversion of 100% or greater [16][17] Q&A Session Summary Question: Guidance on revenue for Americas Commercial HVAC - Management indicated strong bookings growth in the second half of 2025, expecting revenue growth of 7%-8% in Q1 2026, increasing to low teens in the second half [22][24] Question: Confidence in U.S. Residential HVAC inventory and pricing - Management confirmed that inventory levels are normalized and pricing has not faded, with expectations of flat to down 5% in 2026 driven by volume [25][26][28] Question: Broadening of orders among end markets - Management noted broad-based growth across multiple verticals, including data centers, with encouraging signs in previously weak sectors like retail and office [33][34] Question: Impact of customer lead times on orders - Management stated that there have been no significant changes in lead times, maintaining competitiveness in delivery [39][40] Question: European margins and price-cost dynamics - Management expects European margins to improve in 2026, with a target of 25% or better organic incrementals across segments [48][50] Question: Biopharma reshoring visibility - Management is optimistic about large pharma projects related to reshoring, tracking several mega projects in the pipeline [78][80] Question: Data center HVAC content and future trends - Management believes the fraction of spending on HVAC in data centers will remain stable, with innovations in thermal management systems expected [87][88]

Financial Data and Key Metrics Changes - Q2 2025 marked record bookings and revenues, with an 18% growth in adjusted EPS and a 90 basis point expansion in adjusted operating margins [7][11][18] - Organic revenues increased by 7%, and adjusted EBITDA margins expanded by 70 basis points [18][19] - The backlog remains strong at $7.1 billion, up 6% compared to year-end 2024 [8][11] Business Line Data and Key Metrics Changes - Americas commercial HVAC organic bookings reached all-time highs with increases of over 20%, while applied solutions orders surged by over 60% in the quarter [7][12][13] - The services business represented one-third of enterprise revenues, delivering low teens growth [9][18] - Residential HVAC revenues fell mid-single digits due to a shortage of refrigerant cylinders, but year-to-date residential revenues are up 3% [14][56] Market Data and Key Metrics Changes - In EMEA, commercial HVAC bookings were down low single digits against a tough prior year growth comp of 20%, but two-year stack bookings were strong, up high teens [15] - In Asia Pacific, revenue declined by high single digits, primarily due to lower volumes in China, but the region is on track to meet full-year expectations for flat revenues [16][19] Company Strategy and Development Direction - The company is focused on a purpose-driven strategy that addresses energy waste in buildings, aiming to provide sustainable solutions and differentiated shareholder value [6][28] - Strategic investments in channel and M&A integrations are expected to support growth and position the company for future opportunities [19][25] - The company is committed to a balanced capital allocation strategy, including reinvestment in core business and share repurchases [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in raising full-year revenue and EPS guidance, despite temporary challenges in residential HVAC due to refrigerant shortages [11][21] - The Americas commercial HVAC business continues to exceed expectations, particularly in complex applied solutions, with a positive long-term outlook [21][22] - Management anticipates a return to a GDP-plus growth framework for residential HVAC in the long term [21][111] Other Important Information - The company expects approximately $150 million revenue impact in the second half due to inventory normalization and cylinder shortages [21][56] - The estimated cost impact from tariffs in 2025 is approximately $140 million, which is half of the previous estimate [24] Q&A Session Summary Question: What end markets are driving the acceleration in commercial HVAC? - Management noted broad-based growth across various verticals, including healthcare, government, and data centers, with applied solutions leading the way [32][33] Question: What does the service revenue outlook look like? - Management indicated that service revenue is expected to grow in the low teens, with a compounding effect from applied solutions driving future growth [41][42] Question: Can you clarify the guidance increase? - The guidance increase reflects strong operational performance, particularly in commercial HVAC, and adjustments for residential revenue expectations due to the refrigerant issue [102][104] Question: How is the company positioned in the data center market? - Management highlighted ongoing collaboration with data center customers and innovations in cooling solutions, positioning the company well for growth in this sector [80][84]