Ladies and gentlemen, thank you for standing by and welcome to the FIS Second Quarter 2021 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today, Nate Rozof, Head of Corporate Finance and Investor Relations. Please go ahead.

Nathan Rozof - Executive Vice President, Corporate Finance and Investor Relations

Good morning and thank you for joining us today for the FIS second quarter 2021 earnings conference call. This call is being webcasted. Today's news release, corresponding presentation and webcast are all available on our website at fisglobal.com.

Gary Norcross, our Chairman and CEO, will discuss our performance and review our strategy to continue accelerating revenue growth and maximizing shareholder value. Woody Woodall, our Chief Financial Officer will then review our strong financial results and provide updated forward guidance. Bruce Lowthers, President of FIS, will also be joining the call for the Q&A portion.

Turning to Slide 3. Today's remarks will contain forward-looking statements. These statements are subject to risks and uncertainties, as described in the press release and other filings with the SEC. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Please refer to the safe harbor language.

Also throughout this conference call, we will be presenting non-GAAP information, including adjusted EBITDA, adjusted net earnings, adjusted net earnings per share and free cash flow. These are important financial performance measures for the company, but are not financial measures as defined by GAAP. Reconciliations of our non-GAAP information to the GAAP financial information are presented in our earnings release.

With that, I'll turn the call over to Gary, who will begin his remarks on Slide 5.

Gary Norcross - Chairman and Chief Executive Officer

Thanks, Nate. Good morning, everyone, and thank you for joining us. Our second quarter results exceeded expectations across the board and demonstrates the continued success of our pivot to growth strategy that we laid out before the pandemic.

Revenue of $3.5 billion was the highest quarterly revenue in our company's history. Revenue increased more than $500 million or 17% year-over-year, and adjusted EPS grew 40%. Sales results, which were the strongest in our company's history, are being driven because our solutions remain in high demand, enabling businesses of all sizes to advance the way the world pays banks and invest.

This demand, combined with our organizational focus on delivering broader value to our clients, was also reflected in a very strong cross-sales, driving our largest revenue synergy quarter-to-date, increasing our run rate by 50% or $150 million sequentially to $450 million. This sales execution in turn drove a $1.5 billion increase to our backlog, which is now greater than $22 billion.

Our strong execution is driving us to raise both our 2021 guidance and increase our year-end revenue synergy target to $700 million. In addition, as we consider client demand across our portfolio of solutions, we are extending our mid-term outlook of 7% to 9% revenue growth through 2024.

I want to thank and recognize our colleagues around the globe for their continued hard work and dedication. They are our most important asset and play a vital role in advancing the commerce and financial technology that keeps thousands of clients up and running in the economy moving every day.

Turning to Slide 6. I'd like to highlight a few recent wins that demonstrate FIS' differentiation. Clients are increasingly demanding access to new capabilities that are outside of their traditional solution, so they can innovate in new and interesting ways. We have the unique ability to serve our clients horizontally across a breadth of financial technology with integrated cloud native platforms. Further, our open APIs are resilient and easy to use as clients expand their relationships with FIS.

Our sales success with the Modern Banking platform demonstrates this client demand as they look to differentiate with cloud native capabilities. This quarter, we delivered the largest release since the start of MBP, including expansion of commercial deposit functionality as well as new enhancements to our lending module.

As we have previously discussed, one of the exciting opportunities with the current MBP clients is an ongoing ability to cross-sell additional functionality modules. This quarter, we had our first cross-sell to American Express, who added a new checking account feature to their deployment. This is a great example of our ability to land large complex clients and the value of our modern platform.

As we continue to add functionality, clients continue adopting these new capabilities to grow their businesses, which drives additional revenue for FIS and expand these important relationships.

Fifth Third Bank provides a second key example of the ways we grow our strategic relationships. Fifth Third is a longtime client, who is on a journey to reengineer its technical infrastructure with a focus on resiliency and scale. This quarter, they expanded their relationship with us to replace their legacy in-house core with the Modern Banking platform and their legacy wealth management system with FIS Unity. Unity is our leading-edge global wealth management system and will provide rich data and insights for Fifth Third's customers throughout their wealth journey. It incorporates automated cash management, multicurrency and other advanced wealth management functionality and flexible design that is fully integrated with FIS Trust accounting.

T. Rowe Price provides yet another example of an industry leader looking to FIS to help them modernize their 401(k) retirement offering with advanced technology. This landmark win will lay the foundation for other large asset managers to utilize FIS as they look to leverage our scale and expertise in the retirement space.

In addition, PayPal and Chevron both expanded their relationships with us to begin utilizing our cloud-enabled payment switching capabilities. And finally, WesBanco joined our merchant referral network in order to upgrade to our leading acquiring technology.

As we continue to innovate, our integrated cloud native ecosystem creates a powerful network effect that empowers our clients to transform and grow. On Slide 7, I want to highlight another important win. I'm pleased to announce that Walmart will begin utilizing our innovative loyalty network, Premium Payback, for both in-store and e-commerce transactions. The value proposition for this solution is exceptional, driving positive outcomes for our merchants, issuers and the end consumer.

In other retail locations where we have rolled out the solution, we are seeing consumers accept premium paybacks offered to pay with points approximately 50% of the time when they are prompted. Both our merchant and our issuer clients are increasingly eager to participate, and we expect adoption to continue to ramp as we implement the solution with all the innovative clients shown on the slide as well as more in the future. Premium Payback is a clear example of the network effect that we've created by integrating, issuing and acquiring.

Turning to Slide 8. We invest heavily in new solutions and capabilities with the belief that the market is changing and how it consumes technology and looking for cloud-native architectures. The revenue contribution from solutions developed over the past three years continues to grow as a percent of our total revenue mix, up from less than 1% in 2019 to over 4% in 2021. This rapid growth is driven by our ability to cross-sell new solutions into our existing client base as well as adjacent verticals, which increases our total addressable market.

New solutions also contribute meaningfully to our total revenue growth, with contribution increasing from less than 1% in 2019 to more than 2% in total revenue growth in 2021. Looking forward, we expect new solutions to drive up to 3 points of incremental growth each year, supporting our outlook for 7% to 9% revenue growth through the midterm. At this point, a strong commitment to innovation is embedded in our culture and will continue to drive growth for years to come.

I will conclude my prepared remarks with Slide 9 before handing the call to Woody. We are at the forefront of the industry with the broadest collection of cloud-native solutions available. We remain uniquely positioned to serve domestic and multinational merchants who are looking for a single trusted provider for all of their acquiring needs. We solve our clients' most complex problems, ranging from global acquiring for their e-commerce business to treasury and cash management with our innovative Quantum software. Further, on the right side of the page, we show our unique bundle of cloud native solutions for financial institutions that demonstrate our ability to innovate at scale. Lastly, we highlight a few examples of innovative solutions that create compelling value propositions for both merchant and FIS clients in the center of the page.

Clearly, the investments we've made during the pandemic and driving differentiated outcomes for our clients and for us, and we continue to make these investments today in order to power future growth. It's why we are confident in our forward momentum to drive strong 7% to 9% revenue growth through 2024.

I'll now turn the call over to Woody to discuss our financial results and forward guidance. Woody?

James Woodall - Chief Financial Officer

Thanks, Gary, and thank you all for joining us today. Starting on Slide 11, I will begin with our second quarter results, which exceeded our expectations. On a consolidated basis, revenue increased 17% to $3.5 billion, driven by outperformance in each of our operating segments. Organic revenue growth was 16%.

We haven't had any material M&A activity over the past year. So the difference between reported and organic revenue growth this quarter is primarily due to the impact of foreign exchange rate.

Adjusted EBITDA margins expanded 460 basis points to 44%, reflecting strong operating leverage and synergy contribution. As a result, adjusted EPS increased 40% year-over-year to $1.61 per share. As Gary mentioned, we had exceptional cross-selling quarter, driven primarily by Premium Payback, issuer processing, merchant referral and data analytics win.

Given our progress and strength of our pipeline, we are increasing our revenue synergy target for 2021 by $100 million to exit the year at $700 million on an annualized run rate basis. Our achievement of cost synergies also continues to be successful, running further ahead of schedule than we anticipated when we announced the deal. We have more than doubled our initial cost synergy target of $400 million and are on-track to exit the year with approximately $900 million in total annualized savings, including approximately $500 million in operating expense synergies.

Turning to balance sheet and cash flow. We repurchased 2.7 million shares worth approximately $400 million during the quarter, bringing share repurchase to a total of $800 million year-to-date at an average price of $145 a share. Our leverage ratio declined to 3.3 times, keeping us on-track to end the year below 3 times leverage. Lastly, we generated free cash flow in excess of $1 billion this quarter, which is the most in our company's history and reflects the highly cash generative nature of our business.

Turning to Slide 12 to review our segments. Banking revenue growth accelerated to 8% due in part to strong issuer processing growth of 17% and a 30% increase in Modern Banking platform revenue. As Gary noted, we had another 2 MBP wins this quarter as well as an add-on sale and MBP revenue will continue to accelerate as more clients go live. We currently expect MBP revenue growth of nearly 50% for the full year 2021 and for this to further accelerate into 2022.

The Banking segment's adjusted EBITDA margin expanded 410 basis points to 46%. These strong results were driven primarily by ramping revenues from our recent large bank wins as well as continued recurring revenue growth.

Capital markets revenue growth also accelerated to 6% this quarter, reflecting strong recurring revenue growth and sales execution. Capital Markets adjusted EBITDA margin expanded 100 basis points to 46%.

Lastly, for Merchant, revenue growth rebounded sharply to 45% in the second quarter, which includes 10 points of yield benefit and the segment generated its largest new sales quarter in the history of the business. Merchants' revenue acceleration included 31% revenue growth in e-commerce. Our eComm revenue growth is particularly impressive in light of in-store reopening as lockdown orders eased and cross-border travel remains affected, making it an avenue for significant future growth.

Growth was also broad-based, expanding both domestic and international and discretionary verticals like restaurant are accelerating sharply. Merchants adjusted EBITDA margin expanded 910 basis points to 50%, primarily reflecting its high contribution margin and synergy benefits.

As we begin to lap the pandemic with growth spanning online and in-store, SMB and enterprise across North America and International, our results clearly demonstrate the strength of our competitive position. In addition, growth includes both rebounding volume and yields, as we expected.

Relative to 2019, we've seen no increase in attrition, and we'll continue to grow our client count. We have not taken our foot off the gas, investing through the pandemic, completing NAP, ramping Access Worldpay, expanding our sales force, entering new countries and adding multiple strategic ISV and bank partners, including expanding integrated payments to Europe. The business clearly has strong underlying momentum. We expect to further drive acceleration relative to 2019 in the second half of the year.

Turning to guidance on Slide 13. Based on our strong results and favorable outlook, I'm pleased to raise full year guidance. We now anticipate revenue of $13.9 billion to $14 billion for the full year 2021, which represents an increase of $250 million over our prior guidance. This guidance assumes full year revenue growth for Banking in the upper single digits and Capital Markets in the mid-single digits. We now expect Merchant growth to approach 20% this year, ahead of our initial expectations.

Relative to 2019, Merchant revenue growth accelerated 9% in the second quarter or 12% in the U.S. We expect Merchant revenue growth to continue to accelerate into the mid- to high teens in the second half of the year as international revenue and discretionary verticals like travel and airlines continue to rebound versus 2019. We're also raising our full year 2021 adjusted EBITDA guidance to $6.125 billion to $6.2 billion and increasing our adjusted EPS guidance to $6.45 to $6.60 per share.

For the third quarter, we expect 9% to 10% revenue growth and to generate revenue of $3.49 billion to $3.52 billion. As a result of the high contribution margins in our business, we expect adjusted EBITDA margin to expand more than 50 basis points sequentially or about 200 basis points year-over-year to approximately 44% for the third quarter. This will result in adjusted EPS of $1.66 to $1.69 in the first year. I'm excited about our results and raised guidance.

Beyond our guidance for the year, we expect to generate 7% to 9% revenue growth in the midterm through 2024, as Gary discussed. I have comments on this outlook for a number of reasons. First, our sharp second revenue growth acceleration and our ability to significantly increase revenue guidance, show strong execution and the underlying strength in the business. Second, strong new sales and cross-selling activity drove our backlog above $22 billion and increased our revenue synergy attainment by 50% in just one quarter, which will continue to drive future growth into 2022 and beyond. And finally, the investments we've made and continue to make are driving strength across our segments and accelerating our revenue growth profile.

Our cloud native ecosystem of solutions is highly differentiated, helping us to grow in new and emerging verticals.

I would like to thank our colleagues for their efforts to drive FIS forward and to empower our clients.

Operator, would you please open the line for questions?

Question & Answers

Operator

Thank you. [Operator Instructions] Our first question comes from the line of David Togut with Evercore ISI. Your line is now open.

David Togut - Evercore ISI - Analyst

Thank you. Good morning, Gary and Woody.

Gary Norcross - Chairman and Chief Executive Officer

Hey, David. Good morning.

David Togut - Evercore ISI - Analyst

Looking at the 2021 guidance, it's increasing by $153 million over the second quarter beat and EPS by $0.01 over the second quarter beat, implying about 50 basis points less of EBITDA margin expansion. So can you talk to your margin expectations for the second half, and what might be driving higher opex?

And then just as a follow-up, Gary, you've laid out very extensive product innovation, both in the Merchant and Banking Solutions business. I'm curious how do you respond to Square's acquisition of Afterpay yesterday, with their intent really to move more into the national account space in Merchant acquiring?

James Woodall - Chief Financial Officer

I'll touch on the margin profile, Gary, if that's all right.

Gary Norcross - Chairman and Chief Executive Officer

Sure, absolutely.

James Woodall - Chief Financial Officer

Yes, we continue to drive margin expansion, including more than 200 basis points this year, and we expect 50 to 100 basis points longer term. In the quarter, the guidance, we significantly increased the revenue based on the strength of our new sales and our competitive position. I'm excited about driving another $250 million up to 10% to 11%.

On the margin itself, we are increasing incentive accruals to reward our people for their very strong performance compared to our operating plan, which we're outpacing significantly this year. And as we continue to focus on some of the successive quarters of very big wins, it does create some near-term margin pressure as we ramp these contracts. Margins from these new wins will expand as revenue hits full run rate as we get those clients up and running, David.

Gary Norcross - Chairman and Chief Executive Officer

Yes. As far as the Square acquisition of Afterpay, when we think of buy-now-pay-later, David, it's just another payment type for us. It's another unsecured lending mechanism. Obviously, we're enabling buy-now-pay-later in our largest merchants. We're doing it through partnerships because we don't want to take the credit exposure risk that comes with that. But frankly, we feel very comfortable not only competing in the national markets. But as we push down market into the SMB verticals, you're starting to see we're coming off record growth over the last two quarters in our merchant sales as we've now retooled our sales force and increased that and started pushing down market. But clearly, we've got the most extensive capabilities in the merchant acquiring space today, and you're seeing that growth across our large enterprise, our large nationals, our multinationals, and that's playing to our strength in our sales results.

But at this point in time, our view on buy-now-pay-later is just that another payment type that we're going to accept. We'll make sure that we have that available to our customers if they want to offer that, but we're going to minimize taking the credit exposure.

David Togut - Evercore ISI - Analyst

Understood. Thanks very much.

Gary Norcross - Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Jason Kupferberg with Bank of America. Your line is now open.

Jason Kupferberg - Bank of America - Analyst

Good morning, guys. My first question was just to actually build on David's and get your thoughts just in terms of attractiveness of transformational type M&A given what's going on in the environment. Just how you're thinking about that for FIS specifically?

Gary Norcross - Chairman and Chief Executive Officer

Yes. Look, Jason, we've always had transformational M&A in our strategy. We continue to look for opportunities that bring us a new capability or a new service in existing market or adjacencies. The team is doing an excellent job of delivering new product out of our engineering group. And you're seeing the results of that contribute to our accelerated revenue growth.

Will we do additional M&A in the future? Absolutely. Things are expensive. Right now, we continue to see the intrinsic value of our stock is undervalued. And so obviously, we're very focused on share buybacks and deploying free cash flow in that manner, but we're not opposed to doing M&A activity if it fits our strategy and fills in a gap in our overall capability.

Right now, we feel very good about our competitive position of product set. You're seeing it come through in our sales results. I mean, second quarter was the largest sales record for us across the board, across Capital Markets, across Banking, across Merchant. We hit record numbers for that from a sales and in an existing quarter.

So we feel really good about the strength of our position and where we're - the demand for our products and services in market, but M&A will always continue to be something that we evaluate and look at. And if it makes sense, then we'll execute.

Jason Kupferberg - Bank of America - Analyst

Okay. And just a follow-up for Woody on the margin front. It looks like there's an implied step-up of maybe about 300 bps of margin expansion from Q3 to Q4. So can you just talk about the visibility on that acceleration? What's driving it? Is it just the top line or the opex cadence? I know you were calling out some incentive comp and some contract ramp-up costs, but is there just some cadence considerations there between the two quarters? And I just wanted to get the sense of the visibility there on the Q4 ramp.

James Woodall - Chief Financial Officer

Yes. There's certainly some ramp in the fourth quarter as we sign clients and get them up and running and drive the revenue at that point in time. I think there's also just some cadence of the quarterly spread and the consensus is a little off between Q3 and Q4, no more than that, to be honest with you, Jason. We feel very good about the outlook for the remainder of the year across all three segments, are continuing to drive the growth profile and continue to fuel accelerating revenue growth. So we feel really good there.

Jason Kupferberg - Bank of America - Analyst

Okay. I appreciate the thoughts. Thank you, guys.

Operator

Thank you. Our next question comes from the line of Tien-Tsin Wong with JPMorgan. Your line is now open.

Tien-Tsin Wong - JPMorgan - Analyst

Hey, thanks. Always good to connect. I just want to get a sense on the backlog being up 8%. It sounds like the pipeline, Gary, is really strong. Just - I heard the revenue synergies are, I think, up $100 million. Are those all related? Just trying to better understand sort of if you can unpack or decompose the new sales, the backlog from the revenue synergies. Where is it coming from? Is it driven by the synergies? Or is it really from a return on investments on some of the product modernization efforts that you've taken on?

Gary Norcross - Chairman and Chief Executive Officer

Yes, it's a great question. It's really coming across the board. I mean, you're seeing us succeed our cross-sales and revenue synergies with the Worldpay integration, we're real pleased on that with the acceleration and Woody highlighted a number of those products. But we're also seeing great adoption of our new product and innovation capabilities. Modern Banking platform is up over 50%. You're seeing our issuer business with PaymentsOne up substantially. You'd look at what we've done in Capital Markets, about end-to-end solutioning across the front, middle and back office, and you're seeing accelerated revenue growth there in Capital Markets as well.

So when we look at sales holistically, as I said, all three segments were up, had a record quarter from a sales perspective. But it really was - it was new logo sales, actually gaining share and taking share. It was cross-sell to existing customers of new product capabilities we're delivering to market or cross-selling existing products and then revenue synergies across the Worldpay integration efforts. So couldn't be more pleased with our sales channel.

And as I point out, you guys have seen this. We've now had multiple years of record sales and seeing that demand continue to accelerate. So that's what has us so bullish on the future of FIS. And you've seen the growth rates across all three segments consistently trend up as well. And now that the global pandemic, we're starting to see opening, obviously, in the U.S. Europe is lagging a little bit there and Asia. But as you're starting to see reopening, you'll just continue to see more accelerated growth going forward.

Tien-Tsin Wong - JPMorgan - Analyst

Perfect. It was broad based. Just real quick follow-up. Just the visibility into getting - I know Banking accelerated a little bit sequentially in the second quarter. It's sounds like it's going to accelerate more in the second half. Do you need to sell more business to get there? Or is it really just timely conversions of the backlog?

And then really quickly, if you don't mind, the Fifth Third modernization effort to the modern piece on FIS, is there a change in annual contract value by moving from legacy to a modern solution there from an FIS perspective? Thank you. Sorry for the two extra questions.

Gary Norcross - Chairman and Chief Executive Officer

Yes. No, two points. No, it's a great question. Two points on the Banking backlog in Q3. We don't - we don't need a lot of sales to hit that Q3 number. It really is backlog. You saw the backlog increase 8%, which is, I think, on memory, one of the largest increases we've seen of that backlog. It's certainly the largest the backlog has been. So the team is doing a great job of delivering new capabilities. We've now got six of our clients on NBP and production. So you get a ramp effect of that going into that and also the new products and capabilities we're selling. But it's really just in delivery of that backlog into Q3. And so that just goes to show as that backlog builds, you're going to see a consistent ramp across that Banking segment.

When you look at Fifth Third, it's a substantial increase for us in contract value in the relationship because keep in mind a number of those capabilities, they're going off in-house systems to our systems in a fully outsourced manner. And so - so for us, we see a significant step function as we deliver those capabilities and then start recognizing that revenue through the processing channel.

So it's a great relationship we've had with Fifth Third for a very long time. So we're excited about expanding this and excited about helping them rearchitect their technology stack for the future.

Tien-Tsin Wong - JPMorgan - Analyst

Terrific. Thank you. Thank you so much.

Operator

Thank you. Our next question comes from the line of Darrin Peller with Wolfe Research. Your line is now open.

Darrin Peller - Wolfe Research - Analyst

Hey. Thanks, guys. I just want to hone in for a minute on the Merchant side. You talked about record sales growth, I think the second quarter in a row. If you could just give us some of the dynamics of where the - what kind of business you're seeing from that front? And then the confidence level in the second half of '21 being mid- to high teens, above '19 levels. I'm assuming that's in part of these mix, travel and certain geographies. If you can just give us a little more color on understanding the drivers there. What - how much pressure was the second quarter impacted by whether it's volume or revenue from those aspects? And then what could that mean for the second half?

James Woodall - Chief Financial Officer

Yes. I had a hard time hearing the beginning of the question, but I think it was around sales?

Gary Norcross - Chairman and Chief Executive Officer

Yes, and the success.

James Woodall - Chief Financial Officer

So what I would just say, first of all, the team has just done a phenomenal job kind of embracing that in the playbook of sales and what we were trying to accomplish. So whether it be the banking organization, the merchant organization and the capital markets, all three had really strong sales outings for Q2.

The Merchant team, in particular, has really kind of turned that engine around and really creating a lot of momentum, whether it be in the SMB space as you've heard, or the enterprise space and our e-commerce space, we've really had strong sales right across the board, continued expansion with our FI partners, continued expansion in our channels, the SMB space, as I said. So really just a strong outing.

Our pipeline is really robust as we come into Q3. So we feel very good about where we're heading in the back half of the year. And we would expect to continue from the great success that we had in the first half of the year.

Gary Norcross - Chairman and Chief Executive Officer

Yes. Darrin, I'll add too. We've seen yield dynamics were positive as we see volumes and reopenings happen. The international business is reopening, but lagging the U.S. in terms of timing. So we think that's a tailwind in the back half of the year. Discretionary verticals are also improving as we've seen in both restaurant being up very sharply, both domestically and internationally. We really haven't seen any attrition. And our actual merchant count is up year-over-year and about 5% up sequentially during the second quarter.

So you have the sales, you add the merchant count, add the outlook in terms of the yield benefit and the volume expectations, we feel really good about the back half of the year being in that mid- to high teens. Further, we saw July improving compared to June and it's in line with our 3Q guidance that we just put out and generally in line with the networks as well. And then the international business is trending a little higher than the U.S. in terms of volume improvement in July. So you add all those things together, that's how we think about mid- to high teens growth compared to 2019, both Q3 and Q4.

Darrin Peller - Wolfe Research - Analyst

All right. Thanks. Very quick follow-up is just your extension into 2024, your confidence in the 7% to 9%. What really changed about that? Was it just the big pipeline? Was it bookings in Banking or maybe broad-based?

Gary Norcross - Chairman and Chief Executive Officer

Well, I think the nature of our business, Darrin, we've talked about this a lot. It's so highly reoccurring in nature. And when you look at the backlog, you look at the acceleration of $22 billion, you look at the pipeline, you look at records signings in Q2, following record signings in Q1, followed by a record year last year in sales, you look at the delivery channel of what we're onboarding, you look at the trend and the recovery going on, I mean, we feel very confident in extending to 7% to 9% in growth and look at accelerating further beyond that.

You've got Capital Markets that we used to look as a low single-digit grower. You're seeing that move into, what, 6% organic growth this quarter. You're now in the mid-single digits. You're going to see Capital Markets give, its sales success trend towards the upper single digits. Banking is getting well established in the upper single digits, giving its backlog and giving it sales success. And then you look at the strength of the Merchant portfolio and the recovery. I mean, we had strong recovery across every one of the verticals we participate in. Our sales were strong across all those verticals as well. The yield dynamics have recovered from where we - just as we said they would back to kind of 2019 levels.

So all of that comes together. We just got a lot of confidence that the engine is running very well and the growth aspects, just booking the historical sales to-date will continue to propel us into that 7% to 9% range through 2024.

Now obviously, we look at the pipeline as well. We've got a lot of confidence in what we're seeing shaping up in Q3, Q4 and into next year. So all of those things are just driving us to extend the long term - the midterm outlook.

James Woodall - Chief Financial Officer

If I could just add and underscore the really bringing new product to market and the innovation that we're driving there has really helped us accelerate. And we expect that to continue. We've really created a wonderful process with the organization. We're seeing a lot of success whether it be Access Worldpay, whether it be MBP, PaymentsOne. We've got a whole litany of new products that have come and are really making a material impact for us. And we expect that to continue as we're driving forward.

Darrin Peller - Wolfe Research - Analyst

Very helpful. Thanks, guys.

Operator

Thank you. Our next question comes from the line of Dave Koning with Baird. Your line is now open.

Dave Koning - Baird - Analyst

Yes. Hey, guys. Thanks and nice job.

Gary Norcross - Chairman and Chief Executive Officer

Thanks, Dave.

Dave Koning - Baird - Analyst

Yes. And I guess my first question, when we think of some of the yield dynamics that are starting to really play out now, when we look into next year, is this year still depressed from the standpoint, the mix of revenue is still coming less this year from SMBs than normal and volumes are probably a little bit, especially in Q1 this year, were also a little bit non-normal. Do we think yields into next year provide another catalyst - positive catalysts as SMBs recover as part of a mix - as part of the mix?

James Woodall - Chief Financial Officer

Yes, I think it's beyond just the SMBs too. Some of the verticals that had a richer margin profiles, like travel and airlines, we anticipate to continue to recover into 2022 as we continue to go forward. So yes, we think it will still be a bit of a tailwind at least through the first half of 2022.

Over time, we anticipate yields to be a net positive for us, but obviously, not quite as big as we've seen this year with the dynamics that we've seen around the pandemic. But you're right, both a combination of the sharp increase in some of the more discretionary verticals that continue to reopen both in the U.S. and outside the U.S. as well as some of the other verticals like travel and air will certainly be some benefit to yield next year.

Dave Koning - Baird - Analyst

Got you. Okay. Thanks. And then just as a follow-up, it seems like the market - the banking market is really good, and you're taking share on top. I guess, is there a way to almost disaggregate the two, like do you feel like the market is better than usual and maybe sustainable for several years? And then how much of the growth do you think is just kind of above market gain share type stuff?

Gary Norcross - Chairman and Chief Executive Officer

I think we positioned - Dave, it's a great question. I think we've positioned in Banking, and frankly, Capital Markets for the last several quarters. We're really at an inflection point for the industry. A lot of those technologies are legacy - what people call legacy-based technologies. They're in very old architectures. They're trying to respond and becoming more nimble and take cost out and getting more digitally native. And that's where - that plays to the strength of FIS. We started this transformation almost now four years ago. Bruce mentioned a number of the products we're bringing online, Modern Banking platform, Digital One, PaymentsOne, the list goes on and on in Banking, and you're seeing a high demand for that.

So we're taking share from traditional in-house where large - very large financial initiations actually built their own systems or leverage some type of offshoring capability to build their own through some augmentation or just running a very old piece of technology that's been in existence for decades. And so they're now reaching in and taking advantage of some of our modern architectures. And doing it through our cloud because of all the investments that we've made in cloud-based technologies. And all of that really is timing us very well for this inflection point. So we feel very confident that we're just getting started on what I've described as a journey over the next decade and FIS is exceptionally well positioned to take advantage of that globally and will.

James Woodall - Chief Financial Officer

Yes, Dave, I'll just follow on too. We've highlighted over several years, the investments that we've been making. We anticipated those investments to turn into sales and they did. We've told you those sales will turn into revenue acceleration, and they are. And now we're even highlighting the contribution of that new solutions and that new innovation revenue as part of the overall contribution mix and the revenue growth profile to try to give you some confidence in our ability to sustain these higher growth levels based on the investments and the innovation work that we're doing.

Bruce Lowthers - FIS President

Yes. And I would just add from a customer perspective, the thing that I hear back from our customers is really twofold. They're very focused on kind of modernization in the banking space, and they're extremely focused on new product offerings, how do we get more product offerings out to them. And I think you've heard us talk over the last year about these two themes and actually longer as Gary has talked about our modernization efforts started years ago, and we're positioned very well to kind of meet what our customers are asking for, and we feel very good about that.

Dave Koning - Baird - Analyst

Great. Thanks, guys.

Gary Norcross - Chairman and Chief Executive Officer

Thanks, David.

Operator

Thank you. Our next question comes from the line of George Mihalos with Cowen. Your line is now open.

George Mihalos - Cowen - Analyst

Hey, good morning, guys and congrats. I think in normal times, this will be considered a good quarter, so congrats.

Gary Norcross - Chairman and Chief Executive Officer

Thanks.

George Mihalos - Cowen - Analyst

But I just wanted to ask - good to see that longer-term outlook, the 24%, the 7% to 9%, I think that's something that's being under-appreciated by the market. Gary, I'm just curious, the derivation of that 7% to 9%, has that changed at all at the segment level? Meaning, are there segments or businesses where you feel you're doing better than sort of post-pandemic and that will continue and others that may have been perhaps somewhat impacted in the post-pandemic world? Just curious how you're thinking about that?

Gary Norcross - Chairman and Chief Executive Officer

You know, it's a great question, George. I would say that our Merchant businesses, we're seeing good acceleration there. The team has done a very nice job of expanding the sales team and technology stack and starting to push in the markets that Worldpay traditionally didn't play in. We're starting to see a nice acceleration there. So we expect that that segment in the coming years to be a consistent double-digit performer on organic growth, which is used to perform below that historically.

When you look at the Banking business, I would say the Banking business is operating the way we thought it would. We've had good line of sight in that for a number of years of our investments and we're seeing that actually kind of hit the numbers exactly where we projected and realizing that we were expecting some big ramps and big ramps through the sales initiatives. So we made a lot of investments there, and that business has been fundamentally transformed and, and so we're seeing the results that we had hoped for.

Capital Markets actually has improved over what we thought. We traditionally thought when we bought Capital Markets, there was a strong position to expand there. We saw the ability to bring solutions to market, not just products, move beyond the licensing business into an outsourcing business. And we thought if we did that, we were conservative and thought mid to low single digits organic growth there. And what we've seen is that business has transformed actually faster in the demand for our front, middle and back office solutioning, the new investments we made around RegTech and some of the higher-growth areas of that market have really paid big dividends and so now we're seeing that move much closer to the Banking business.

So I think that's going to continue to accelerate for us and that's why we think that the 7% to 9% is it very, we're very confident in executing in that range for the coming years and look forward to continued execution.

George Mihalos - Cowen - Analyst

Okay, that's great color. Just sort of a quick follow-up. I know you got the buy-now-pay-later question, but maybe I'll ask us a little bit more broadly. Some of your competitors, your partners, they have acquiring models but they obviously own proprietary APMs I'm curious is that something that could potentially be of interest to you guys or do you sort of want to sort of stay in the Switzerland approach in terms of how you're servicing clients?

James Woodall - Chief Financial Officer

Yes, I think from our perspective, we participated in APM for a long time and we'll continue to do that in more of a Switzerland type of –. We're going to take the right payment types in the right markets and continue to partner. One of the things we talk a lot about is being kind of a world-class collaborator with others. The bedrock of that for us has really been Code Connect and Worldpay Connect. As we have built out these exponential APIs and it's allowing us to bring product to market faster and meet the needs of our customers. So I think for us, we're going to continue to go down that path, building out solutions that I think other people won't be able to do in time frames that we'll be able to bring them.

George Mihalos - Cowen - Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Ashwin Shirvaikar with Citi. Your line is now open.

Ashwin Shirvaikar - Citi - Analyst

Thank you. Hi, Gary. Hi, Woody.

Gary Norcross - Chairman and Chief Executive Officer

Hey, Ashwin.

Ashwin Shirvaikar - Citi - Analyst

Hey. Congratulations on another strong quarter. I guess I want to go back to the margins and completely understand investing in people, clients and, those are all good things. The question is, what drives the lower, lower-end of your margin range, what drives the upper end of the margins range, and while sticking on margins? Were there any one-timers slight maybe non-recurring things like higher crypto you think that might have driven this particular quarter here?

Gary Norcross - Chairman and Chief Executive Officer

Yes. A couple of things. We are seeing higher incentive accruals, as we've talked about, driving that up to reward our people for outperforming our operating plan. You've got - that is one component. I would tell you, incremental incentive accruals, Ashwin, are about $0.04 and our full year outlook of incremental there. We also were seeing continued wins in these large deals that are taking some time to get up and running. T. Rowe Price as well as Fifth Third are two of the largest transactions that we've ever run in terms of size of contract and they'll have some short-term pressure on margin as we continue to ramp up those customers and get their revenues moving. This flows all the way from revenue driving at full run rate showing the operating leverage in the business, but you have to ramp that revenue up and you have a little bit of a headwind in terms of the margin rate, as we continue to see accelerating revenue on the top line.

So those are really kind of the components I tried to highlight in there as what's driving the margin. From a one-time or perspective, not a lot of one-timers in here, pretty clean in terms of the quarter and feel good about what we've executed on.

James Woodall - Chief Financial Officer

We do feel good Ashwin, long-term. Even in the out years, we've talked about 7% to 9%, but we've got consistent margin expansion built into our models in the outyears as well. I mean, the contribution margins of these new sales come on as we've talked about in the past. They come on in very high margins. Bruce has talked about our ramp in investment in new products and obviously we continue to do that, continue to bring new product capability to continue to consolidate - increase our overall growth rates. But we feel very good about where our margins are today. We have really strong margin expansion for the full year this year, also highlights just how well we're doing with operating synergies and all of the revenue growth. So that will continue as we push into the out-years with margin expansion in the mid-term guidance we gave each year.

Ashwin Shirvaikar - Citi - Analyst

That's great. No, I definitely agree with the you guys are executing. There was some speculation recently with regards to a portion of your Capital Markets business, potentially from being divested or let you perhaps open to divesting it. Any updates until broadly when you look at your look - current book current businesses? Does it all fit together in your eyes? Or any strategic new point you might want to share?

Gary Norcross - Chairman and Chief Executive Officer

Ashwin, we don't comment on rumors, as you know. But what I would tell you is we've always had a strong viewpoint as part of our strategy is to continue to look at our portfolio and make sure that our portfolio of assets makes sense for our long-term strategy. We signaled recently that we pushed some things into our other segment as non-strategic. Would we divest things in the portfolio don't fit our overall strategy? We've done that historically, and when you think about what we did years ago with our health care business and our public sector business. But typically, as I said, we signaled that we move things into the other category, things that we are considering as non-strategic, but we really don't comment on rumors on divestitures or acquisitions for that matter.

Ashwin Shirvaikar - Citi - Analyst

Got it, got it. Congratulations again. This is pretty solid.

Gary Norcross - Chairman and Chief Executive Officer

Thank you.

James Woodall - Chief Financial Officer

Thank you, Ashwin.

Operator

Thank you. Our next question comes from the line of Dan Dolev with Mizuho. Your line is now open.

Dan Dolev - Mizuho - Analyst

Hi, guys. Thanks so much for taking my question. Two questions. The first one is - and then I have a follow-up. Can you maybe elaborate a little bit on sort of the puts and takes of what happened in the second quarter in terms of just the growth rates between SMB? I know you called out e-commerce, but just if you think about those subsegments, and then I have a follow-up. Thank you.

James Woodall - Chief Financial Officer

Yes, I can comment on that. Overall, Merchant growth in the second quarter was 45%. If you break that down between enterprise and SMB, SMB grew 50% for us in the second quarter and the enterprise business grew a little over 40% combining to that 45%. If you remember, global eCom sits in the enterprise business, growing at 31%. So that's a little bit of the breakdown between them.

We did see some sharp increases in verticals, both North America restaurant and international restaurant were up about 70% around reopening. So as we anticipated, we expected the volumes to come back and they did. And then we got the yield benefit through those some of those higher yielding verticals. As the reopenings happened, it rebounded. So that's a little color around SMB and enterprise there, Dan.

Gary Norcross - Chairman and Chief Executive Officer

I would just add that the team is just performing at a very high level, the execution with the Merchant team bringing product to market, execution, driving sales, the Banking team, the Capital Markets team, all of them just really kind of embracing what we're trying to do and executing at a very, very high level.

Dan Dolev - Mizuho - Analyst

Yes. That sounds really strong. And then my follow-up is more macro. There is a lot of anxiety here in the U.S. that we're kind of a few months behind the U.K. I know you have like a huge U.K. exposure. Can you give us some understanding of how things are trending there given the decision that they made to reopen everything? I mean are there, are you seeing things sort of reopen as it peaks and comes down? Like, it's just I think there is a lot of anxiety here that we're going to see the same thing in a couple of months, given the surge in the Delta. Thank you.

Gary Norcross - Chairman and Chief Executive Officer

Yes. As we highlighted, we continue to see July results improving. That is improving better or trending better internationally than in the U.S. right now. You. We certainly saw some benefit in the back half of July with some of the U.K. reopening as we've seen the volumes increasing there. Certainly, continue to monitor everything as things go along, but feel good about what we're seeing right now in terms of volumes outside of the U.S. continuing to improve.

They are lagging the U.S. a little bit as we talked about. We certainly saw the U.S. outpace international growth in the second quarter, but we anticipate the international areas to continue to drive into the back half of the year.

Dan Dolev - Mizuho - Analyst

Really appreciate it.

Gary Norcross - Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. This concludes today's question-and-answer session. I will now turn the call over to Gary Norcross for closing remarks.

Gary Norcross - Chairman and Chief Executive Officer

Thank you again for joining us this morning and thank you to our dedicated colleagues who continue to show their commitment to providing world-class technology solutions for our clients, so that they can stay ahead of the curve. This commitment will lay the foundation for our growth in 2021 and beyond.

If you have any further questions that were not addressed on this call, please reach out to our Investor Relations team. Thank you and goodbye.

Operator

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FIDELITY NATIONAL INFORMATION SERVICES INC

Q2 2021

Earnings Transcript

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