Nathan Andrew Winters
Chief Financial Officer at Zebra Technologies
Thank you, Anders. Let's start with the P&L on slide six. In Q2, adjusted net sales increased 44.4%, including the impact of currency and acquisitions and 39.8% on an organic basis, reflecting broad-based demand for our solutions from customers of all sizes. We realized particularly high growth from our run rate business through the channel, partially driven by pent-up demand, while continuing to see strong growth in direct sales to large customers. Our Asset Intelligence and tracking segment, including printing and supplies, grew 51.2%, while enterprise visibility and mobility segment sales increased 35.1%, driven by exceptional growth across all major categories, including enterprise mobile computing and data capture.
Note that we also realized double-digit growth in services and software, along with very strong growth in our RFID solutions, for which deployment activity has snapped back as customers recover from the pandemic. We recognized double-digit growth in all regions. In North America, sales increased 39% with all major categories growing double digits. In EMEA, sales increased 44% with solid growth across subregions and solutions offerings. APAC again realized strong growth with sales up 20%, led by strength in China, Australia, India and Japan. Latin America also continued its recovery with exceptionally strong growth in all subregions with sales increasing 79%. Adjusted gross margin expanded 390 basis points to 48%, primarily driven by favorable business mix, a $12 million recovery of Chinese import tariffs, higher support service margins and contribution from our recent high-margin acquisitions.
These benefits were partially offset by higher premium freight charges, which we'll discuss further in a moment. Adjusted operating expenses as a percentage of sales improved 180 basis points. We continue to scale opex while prioritizing high-return investments in the business. Second quarter adjusted EBITDA margin was 23.6%, a 530 basis point improvement from the prior year period, reflecting higher gross margin and operating expense leverage. We drove non-GAAP earnings per diluted share of $4.57, a $2.16 or 89.6% year-over-year increase. EPS growth also benefited from lower interest expense, partially offset by a slightly higher tax rate.
Turning now to the balance sheet and cash flow highlights on slide seven. We generated $514 million of free cash flow in the first half of 2021. This was $192 million higher than the prior year, primarily due to increased profitable growth. In Q2, we acquired Adaptive Vision for $18 million to advance our machine vision solutions and made $4 million of venture investments. In addition, we also repurchased $25 million of Zebra shares. Our balance sheet remains strong. From a debt leverage perspective, we ended Q2 at a modest 0.6 times net debt-to-adjusted EBITDA leverage ratio, which affords flexibility to invest in attractive business acquisitions.
On slide eight, we show the multiyear impact of transitory costs, primarily related to expedited freight due to supply chain bottlenecks caused by the global pandemic as well as tariffs on China imports. For the second half of the year, we now expect the year-on-year unfavorable impact from these items to be approximately $85 million, which translates to a three percentage point negative gross margin impact. Our supply chain team has been taking extraordinary actions to satisfy customer demand in an exceptionally challenging global environment. Global freight costs for virtually all modalities of delivery across our supply chain continue to escalate.
Impacts include higher global shipping cost per kilo, a shift in modality from ocean to airfreight as well as increased cost to expedite component parts to our Tier one manufacturers in order to meet customer commitments. We expect premium freight costs to abate once component supply and freight capacity improves. Let's now turn to our outlook. The pandemic has accelerated trends that have been driving our business, including omnichannel shopping adoption, the desire for track and trace across the supply chain and the need for more digital health care experience. We entered Q3 with a strong order backlog, and we continue to see broad-based robust demand across virtually every dimension of our business.
This momentum, along with our sales pipeline, gives us the confidence to provide a strong Q3 guide and substantially raise our full year outlook. In Q3, we expect adjusted net sales to increase between 21% and 25% year-over-year. This outlook assumes a three percentage point additive impact from the acquisitions and foreign currency changes. We anticipate Q3 adjusted EBITDA margin to be between 20% and 21%, which assumes gross margin expansion and operating expense leverage from the prior year. It also assumes approximately $45 million of premium freight expense, which is $37 million higher than last year. We are also experiencing higher product component costs, which we expect to largely offset with recently announced price increases. Non-GAAP diluted EPS is expected to be in the range of $3.90 to $4.10.
For the full year 2021, we are raising our guide for adjusted net sales growth to be between 23% and 25%, which reflects our increasing optimism for strong growth in the second half of the year despite significant industry supply chain constraints for certain product components as well as transportation bottlenecks. This outlook assumes an approximately three percentage point additive impact from acquisitions and foreign currency changes. Despite our significantly increased expectation for transitory premium freight charges that we just highlighted, we are maintaining our expectation of full year 2021 adjusted EBITDA margin to be between 22% and 23%, which assumes operating expense leverage and gross margin expansion from the prior year.
We now expect our free cash flow to be at least $900 million for the year due to increased profitability. Please reference additional modeling assumptions shown on slide nine. Note that our outlook does not include any projected results from the pending acquisition of Fetch Robotics. Anders will discuss the strategic acquisition in a few moments. With that, I'll turn the call back to Anders to discuss how we're advancing our Enterprise Asset Intelligence vision in new and existing markets.