Ladies and gentlemen, thank you for standing by, and welcome to the FIS Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker, Mr. Nathan Rozof, Head of Investor Relations. Please go ahead.
Good morning, and thank you for joining us for the FIS fourth quarter and full year 2021 earnings conference call. The call is being webcast. 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 operating performance in 2022 priorities. Stephanie Ferris, our President, will describe our strategy to unlock the value of FIS. James Woodall, our Chief Financial Officer, will then review our financial results and provide forward guidance. Finally, Erik Hoag, our Deputy CFO, 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. Reconciliation 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. Gary?
Thanks, Nate, and thank you for joining us this morning. Starting on slide 5, by all metrics, our colleagues delivered a historic operating performance for FIS in 2021. Our strategy continues to resonate with our clients and prospects, and our team continues to execute at exceptionally high level. For the full year, revenue increased 11% to nearly $14 billion. Margin expanded by over 200 basis points to 44%, and adjusted EPS increased 20% to $6.55 per share. Growth for the year was driven by strong performance across our operating segments, with banking at 8%, capital markets at 8%, and merchant at 19%. In the quarter, merchant came in softer than we expected due to the Omicron variant.
As you will see in our deep dive on merchant later in the deck, without this impact in late November and December, our merchant growth would have been even higher. For the year, we generated record free cash flow of $3.6 billion. We returned $3 billion to shareholders, increased our dividend, and acquired Payrix, which will accelerate merchants e-commerce offering for platforms that primarily serve SMBs. We also successfully completed the Worldpay integration nearly a year ahead of schedule, beating our initial revenue synergy target by 50% and more than doubling our initial expense synergy target. We had a very strong sales quarter, even with the Omicron variant, due to the strong demand for our differentiated solutions. New sales increased our backlog to a record $23 billion, an increase of 8% organically.
By any account, this was a record year for FIS and the strongest operating performance in our 53-year history. Turning to slide 6. Given our sales success, we wanted to highlight several landmark wins across our company with clients and prospects who look to FIS as their trusted technology partner to help them to expand or transform their business. In banking, this includes a top 15 global financial institution who wanted to accelerate their growth and expansion in the U.S. by executing a digital strategy. This innovative client selected FIS and the Modern Banking Platform to modernize their infrastructure using our cloud-native processing platform. They will also use our cloud-native Digital One platform to enable their strategy, which was a key selling point in their decision-making process.
Additionally, Amerant Bank signed a significant deal to outsource most of their solutions to FIS, which allows them to transform their business from a multi-vendor solution to a single innovation partner. This will drive a significant savings for Amerant while bringing their solutions to the most current technologies, which is a great example of the power of the FIS portfolio. These wins are indicative of how the differentiated capabilities in our banking segment drove the more than 30% increase in new sales for the year. Turning to our merchant segment, geographic expansion was a core tenet to our strategic rationale of the buy of Worldpay. Throughout 2021, we entered seven new countries, which continued to push accelerated growth in our merchant offerings, especially e-commerce. One of those markets was Argentina, and as a direct result, we signed the country's largest airline this quarter.
They chose FIS because they are looking for a trusted partner with the sophisticated vertical expertise and global processing platform that will help them grow their business. Another key rationale for the Worldpay acquisition is our ability to utilize our combined solutions and data to increase authorization rates. We now integrated our merchant and issuer processing solutions to create AuthMax Preferred. This innovative new solution dramatically increases authorization rates for transactions where we are both the merchant acquirer and issuer processor based on our insight into both sides of the transaction. With this significant innovation, we can improve authorization of historically declined transactions as much as 40% for trusted cardholders of Worldpay's participating merchants. This generates significant revenue uplift for our clients. Based on this advancement, Netflix expanded our long-standing relationship this quarter to quickly take advantage of this new capability.
Given our strong pipeline, we are looking forward to building on our record new sales increase in merchant of more than 40% for the year. In capital markets, we signed our largest deal in the history of this business with Franklin Templeton. Like our T. Rowe Price announcement a few quarters ago in the wealth vertical, this anchor client establishes us as a leading global player with a differentiated international transfer agency solution that will provide a new leg of growth for capital markets. Additionally, the recent investments we've made in our Cleared Derivatives platform are driving significant new wins, including Société Générale this quarter, which will transition their middle and back office to our innovative solution. We could not be more pleased with the structural transformation that has occurred within our capital markets business.
This team has done an outstanding job of combining our industry-leading products into advanced end-to-end solutions that are clearly resonating through our sales channel. Like our other segments, capital markets had a record year in sales and organic growth, with new sales increase of more than 40% for the year. On slide 7, I'd like to revisit a topic that we discussed last quarter, which is the opportunity that we are seeing in the market to bring solutions together from across our segments. Buyer preferences continue to move in our favor, with clients consuming more of our solutions across their enterprise to create unique client experiences. Last quarter, we brought forward the example of Amazon, first utilizing our NYCE debit network capabilities from banking before consuming our omni-channel merchant acquiring capabilities and adding our treasury and cash management solution from capital markets.
Given our success in revenue synergies with the Worldpay integration, we continue to evolve our go-to-market strategies through better organizational alignment, which allows us to take advantage of a broader addressable market for our unique solution set. These changes are driving real results as we grow our list of clients that are working across our business segments in unique and differentiating ways. As we continue to build capabilities, programmatically addressing this opportunity to create innovative new experiences truly unlocks the power of FIS. We will continue to bring this forward in the coming quarters as we think this alone could accelerate our growth rates from current levels. As we close out 2021, I'd like to take a moment to recognize some of the awards FIS earned and to lay out priorities for 2022 on slide 8.
This year, we saw tremendous recognition for our leadership in Fintech as a global company. To name a few, Fast Company magazine named FIS in their best workplaces for innovators list, which recognizes companies that empower their employees to improve processes, create new products, and invent new ways of doing business. In merchant, our Access Worldpay earned honors for highest authorization rate by the Strawhecker Group. In banking, our Unity Wealth management platform was named best technology for family offices in the PAM Awards. In capital markets, our Cleared Derivatives Suite was named post-trade system of the year, Global Investor Group. We were also recognized by Fortune as the most admired company, and we were named a best place to work for the LGBTQ+ community for the fourth consecutive year. Lastly, we were recognized for the best ESG reporting by IR Magazine. Turning our focus to 2022.
At FIS, we have consistently invested for growth, executed at scale, and delivered innovation at the highest level. We will continue to focus on unlocking the power of FIS in an organized and systematic way. This will be centered around delivering compelling new solutions for our clients and taking advantage of our significant head start in the cloud to innovate at speed. We will also continue to componentize our technology stack to make all our industry-leading solutions available to every client, regardless of the segment where they reside today. This will enable us to expand into attractive new verticals like crypto to capture fast-growing and emerging new markets. We have built FIS into an industry leader over the past 50 years, and in 2022, we will again demonstrate how FIS will further its lead over the next 50 years.
This business will continue to grow and generate exceptional profitability and free cash flow, which we'll use to maximize shareholder returns and drive continued strong organic growth rates. Finally, I'd like to address a couple of executive announcements that we made this quarter. First, Bruce Lowthers decided to leave FIS to pursue a role outside the company. Over the past 15 years, Bruce has been a champion of our transformation, and the result of his focus and contributions has been a significant acceleration in growth at FIS. Thank you for your service to FIS, Bruce. We wish you all the best with your next role. Second, I'm pleased to announce that I've promoted Stephanie Ferris to be President of FIS. Stephanie returned to the company in September of last year as Chief Administrative Officer after originally joining FIS from the acquisition of Worldpay in 2019.
She is a seasoned global executive with over 25 years of experience leading payments and technology platform businesses. She also has impressive experience driving digital transformation, frontline customer engagement, and inclusive growth. This is a tremendous achievement. We are excited to have Stephanie step into this new role. Congratulations, Stephanie. She joins us today and will continue to participate on future earnings calls. Stephanie, welcome. I'll turn the call to you.
Thanks, Gary, good morning, everyone. I'm excited to be here and to share a little bit more about our vision to unlock the power of FIS. FIS is uniquely positioned with the best and broadest set of assets delivered at scale and with global reach. All the startups that are coming to market are trying to create what we already have. They wanna offer embedded finance solutions and are trying to build those capabilities one by one. We already have leading deposit, lending, issuing, and B2B solutions, and we have a large network of financial institutions, capital markets, and merchant participants to drive adoption at a global scale. Our clients compete effectively within their traditional segments, but the market post-pandemic has shifted, and the lines between traditional segments have blurred.
By bringing all of our capabilities together to deliver embedded finance solutions, we have the unique opportunity to help our clients compete and win in this new reality. I'll build on this by providing an example of how we are translating our leading crypto capabilities within e-commerce to drive innovation across all of FIS. Beginning with slide 10, we see merchants' e-commerce opportunity as centered around three segments, enterprise, platforms, and small to medium-sized businesses. Today, our expertise is in the enterprise space. Multinational enterprises and leading global brands choose us because of our global reach, best-in-class authorization and fraud rates, and white glove service. We consistently win landmark clients who need our help to expand into new countries or to help them solve their challenges using our payments expertise. The clients in these segments have unique needs.
Serving millions of small businesses directly or through a platform requires specialized capabilities like automated underwriting and onboarding. Payrix will modernize our client experience through their next-generation product suite and enable us to deliver differentiated embedded finance and payments experiences for platforms that primarily serve SMBs, speeding our entry into this high-growth, growth segment of e-commerce. Their team is extremely talented, and we are excited to welcome them into the FIS family. Following the Payrix acquisition, we expect to formally launch our entry into platforms later this year, and I will be back again next quarter to share an update with you about this. First, on slide 11, I'd like to give you a little more color about how we operate in enterprise e-commerce and provide a case study about why we win in the crypto vertical.
We serve 4 of the top 5 exchanges and have 100% client retention. Our success reflects a combination of both our product and innovation leadership. FIS was the first to offer Apple Pay for cryptocurrencies, and now we are launching direct settlement in crypto. We offer 14 payment methods across 46 markets, and we're named Crypto Payment Service Provider of the Year by Crypto AM in 2021. We were able to quickly expand into this emerging vertical because we have the technology and the expertise to enter new markets faster than our peers. We also have sophisticated solutions that we developed by serving other complex verticals like travel and airlines that allow us to assess and properly underwrite new clients that other players may not understand. Here's where it gets interesting. We are expanding our expertise in crypto from merchant to both banking and capital markets.
Our clients in all of our segments want access to this high-growth vertical. We're enabling banks to open cryptocurrency accounts for their customers, and we enable them to buy, sell, and hold crypto in partnership with NYDIG. By integrating Digital One, our clients can offer these accounts to their customers through their mobile apps, displaying crypto and traditional checking and savings accounts side by side. We are also blazing the trail for crypto card issuing within our banking segment. FIS will handle all aspects of card management and processing for CEX.IO. This crypto exchange is offering a new line of crypto-based consumer cards across Europe and the U.K. by leveraging our innovative capabilities. Additionally, our capital markets segment develops the software that powers exchanges, traders, and asset managers. These solutions are in demand by our crypto exchange clients, and we are quickly deploying our expertise there.
In summary, we are expanding the reach of our crypto expertise from merchant to banking and capital markets in order to enable all of our clients to participate in this high-growth vertical. With that, I'll now turn the call over to Woody to discuss our financial results and provide 2022 guidance. Woody?
Thanks, Stephanie, and thank you all for joining us. I will begin with our fourth quarter and full year results, then touch on our balance sheet, cash flow, and 2022 guidance before taking you through our enhanced merchant disclosures. Starting with the fourth quarter on slide 13. On a consolidated basis, revenue grew 11% and adjusted EBITDA margins expanded 120 basis points, generated adjusted EPS of $1.92 per share. Both banking and capital markets revenue grew 8%, while merchant revenue growth accelerated by 500 basis points sequentially to 19%. Banking's adjusted EBITDA margin expanded 30 basis points to 45%, primarily due to continued operating leverage. Merchants' adjusted EBITDA margin expanded 140 basis points to 52%, primarily due to revenue and cost synergies associated with the Worldpay acquisition.
Capital Markets' adjusted EBITDA margin remained constant at 52%, primarily reflecting higher bonus expense related to strong revenue growth, which offset operating leverage from new wins. Turning to full-year results on slide 14. On a consolidated basis, revenue grew 11%. Adjusted EBITDA margins were 44%, and adjusted EPS was $6.55 per share. Adjusted EBITDA margins expanded 220 basis points, primarily due to operating leverage and strong execution of revenue and cost synergies associated with the Worldpay acquisition. In banking, revenue growth accelerated 8%, primarily due to strong new sales execution.
Based on our large and growing backlog, as well as our expanding pipeline of new opportunities, we expect Banking to continue to grow high single digits in the midterm. In 2022, Banking will grow 6% or more due to approximately 200 basis points in growth overs. This is primarily due to lapping pandemic-related stimulus and expected lower termination fees. Merchant revenue grew 19%. While new variants of COVID-19 are affecting near-term results, our strong new sales gives us confidence that Merchant will grow low double digits in 2022 and beyond. Capital Markets also continues to execute well, with revenue growth of 8%. This segment is well-positioned to accelerate revenue growth to the mid to upper single digits in 2022, driven by another strong year of new sales, cross-sell opportunities, and recurring revenue growth.
Turning to slide 15, I'll touch on the strength of our balance sheet and free cash flow. We generated $3.6 billion of free cash flow for the full year, which we used to buy back 15 million shares, and we paid nearly $1 billion in dividends during 2021. During the fourth quarter, we generated approximately $850 million in free cash flow, which we primarily used to acquire Payrix. In addition, our board of directors recently increased our quarterly dividend by 21% to $0.47 per share. We intend to increase our dividend by approximately 20% per year. This will allow us to gradually grow our dividend payout ratio to approximately 35% of adjusted net income. Turning to our guidance on slide 16. In the first quarter, we expect organic revenue growth of 7%-8%.
We expect our adjusted EBITDA margin to increase by approximately 50 basis points to 41%. Lastly, we expect to generate adjusted EPS of $1.44-$1.47 per share. For the full year, we expect organic revenue growth of 7%-9%. We expect our adjusted EBITDA margin to increase by 50-100 basis points to approximately 45%. We expect to generate 150-200 basis points of margin expansion from operating leverage and annualization of synergies. This will be partially offset by higher labor costs, resulting in our guidance of 50-100 basis points of margin expansion for the full year.
As a result of our accelerating revenue growth and expanding margins, we expect adjusted EPS to grow 11%-13% to a range of $7.25-$7.37 per share for full year 2022. We expect to generate free cash flow growth of approximately 15%, an improved conversion of about 27% of revenue, which is approaching 95% of earnings for the full year. To start the year, we'll repay debt and reduce our leverage below 3 turns before we resume share repurchase. Our guidance then assumes share repurchase of approximately $3 billion, mostly during the back half of 2022. Please note that we have provided our detailed assumptions for depreciation and amortization, tax rate, and share counts within the appendix of this presentation on slides 26 and 27.
Turning now to our enhanced merchant disclosures on slide 18. Our volume trends continue to track closely with the networks. As compared to 2020, global volume growth remained stable at 17%. As a reminder, the networks also experienced stable volume growth between the third and the fourth quarters. Our U.S. volume growth accelerated by 200 basis points to 19%. This trend is again consistent with the networks. On slide 19, we show volume growth trends as compared to 2019. Our global volume growth remained consistent at 23%, while the network's volumes accelerated modestly. This is due to our larger U.K. exposure, where Omicron variant had a significant impact, as I will show you in a few minutes. In the U.S., our volume accelerated by 100 basis points to 26%.
We do not currently serve SMB e-com or platforms which help the networks to accelerate slightly more than us this quarter. We're looking to use Payrix as a first step to close this gap, as Stephanie mentioned earlier. As we begin 2022, our volume trends continue to be consistent with the networks in January. International volumes began to improve in January as new Omicron cases started to slow in the U.K. In the U.S., volume growth slowed modestly in January as we lapped last year's stimulus. As the Omicron variant recedes, we expect our volumes to continue to track closely with the networks. Turning to slide 20. We updated the detailed sub-segment data that we showed last quarter to include our fourth quarter results as compared to 2019.
While all our sub-segments continue to grow well above 2019 levels, the Omicron variant impacted the fourth quarter. Omicron primarily affected revenue yield as compared to 2019 by reducing the mix of SMB, travel, and international volumes for the quarter. On a more positive note, as compared to 2020, merchant yield improved both sequentially and on a year-over-year basis, demonstrating our future revenue growth potential as high-yielding segments recover from the pandemic. Over the next few slides, I will talk you through the results of each sub-segment and how they contributed to our merchant revenue growth. Global e-commerce generated $1.2 billion in revenue during 2021, as shown on slide 21. During the fourth quarter, global e-com revenue grew 31% as compared to 2019, excluding travel and airlines.
Even with these strong results, we saw the effects of Omicron in travel and airlines. The chart on the right shows our monthly travel volumes versus 2019. Travel accelerated through November, but then pulled back to May levels in December. The difference between same-store sales and our total volume growth is due to new client wins. As travel comes back and exciting new verticals like crypto continue to emerge, we see significant opportunity for future growth. Turning to slide 22. Enterprise generated $2 billion in revenue during 2021. During the fourth quarter, revenue grew 16% year-over-year and 8% over 2019.
In the upper right-hand corner, the impacts of Omicron on the U.K. are obvious, where growth dropped to 0 in December from mid-teen levels previously. Our U.S. enterprise business also saw some pullback in December, but was not nearly as severe as in the U.K. SMB revenue growth over 2019 decelerated to 11% in the fourth quarter, as shown on slide 23. This is clearly due to Omicron, as the deceleration occurred in all verticals. As this variant recedes, we expect growth to re-accelerate. However, we are more excited by the opportunity to push into SMBs with e-commerce. In summary, while we continue to see impacts from the pandemic in the short term, merchant TAM is expected to grow 8%-10% through the midterm, as shown on slide 24.
Further, as we continue to grow e-commerce as a larger and larger portion of our overall revenue mix, we're confident in our ability to outpace TAM growth and to generate low double-digit merchant revenue growth in 2022 and beyond. The combination of merchant growth with our continued strength in banking and capital markets gives us confidence in our 2022 outlook and in the future of FIS. I would like to thank our colleagues for their continued efforts in serving our clients and driving our business forward. With that, I'd like to open the line for Q&A. Operator?
Thank you. To ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question will come from Raina Kumar with UBS. Please go ahead.
Good morning, Gary and team, and congratulations, Stephanie. Can you comment on the banking solutions demand environment and where you expect your financial institutional clients to focus IT spend this year?
Yeah, no, Raina, thanks. Yeah, it's a great question. You know, honestly, we don't, we're not seeing a lot of change from a demand standpoint. It's been very strong, and it continues to accelerate that strength into 2022. We're coming off a record year in banking sales. That was off a record year in 2020 as well, and 2019. We've seen consistent acceleration of our signings. What we're seeing in that industry is, you know, a massive transformation in the need to move off legacy technologies. We're well ahead of this trend. As you know, we started our cloud migration over 5 years ago. We started our cloud-native development applications in market 3 years ago, and then brought Modern Banking was the last one that we brought forward.
Seeing a really strong pipeline around all of those topics as financial institutions around the world are gonna need to transform to go to more componentized, highly nimble architectures, open systems to allow them to drive and innovate against, you know, some of the other disruptors that are entering in the space. As you think about interest rates, and obviously there's been a lot of touting of interest rate expansion, this is good news for our financial institutions. It'll actually embolden them to continue to accelerate that spend and that demand on those fronts. We think we're extremely well positioned going in 2022. We're coming off a great year in banking and that's gonna continue throughout next year.
Got it. It's very helpful. So Payrix, that's a very interesting acquisition. If you can talk about what the acquisition brings to the table for FIS in regards to vertical exposure and new e-commerce capabilities. Then for the purposes of modeling, what impact should we anticipate from Payrix on your revenue and earnings this year? Thank you.
Yeah, no, I'm happy to talk about that. Payrix is a small but really highly strategic acquisition for us. First of all, it brings our leading global e-commerce capabilities, downstream to SMBs through platforms, similar to Stripe Connect. Specifically, it brings capabilities around automated underwriting and onboarding, which are really critical for us to be able to access that marketplace. Secondly, and even more strategically, it enables us to add our unique card-present capabilities to create an omni-channel experience, along with our embedded finance capabilities, whether it's deposit taking, issuing, banking-as-a-service capability.
We think about this acquisition as being very strategic, both in terms of accessing an e-commerce market we haven't been in before, but also really unlocking the value of FIS as we start to be able to deliver embedded financial services out to this marketplace.
In terms of its financial impact, I would tell you it's immaterial to the top line organic growth rate, and probably a few pennies dilutive, so modestly dilutive to EPS.
Got it. Thank you.
Thank you. Our next question will come from Jason Kupferberg with Bank of America. Please go ahead.
Good morning, guys. Thanks for taking the question. I just wanted to go back to the slides where you outlined the volume growth versus the networks. Like you said, the trajectory is quite similar, but just the absolute level of growth, obviously the spread there widened out a bit in the quarter. I mean, do you attribute all of that to Omicron? I'm just trying to get a sense of how investors' expectations should maybe be calibrated during 2022. Do you think there can actually be some convergence in the absolute level of volume growth for FIS Merchant versus the networks? You know, is there any way to perhaps suggest what merchant volume or revenue growth in the quarter would have been if not for Omicron? Thank you.
Yeah, I think it definitely was Omicron related. I think it's very clear as you look at, you know, the U.K. and our exposure to the U.K. compared to the others potentially. You know, 13% or so of our revenue comes out of the U.K. from the merchant segment. And obviously it dropped to 0 in December. So you're clearly seeing the impacts. As that comes back, you certainly anticipate volumes to come back around it as well. So we feel like it was definitely Omicron related. We saw some improvement in volumes in January, particularly in the U.K., as we started to see cases reduce there and some of the reopening come back there. And obviously, it's having a little bit of an impact on our guide for the first quarter, but it's Omicron related.
Okay. Understood. Then just to follow up on the SMB e-com strategy. It sounds like there'll be more formal announcements over the next quarter or so. How long do you think this takes to move the needle on overall merchant segment revenue growth once the strategy is implemented, and you start to execute out in the market?
Why don't I start, and then we'll let Stephanie add? I mean, you know, as we're guiding to for the merchant business, we really see the merchant business growing in low double digits this coming year. If you look at historically, based on where the merchant business group prior to COVID, this is certainly a substantial acceleration given our exposure into e-commerce at the enterprise level. You know, we counted e-com growing at greater than 30% minus travel and airlines. We've got a really strong business. This actually in 2022, in the short term, is gonna be very little tailwind for us. We do think it's very strategic to move into this new market that we talked about on prior calls that we are not traditionally in.
That's why we think this acquisition is gonna be very important for our future expansion in this new market. I'll let Stephanie add to that.
No, I think Gary nailed the answer to that. The other thing I would say is, as we look at the merchant segment, and we think about e-commerce as being, you know, we're one of the best in class and being able to access a market we haven't been in before, it's obviously very strategic.
Mm-hmm.
It also enables us to bring the embedded finance capabilities of the banking and capital market segments into this customer set and really starts to unlock that full value. We're very excited about that. Now, granted, that's gonna take us a bit of time, to Gary's point. The asset is really strategic for us, both from accessing the e-commerce segment as well as really starting to deliver those embedded finance capabilities that we already have. We're really excited about it.
All right. Well, thank you for the comments.
Thank you. Our next question will come from John Davis with Raymond James. Please go ahead.
Hey, good morning, guys. First, just wanted to touch on Banking. What are you calling out, about 200 basis points kind of growth over headwind, stimulus, and term fees? First, maybe a breakout there. Is that basically 100 basis points each? And also, do you have anything in the guidance for any of the CPI inflators that are in the contracts in the Banking segment, or is that just outside that 6% number?
Yeah. The impact on stimulus is about 150 basis points, think primarily Paycheck Protection Program and the lending capabilities that we rolled out last year. The term fees are roughly 50 basis points in our expectation of just lower term fees this year. We do have CPI within our contracts. They roll over in terms of how the contracts roll in terms of annualization, so that'll come on over the course of the year. It's really how we think about the shape of the year, too, where we expect a little higher growth in the back half of the year, as those contracts kick in with CPI.
Okay, thanks. Just a quick follow-up on free cash flow. You talked to 95% conversion, but 15% free cash flow growth, which is a little bit faster than EPS growth. I mean, I guess, you know, how do we think about that 95% going forward? Would you expect the EPS growth to catch the cash flow growth once the kind of the CapEx rolls through to D&A?
Yeah. It's a great point, John. We're trying to highlight it as well. You know, we've been spending heavier than many in the CapEx world for the past several years. We actually anticipate CapEx of about 8%-9% this year, but I could see, you know, rolling towards the lower end of that outlook. As we see that, you'll see cash flow outpace earnings per share potentially for the next few years, and then it'll normalize out, where you've seen it go the other direction for the last several years, where, you know, we were expanding CapEx, and then the D&A is catching up right now.
The DNA right now is one of the headwinds that we're seeing in terms of higher teens EPS growth, but you're seeing it convert into free cash flow at that 15% growth level.
Okay, appreciate it. Thanks, guys.
Thank you. Our next question will come from Darrin Peller with Wolfe Research. Please go ahead.
Thanks, guys. Let's shift gears to the banking segment for a minute. I know a lot of talk about merchant, but you know, just given the magnitude of the growth there and the size, along with it, maybe just touch on capital markets, too. Gary, can you just tell us if you think you have all the right assets now? There's been a lot of you know, smaller companies moving up the value chain in terms of trying to get bigger and work on bigger banks. But in terms of what you can offer from a cloud-based offering for both core and some of the ancillary products, do you have enough to see yourself growing in that segment in that 7%-9% range, call it medium term, medium to long term for banking?
Look, I mean, capital markets has been strong. Just remind us what's really driving that and if that's sustainable in your mind?
Yeah, Darrin, it's a great question. The quick answer is absolutely. I mean, we think these are in the near term easily 7%-9% growers as we get beyond a couple of these headwinds in banking. From an asset pool, I think we're best in class at this point in time. What he just highlighted, and our free cash flow is increasing because our large program spend is coming down because our large programs are completing, right? We knew we were gonna have to go through this process. If you look from a banking standpoint and you look at
Our Digital One capabilities, which is truly, you know, an omni-channel digital experience, cloud native from the ground up built. We're into hundreds and hundreds of institutions now that have deployed various components of that Digital One platform. When you look at Code Connect, we've got a similar scenario. You look at our Modern Banking Platform and some of our key wins. With that being said, we have had some competitors announce that they're entering into the space, and we think that just endorses our strategy that we started 3+ years ago. I mean, today, we're leader in cloud deployment. No one can beat us on availability. No one can beat us on total cost of ownership and delivery through our private cloud, as well as our ability to burst to the public cloud.
When you look at our application stack, we have the most advanced, solid application stack in market today, and even our capabilities are driving further outcomes through back office type services, et cetera. When you look at capital markets is a very similar story. We told everybody that we were going to start leaning into software-as-a-service and deploying in a one-to-many model our leading capabilities after we brought our applications together and modernized those through an end-to-end solution stack. You look at what we saw in 2021, you look at what we're seeing in 2022, that acceleration's just going to continue. The only headwind we have in that market is really our license fee grow-over business, which over the years, we've been telling the market very consistently, the percentage of revenue tied to license fees continues to decline.
We do still have license fee volatility due to the term nature of those fees. The recurring revenue on Capital Markets has been growing very, very strong now for a number of years that continued through 2021. Both of these businesses have continued to perform exceptionally well, and our timing's been very strong given now this inflection point that all of our financial institutions and large investment houses, private equity firms are gonna need to be going through a modernization strategy. They're all looking to drive that in a highly resilient outsourced fashion. We feel great about these two businesses. You know, a little headwind in the Banking business this year due to the grow-overs Woody talked about.
These two businesses can easily grow greater than 7% in the coming years, and we feel very good about it.
All right. That's helpful, Gary. Just a quick follow-ups on the capital allocation. You know, the strategy and the focus there, just given, you know, if you believe everything you're saying, the stock should obviously move in the right direction. So can you remind us of the capital, the liquidity you really have when considering free cash and your debt capacity that you can actually put towards either buybacks or, you know, even M&A and on M&A? Obviously, there's probably a narrowing of bid-ask spreads in some of these smaller fintech growthy companies. So what are your thoughts now given the way the market's trading around and even on the private side, some of the valuations for some of these growth assets? Thanks, guys.
Yeah. Yeah, Darrin. It's interesting. I talked about. We got a couple of things going there. One, we're gonna pay debt down below three turns. You know, in a rising interest rate environment, we think our credit rating is extraordinarily important. The pandemic put us behind probably, you know, two years in terms of reducing our debt back to below three turns. We're gonna focus on that first. At that point in time, call it midyear this year, we'll look to either buy back shares or do additional M&A. As you've heard us consistently talk about, we would rather do M&A, but we look at share buyback for default purposes. Your other point is also very interesting, where there's some interesting assets that are in the marketplace.
Valuations look a lot differently than they did, say, six months ago. So I think it, you know, maybe resets a bit of a chessboard for other assets that are out there that we might be able to consolidate or bring into our distribution channel. Yeah, Darrin, the only thing I'd add to that is, look, I mean, Woody's kind of hitting on it. The aperture gets more open, right? As some of these pullbacks occur and valuations. We've all always talked about it. You know, these when we look at M&A, we've got to find capabilities that drive a new product or service to an existing market we serve or break us into an adjacency. You know, financials matter, right? Obviously, we've got to make a strong investment for our shareholders, and that return's important, culture's important.
We can have a pretty wide aperture when it comes to things that we look at now, given the scope of our business. M&A will continue to play an important role once we get our balance sheet reloaded, and we'll continue to look for strategic ways to accelerate our growth from here. We're not looking to do turnaround deals, and that we've been very clear about that. We've gone through a tremendous transformation at FIS. You can go across any one of our businesses and you look at this modernization effort is starting to become behind us, right? With our capabilities in market, even when you look at, you know, Access Worldpay and the new acquiring platform on the merchant side.
Really, it's gonna be all about things that can accelerate our growth from these current levels. Last year was a record growth year for us. You know, just really strong operating performance. We'll continue to evaluate that lens on M&A.
Thanks, guys.
Thank you. Our next question will come from Ramsey El-Assal with Barclays. Please go ahead.
Hi. Thanks so much for taking my question this morning. I was wondering if I could ask you about revenue yield and sort of the trend for the rest of the year, whether we should continue to expect to see expansion in fiscal 2022, I guess, due primarily to travel recovery in travel volumes and other mix-related factors. Any commentary on the revenue yield kind of trend and expectations in 2022 would be appreciated.
Yeah. Thanks, Ramsey. Yes, we anticipate revenue yields to continue to improve. As you compare to 2020, you know, revenue yields were a -3% in the third quarter and a +2% in the fourth quarter, so you're starting to see that. You compare back to 2019, you know, we saw a little bit of a stepback for Omicron, but over the course of the year in 2020 versus 2019, you saw a -14%, a -16%, then you saw a -7%, so improvement, and then, -10%, really impacted by Omicron in the fourth quarter. But obviously, we expect those yields to continue to come forward, and, trying to highlight that, really looking at the sequential and year-over-year in 2020 yields.
Got it. All right. A follow-up from me. I wanted to ask about the slide 7 and the componentized cross-segment solutions that you discussed. What type of internal work needs to be done technologically, organizationally? What type of integration needs to be done in order to really execute on that strategy? Just also, if you could just comment on whether a share repurchase is contemplated in the EPS guide.
Yeah. Let me take the cross-segment sales. I think the team's done an excellent job driving cross sales through the Worldpay acquisition, and that we exceeded more than $700 million in cross sales, and so far exceeded our original guide of what we thought we would get. What that has opened up is this opportunity that we just got significant cross-sell opportunities across the entire base. What needs to be done from a product standpoint is we need to continue to drive our investment in some of these modernization platforms and exposure through componentization. We're gonna continue to work on that through this year, and then those programs will predominantly be completed at that time.
You've seen us lay the groundwork and some of the stuff we've done through cloud. We've got now over 83% of our compute in the cloud. A lot of the technical aspects of this are done. Now, organizationally, we are starting to pull the organization together in a very different way with our go-to-market motion. You know, historically, while our sales have been enterprise in nature, they've been enterprise in nature within the segment. We're now lifting those up, and we're starting to bring our sales teams together where they're enterprise in nature across the entire company. We're doing that by focusing first on our top 200 client base. That's where a lot, most of our revenue's generated.
We wanna lean in onto that base first and really drive that sales team to engage, where they're bringing the full capability of FIS. We're really just getting started on that. We've got a little over, you know, there's a little over 20 of our top 200 clients today that are executing across all three segments. That's gonna grow exponentially with this first change. We've had a lot of success with this in the past, where we've lifted up our sales from the product level to first to the customer level and then to the segment level. We're doing the same thing now. We're lifting it up to the enterprise level. We're really excited about this opportunity. We think this alone could accelerate our growth rate from where our current 7%-9% targets are.
We're gonna certainly continue to keep our investors up to date on this. Just made the change last week as we rolled it out through our sales kickoff meetings, and so really excited about what the future holds here.
To answer the second part of your question around a share buyback, we do anticipate and modeled about $3 billion in share repurchase, and that's mostly in the back half of the year, Ramsey.
Thank you very much. Appreciate it.
Thank you. Our next question will come from David Koning with Baird. Please go ahead.
Yeah. Hey, guys. Thank you. Maybe to ask the yield question another way. I think yield this year is about 89% of 2019. Is there any reason that the mix has permanently shifted, or do you think it could come back to a normal economy? If so, if we get back to 100%, you could have a volume year of normal 10%, let's say, plus 10% extra from yield. Like, could you have a 20% merchant yield just because merchant gets back to normal kind of mix of business?
Yeah. As we've talked about, as recovery occurs, particularly in the high-yielding verticals, we certainly would anticipate that to invert the other way, as we've talked about, you know, for last several quarters actually. You know, that said, we don't see travel coming back 100% in 2022. We do continue to expect it to increase over the course of the year, but not to be at 100% of pre-pandemic levels. But you're right, we do anticipate seeing yields being a net benefit as those higher-yielding verticals return back to more normalized levels.
Simply stated, Dave, we're seeing no difference in yields. As they decline due to the pandemic, as they come back after the pandemic, the yields return. We're seeing zero evidence of anything impacting our yields from that viewpoint.
Gotcha. Thank you. Then just as a follow-up, I think if I remember right, back when you announced Worldpay, I think you assumed kind of mid-teens EPS growth kind of through the you know in the future. I know you're guiding to 11%-13% this year, despite pretty good revenue growth and recovery-type revenue growth. Maybe what's the delta there, and can we get back to mid-teens or better in the future?
Yeah, I think we can. I think you got a couple of things in terms of the yields here. We've got some labor costs that are a bit of a headwind, about 100 basis points of headwind in that 50-100 basis point margin expansion guide. When we, you know, pulled that together originally, I don't think we anticipated this level of labor costs. Then you're seeing some of the D&A being a little bit of a headwind in the short term. As we normalize that over the next few years, we think you'll see that mid-teens growth again in EPS.
Gotcha. Thanks, guys.
Thank you. Our next question will come from Timothy Chiodo with Credit Suisse. Please go ahead.
Great. Thank you. Good morning. Thanks for taking this question. It's on the embedded finance opportunity. You talked a lot about addressing this with new platforms and expansion into SMB and e-com. Maybe you could talk a little bit about the opportunity for embedded finance with your existing book of software partners through the traditional integrated payments business. As a follow-up, maybe you could just give us an update on the number of software companies that you're already working with through that business. I understand it's a pretty large absolute number and a good starting point.
Yeah, no, great. It's a great question. Happy to chat. Our existing ISV business, we have about 1,000 partners there. In order for us to really enable embedded finance, we needed automated onboarding and underwriting capabilities, because you don't do that as a one-off, you do that really automated. That's what the Payrix acquisition brings to us, is those capabilities. We've been partnered with them. They've been integrated to us using our best-in-class acquiring payment capabilities since they started in 2015. They bring that automated onboarding and underwriting, and you're exactly right. We can offer out now that capability to our existing ISV base to the extent it's relevant to them because as you know, it's vertical specific in terms of if this capability works for you.
It is an opportunity to go through our existing base. As you know, our strategy has been software-led. You know, now the current market, the current term for that is platforms. Our strategy within SMB has always been software-led, dating way back to when we bought Mercury. The acquisition of Payrix really starts to strategically pivot us, continuing our software-led strategy, but now getting us to access our e-commerce capabilities and our embedded finance capabilities. We're pretty excited about it, both in terms of being able to access the platforms that sit in market we can't serve today because we didn't have the CNP capabilities, but also to go back through our existing ISV base and offer out these capabilities as well, including not just payments, but also embedded finance. Really excited about it.
Great. Thank you.
Thank you. Our next question will come from Lisa Ellis with MoffettNathanson. Please go ahead.
Hi.
Sure. No, thanks for taking my question. I wanted to follow up on the announcement you made around AuthMax Preferred. You had highlighted this capability, I recall, at the time of the Worldpay acquisition, the ability to connect the issuer processing side and the acquiring side together to offer this differentiated solution. Can you just maybe dimension a bit how we should think about kind of what portion of either the TAM or your existing customer base this type of capability is applicable to and kind of what opportunity that could drive for FIS?
Yeah. Lisa, it's a great question. I'll start. We'll let Stephanie add in on this. At the end of the day, I mean, this is a fantastic product that's not specifically, it's good for all of our merchants, but our e-commerce merchants really are gonna like this solution. As you pointed out, this was an area that we thought there was a unique opportunity for as we put the companies together. The team has successfully come together. There was a lot of work here in getting these two data streams together and really being able to tie all this together. Successfully launched this in very late Q4. As we highlighted, Netflix, very early adopter of it. You know, we really can see some significant improvement in decline rates.
When you're, especially in, you know, the e-commerce world, that decline rate's very, very important to manage that and to make that as strong as possible in order to drive onboarding growth. I think we'll see a lot of demand early on from our e-com merchants, but it'll push down into all of our merchant capabilities as just another way for us to differentiate the strength of FIS going forward. We just launched it in late Q4 and it's just coming online, so we're excited about the future of it.
Yeah, I think it's very relevant, as Gary said, for our global e-commerce clients. The power of having issuing and acquiring data together is very powerful. I also think, you know, I keep beating this drum on platforms, but I also think that it's really relevant for platforms that serve SMBs or marketplaces because as Gary said, you know, they're really about driving those businesses' revenue. Being able to authorize a transaction or more transactions is really relevant to them. It drives revenue to the end business. We think it not only is really relevant for our global e-commerce space, but also for really any software as a service platform or a marketplace out there who's really trying to help SMBs deliver more revenue to their end customers.
Mm-hmm. Okay, my follow-up was gonna be on the SMB e-com strategy that you highlighted on the right-hand side of slide 10. You know, you highlight at the bottom attractive new TAM opportunity, and I know SMB is an area where FIS has historically not been a huge focus. Can you just elaborate a bit here on what you're gonna be doing differently to really differentiate FIS in this space, you know, relative to
You know, some of the more, I guess, vertical specific like PayFac and other players and, you know, and what's a pretty competitive space with a lot of the players maybe coming up from the very small end of that market. Thank you.
Yeah. Really it's all about we do believe that software payments is going to be embedded in software. Software is how payments are gonna be consumed. Whether you're getting a payment through a platform or through a marketplace, we do ultimately see software being the leading capability for that. Which is why we bought the Payrix asset. Lisa, we're starting with platforms, the software-led piece, and then we're giving ourselves some optionality around SMB direct. Our strategy is really around enabling those software as a service platforms to enable their SMBs long term. We do see vertical specific strategies. As you know, we haven't been a buyer of software. We don't think that's the right answer for us. We think the right answer for us is to be the embedded finance and payments player for all those software-as-a-service companies.
You can really start to see there's a lot of niche players that are coming up and providing all kinds of as-a-service capabilities to these platforms, payments as a service, checkout as a service, risk as a service. You know, we see in the midterm we stand perfectly positioned to deliver those types of services. We're just starting with what we have in-house, which is payments and banking as a service solutions. But we don't see these platforms long term wanting to have that many vendors and that much complexity in their back office. Hopefully that helps.
Yep, super helpful. Thank you.
Thank you. We do have time for one last question. That will come from Tien-Tsin Huang with JPMorgan. Please go ahead.
Hey, thanks so much. Good morning. I just wanted to follow up on Tim and Lisa's question here and what you said there, Steph. By the way, congrats on the title change. I'm happy for you. Just on the integrated versus embedded payments sort of strategy change, just thinking about the back book and now the front book of how you're describing it, what are the implications there for revenue? You know, can those two coexist? I'm just trying to understand how that transition plays out here.
Great question, Tien-Tsin. I think, you know, the world started with integrated. I think as software pushed down market, and became much more competitive, the world has moved and evolved to embedded. Those platforms, the integrated solution will always be available, but it's a bit of an evolution, which is now we need an embedded B2B payments capability. Then I think you're even the next gen as well is embedded fintech. I don't envision embedded payments lives by itself very long either. I do think you're seeing the world converge on embedded fintech. I think the nice thing about the Payrix acquisition for us is it enables us to give any model people want. Some people might be really happy with their integrated solution in that model.
We now have the embedded payment solution in that model, and as you know, we have a PayFac solution in that model. We do have a pretty significant back book of card present ISVs, and we're pretty excited about it because we think that we can now offer out embedded capabilities. Remember, along with these embedded capabilities, beyond onboarding and underwriting, there's also all kinds of other à la carte services we can offer, like KYC, credit risk monitoring, a lot of capabilities that these platforms have been looking for. But we do have to keep a close eye out on the financials around that, but we think we're pretty good at that, and, we're excited about the opportunity both for front book and back book.
Gotcha. No, it's good to have the full spectrum, so. There's not one solution that fits everyone. I think I appreciate that. I know we're at an hour here, but I wanted to ask one on margins, if you don't mind. Just, you know, you're guiding a little bit more expansion than what we had expected. Do you have enough room to invest and make the push towards some of these, you know, for the platform side as well as implementing the back book, which sounds like the bookings were quite good? Just curious around the balance of investing, integrating versus, you know, playing out the normal margin expansion. Thank you.
Yeah. Thanks, Tien-Tsin. It's a great question. You know, we always try to balance margin expansion versus investment. You know, we haven't pulled back on our capital as well. The synergies and the level of synergies that we've able to push through and the operating leverage within the business allows us to continue to invest but to still drive that margin expansion, even in light of higher labor costs this year. We feel good about having enough money to invest and having enough resource focus towards that investment. You also, while we talked about CapEx maybe not being quite as high as it has been in the past, we still have a good bit of CapEx, call it, you know, 8% of revenue, outlined to build out some of this capability Stephanie's talking about as well.
We think we're properly resourced and feel good about being able to deliver these capabilities that'll help drive revenue growth in 2023 and 2024 and beyond.
Great. Thank you.
Ladies and gentlemen, thank you for participating in today's question and answer session. I would now like to turn the call back over to Mr. Gary Norcross for any closing remarks.
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 2022 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 I hope you enjoy the rest of your day. Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.