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Ladies and gentlemen, thank you for standing by, and welcome to today's ACI Worldwide reports third quarter earnings conference call. [Operator Instructions]
It is now my pleasure to turn today's program over to Mr. John Kraft. Sir, the floor is yours.
Thank you, Grace, and good morning, everybody. Today's call, like all of our events, is subject to both safe harbor and forward-looking statements. You can find the full text of both statements on the first and final pages of our presentation deck today, a copy of which is available on our website as well as with the SEC. On this morning's call is Phil Heasley, our CEO; and Scott Behrens, our CFO.
But before I turn it over to Phil, I'd like to let folks know about several upcoming investor events. We will be attending Citi -- Citibank's 2018 Financial Technology Conference in New York next Monday and Tuesday, November 12 and 13. We will then host our annual Analyst Day in Naples, next Wednesday, November 14. Later this month, we will be attending the Crédit Suisse 22nd Annual Technology, Media & Telecom Conference on Tuesday, November 27. ACI will be hosting an additional and similar analyst event in London, Thursday, November 29. And lastly, we will be attending Bank of America Merrill Lynch's 2018 Leveraged Finance Conference in Boca Raton on December 5. With that, I'd like to hand it over to Phil.
Thanks, John, and good morning, everyone. I’ll spend the next few minutes providing deeper insight into quarter 3. I’ll focus my comments on the customer and market trends through the lens of ACI's 2 P&Ls, 6 solutions and 4 customer segments by sharing key customer wins that highlight our global traction. I will then turn the call over to Scott for the financial review. Jumping right in, I'm pleased to report that our quarter 3 revenue growth and EBITDA growth were ahead of expectations and have allowed us to raise our full year 2018 guidance. Bookings are up year-to-date and with the strong and exciting pipeline of new business across all 4 target segments, we remain optimistic for the rest of 2018 and beyond. In a moment, I'll highlight key new contracts and renewed strategic relationships, and we will now begin with a quarter 3 recap. Year-to-date new bookings were up 27% and total bookings were up 25%. UP renewals to our new technology are a major element of this bookings growth. Both of our P&Ls, ACI On Premise and ACI On Demand, are performing well. In our ACI On Premise business, quarter 3 revenue was up 12% from last year. This growth is the result of key global trends around payments modernization, open banking and real-time payments. Additionally, we once again continued our virtually 100% adoption rate for customers renewing in the UP Retail Payments solution, or RPS, program. We also continue to see considerable global demand for our Real-Time and Immediate Payments Solutions. We are working closely with PayNet, the national financial market infrastructure provider for Malaysia. PayNet would -- utilize as our UP Immediate Payments solution, expects to launch its paid proxy service known as Do It Now to the public next month. Separately, we also announced a major go-live with BMO Financial Group achieved in just 9 months. Additionally, another long-term ACI customer, which is a subsidiary of a major global bank customer has selected our UP Real-Time Payments solution, which would be used to process wires. Moving on to our ACI On Demand business, quarter 3 revenues increased 5% from last year. A key driver of growth is global merchant demand for our highly secure platform-based e-commerce and omni-channel payment solutions. An example is one of the largest global merchant apparel brands, the company selected ACI's Payment Fraud Management solution as part of its global e-commerce and omni-channel strategy. Within ACI On Demand, we also continue to see strong traction for Bill Payment Solutions among vertical markets in the U.S. such as higher education, consumer finance and health care.
I also want to reiterate the continued traction we're seeing in the market due to our 6421 approach. To recap the 6421, we match our 6 software-based payment solutions: retail payments, real-time payments, payments intelligence, merchant payments as well as bill payments and digital channels to the market needs of 4 target segments: banks, intermediaries, merchants and corporates, delivered through the flexibility of our 2 licensing models in ACI On Demand and ACI On Premise and leveraging our one ACI global team intellectual property. 6421 further transitioned as I highlight some of the more significant contracts we signed in quarter 3 across our 4 customer segments. I'll start with the banking segment where we closed several major contracts.
ABN AMRO, one of the top 3 retail and corporate banks in The Netherlands, signed a renewal contract to use UP Retail Payments as part of its agile banking transformation. Another leading global bank has extended its licensing relationship with ACI to include the UP Framework and will continue to work with us in 2019 to define its ATM processing strategy. Itaú, the largest private bank in Brazil, with strong and growing presence across Latin America and other key global market, selected ACI's UP Payment Risk Management solution to provide multi-dimensional fraud monitoring through a 360-degree view of events. ACI helps the bank to prevent fraud and money laundering across all its businesses from a single solution.
Moving to the intermediary segment. Some of our key wins included Stet, one of the largest automated clearinghouses in Europe, selected ACI's cloud-based UP payments to jointly deliver a new service to its member banks as a single view for SEPA-wide instant payments. Supporting 17 banks across Hungary, T-Systems selected ACI's UP Immediate Payments solution to interface into the local Hungarian immediate payments scheme. DXC Technology, the world's leading independent and IT services company, has extended its relationship with UP payments supporting a leading Canadian bank. High Payment Solutions, HPS, a Mongolian payment processor, selected ACI's UP Immediate Payments and UP Merchant Payments solution as it builds the country's national payment hub. HPS will link more than 14 banks in the country and will expand to billers, e-commerce and merchants with international e-commerce connections.
Moving to merchants. This segment continues to see increased global adoption of platform-based omni-channel and e-commerce solutions such as global -- such as the global apparel merchant I mentioned a few minutes ago. In addition, [ CONS ], one of the top consumer goods retailers in the U.S., selected UP Bill Payments to replace manual labor intensive billing processes through increased digital relationship with its customer.
And finally, I'll turn it to the corporate segment, where we're seeing more organizations moving their bill payment infrastructure to platform. Key wins include Maricopa County, the fourth largest county in the U.S. in terms of population, a long-time customer of our UP Bill Payments solution, they've extended their relationship with ACI through middle of 2022. EnerBank, a leading U.S. home improvement finance company for contractors, selected ACI's UP Bill Payments solution for onetime payments, recurring payments, e-bill printed statements and text to pay. One of the oldest and largest financial services firms in the United States bringing its previously outsourced student loan portfolio in-house, utilizing ACI's UP Bill Payments solution for repayment to those student loans. In addition to the continued customer traction for our UP solutions, the industry is also taking notice. I wanted to mention recent recognition received from industry analyst community. We were named a leader in the Forrester Wave for global merchant payment providers. ACI received the highest possible score in criteria of omni-channel solution vision and market presence category. We were the only nonacquirer in this comparative report and we’re highlighted for providing vast global reach with superior flexibility. Our digital banking platform, Universal Online Banker, was recognized as best-in-class by Aite in its recent cash management, a benchmarking study. The comparative report noted that the Universal Online Banker showed strength and has breadth of functionality and had the best open API enabled architecture providing greater flexibility and a new modern interface. As I conclude, based on the momentum we’re seeing, I wanted to reiterate that we’re very optimistic as we close out our fiscal year. With that, I'll pass the baton to Scott to provide his quarter 3 financial commentary and longer-term outlook. Thank you.
Thanks, Phil, and good morning, everyone. I’ll first go through the highlights of the third quarter and then provide an update on our outlook for the rest of 2018. We'll then open the line for questions. I'll be starting my comments on Slide 6 with key takeaways from the quarter. Q3 was another solid quarter for us with total bookings up 37% over Q3 last year, which brings us to 25% growth year-to-date. New bookings were down on a quarterly basis but up 27% year-to-date, and we continue to expect full year new bookings growth to be in the low double digits. Our 12-month and 60-month backlog declined $7 million and $112 million, respectively, which is not unusual just prior to the heavy bookings quarter we normally see in Q4. We saw strong revenue growth with Q3 revenue of $246 million, up 9% over Q3 last year. Revenue from our On Premise segment was up 12% over last year while revenue from our On Demand segment was up 5% over last year. This revenue growth contributed to strong EBITDA growth, up 28% over last year. Our On Premise segment EBITDA margin was 55%, up from 52% last year, and our On Demand segment on its path to improved profitability saw EBITDA margins of 5%, up from a negative 2% last year. In Q3, we generated $21 million of free cash flow, up significantly from the $4 million generated in Q3 last year. We ended the quarter with $76 million in cash and a debt balance of $689 million. Also, during the quarter, we refinanced our long-term bonds at a lower interest rate and an 8-year tenor strengthening our financial position and giving us greater flexibility to invest in future growth opportunities. Turning next to Slide 7 with our outlook. As a reminder, effective January 1 of this year, we adopted the new revenue recognition standard, ASC 606, which replaces ASC 605 and have been presenting our key financial results on both the new and old basis for all of 2018. Given the outperformance in Q3 and the mix and timing of our new bookings and renewal activity for the rest of the year, we are raising our full year guidance under ASC 606. We now expect results for the year to be similar under both ASC 605 and 606. So for the full year 2018, we expect revenue to be between $1.05 billion and $1.075 billion and adjusted EBITDA to be in a range of $270 million to $285 million. And as I mentioned earlier, we continue to expect new bookings growth to be in the low double digits for the full year of 2018. And based on how we’re positioned as we exit the year, we’re comfortable reaffirming our longer range outlook for 2019 and 2020 EBITDA. So that concludes my prepared remarks.
Operator, we are ready to open the line for questions at this time.
[Operator Instructions] And our first question came from the line of Peter Heckmann from Davidson.
Nice results. Lot of information there on new clients. Can you talk a little bit about specifically 2 niches, I may have missed them, but within the merchant space, whether it's e-commerce or the gateway, so many things that are working there and then as well give us an update on fraud. How are those 2 contributing to growth year-to-date?
Well, merchant omni-channel and our merchant platform offerings are doing extremely well on a year-to-year basis. And of course, payment intelligence fraud is an important piece of it. We are seeing very good interest from a pipeline and actually from beginning to go-live with some of these omni-channel customers who have that doing business with their customer as the hub, as the denominator of their business. It's going very -- it's beginning to go very, very well. We're beginning to see, whether you call them merchants or whether you call them corporates, more and more companies are selling directly to people who love their brands and that's really -- that's wind behind our back in terms of being able to give them the capabilities they need to accomplish that.
Okay. That's helpful. And then I think your guidance for new business bookings for the year is still to be up in the low double digits. If my numbers are correct, it looks like through the first 3 quarters, you're up around 26%, 27%. So does that perhaps imply that your guidance could prove conservative? Or maybe you're expecting a bit of a softer fourth quarter?
No, I would say we’re comfortable with the guidance. Your math is right in terms of the year-to-date new bookings and I think we're comfortable kind of in line with that for the year.
And the next question comes from the line of George Sutton from Craig-Hallum.
Great results, guys. So Phil, it feels like a bit of a statement quarter from my perspective, particularly when we look at things that we've been looking for, for a long time like On Demand margins really starting to kick in. You've talked for a long time about large transformational deals, I'm curious, is this the start of what we're seeing in terms of those? Or are these just more garden variety wins from your perspective?
Well, I think sometimes the market underestimates the value of -- we had the industry-leading solution in the old technology. Instead of trying to catch the falling knife, we tried to make a spear out of it and transform it to a new technology. With virtually 100% renewal rate into our new technology, I think we feel what would be a very, very big deal for other “competitors” and whatnot is a very, very good deal for us, both securing our historic business as well as getting that 25% to 30% growth on top of it by being able to do a lot more for our customers with our new real-time, agnostic, low-cost solutions that meet the type. So yes, I do think that -- I do think and I think the embrace by the omni-channel is very, I think we would be viewed very differently if all we did was omni-channel. Now if you look at the other players that were up in that quadrant with albeit, they're mostly acquirers and lot of them are our customers which is a double complement to us. I think we're feeling very good, George.
Got you. On the immediate payments side, and I don't want to steal thunder from your Analyst Day, but you talked about Malaysia. I'm curious, if you can give us a bigger picture, thought process over the relative near term with prospective markets like India and Brazil and Indonesia and Canada, et cetera.
Well, I think we can give you a lot better framework next week because we're going to go through it, the level of detail. But probably, I don't know the exact number, but we're probably up to 85%, 90% of global GDP is embracing immediate, instant, whatever they want to call it, payments and they’re understanding this e-commerce world that we live in and it also has a lot less risk on a bank-to-bank basis than traditional delayed payments. So be it Australia, be it -- we talked to you about Mongolia, whether it's Malaysia, whether it's Great Britain, the United States, Canada, we're involved in an awful lot of these and the nice thing is they're beginning to come to market as – first, you got to sell them then you've got to implement them, then you got to go-live and then you've got to get the volumes from the go-live. So it's nice that we're covering the whole spectrum right now from having a good pipeline to beginning to see real transactions come out the other side.
We don't have any questions at this time. I will turn the call over back to the management for any closing remarks.
Well, thanks everybody for dialing in. We look forward to seeing folks at the coming events and at our Analyst Day. Have a good day.
Ladies and gentlemen, we thank you for your participation. This concludes our conference for today. You may now disconnect. Have a great day.