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NCR (NYSE: VYX)
Q3 2024 Earnings Call
Nov 07, 2024, 8:00 a.m. ET
Prepared Remarks Questions and Answers Call Participants
Operator
Good day, ladies and gentlemen, and welcome to the NCR Voyix third-quarter 2024 earnings call. Our host for today’s call is Alan Katz. [Operator instructions]. I would like to now turn the call over to your host.
Mr. Katz, you may begin.
Alan Katz — Vice President, Investor Relations
Good morning, and thank you for joining our third-quarter 2024 earnings conference call. This morning, we issued our earnings release reporting financials for the quarter ended September 30, 2024. A copy of the earnings release and the presentation that we will reference during this call are available on the investor relations section of our website which can be found at www.ncrvoyix.com and have been filed with the SEC. With me on the call today are David Wilkinson, our chief executive officer; and Brian Webb-Walsh, our chief financial officer.
This call is being recorded, and the webcast is available on the investor relations section of our website. Before we begin, please be advised that remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors.
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Please refer to our earnings release and our other reports filed with the SEC. We caution you not to place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. In addition, we will be discussing and providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance.
For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit on Form 8-K filed this morning and their supplemental materials available on the investor relations section of our website. With that, I would now like to turn the call over to David. David?
David Wilkinson — Chief Executive Officer
Thanks, Alan, and good morning, everyone. I would like to welcome all of you to our third-quarter 2024 earnings call. Before I begin, I’d like to welcome our newest executive vice president, Darren Wilson, to NCR Voyix. As you saw in our press release, Darren has joined to lead our international retail and restaurant businesses, primarily in Europe and Asia Pacific.
This new leadership position will allow us to focus on expanding our international presence in restaurants and retail. I’ll now spend a few moments discussing our recent progress on the digital banking and hardware transactions announced in August before commenting on our recent business performance and the company’s go-forward objectives. Brian will then review our financial results for the quarter and our outlook for the remainder of the year. Beginning with digital banking, we completed the sale on September 30, ahead of expectations.
This was an important step in our plans to simplify the business and significantly improve our balance sheet with $2.45 billion in gross sale proceeds. After estimated taxes and fees of $437 million, we utilized approximately $1.8 billion of proceeds to reduce our indebtedness. Further, positive impact of these actions reduced our annual cash interest expense by approximately $95 million. Of the remaining proceeds, the company intends to utilize approximately $100 million to complete repurchases of common stock under its existing share repurchase program, which is an aggregate repurchase authority of up to $153 million and has been previously outlined in our public filings.
We believe this is the best use of proceeds given our current valuation. Brian will discuss the details of the remaining proceeds allocation later on the call. For hardware, we anticipate the agreement to become effective by year-end and will provide Ennoconn certain transitional services until they are fully operational in 2025. In connection with the transaction, we have jointly notified our affected employees who will be part of the new organization.
As a reminder, we will continue to sell hardware to our customers as a sales agent and earn a commission on the sale. But all other aspects of the contract, including design, manufacture, delivery and warranty will be fulfilled by Ennoconn. Turning to our third-quarter performance. On a normalized basis, total revenue for the quarter was $708 million, a decline of 11%, driven primarily by lower hardware and hardware-related installed services.
Software and Services revenue was flat when excluding the adverse impact of a onetime software true-up from the prior year. Normalized adjusted EBITDA for the quarter was $101 million, driven by cost actions taken in the second quarter, coupled with sales mix. As of the third quarter, we had approximately 70,000 sites on our cloud-native commerce platform, an increase of 25% from the prior year. Software ARR and total segment ARR increased 2% in the quarter.
Turning to our restaurant segment. In the third quarter, we continued to demonstrate momentum, signing more than 230 new software customers and increasing our platform and payment sites by 4% and 12%, respectively. Software ARR and total ARR both increased 1% in the quarter. Within our enterprise division, we executed 11 renewal and expansion agreements for both software and services solutions.
These included converting existing software customers representing more than 350 sites to our cloud-native commerce platform. For example, we converted Cafe Rio and Aloha user to the platform at the time of renewal. We also expanded our platform contract with Hungry Jack’s to now include our value-added solution. Under our new agreement with Hungry Jack’s, we will provide loyalty solutions for nearly 500 sites across Australia.
For services, we renewed and expanded our long-standing health desk contract with a global coffee chain this quarter. We have extended our monitoring assistance services to their shops in Latin America while continuing to service their existing site base in the US and the UK Finally, we continue to execute against our payments attach strategy, both for enterprise and mid-market restaurants. This quarter, we expanded agreements with two existing enterprise software customers to provide end-to-end payment capabilities across nearly 40 sites. In our mid-market business, our payments attach rate remains strong with 97% of new customers attaching payments to their point-of-sale contracts in the third quarter.
As we move into 2025 and implement our new sales strategy to drive growth, we will focus aggressively on cross-selling payments into our existing base. Turning to our retail segment. This quarter, we signed two new enterprise customers and more than five mid-market customers, leading to nearly 3,000 additional sites. We increased our platform sites by 47% as we continue to convert on-premise customers and onboard newly signed customers.
Software ARR increased 2% and total ARR increased 3% in the quarter. In enterprise, we signed a new multiyear software and hosting services agreement with Endeavor Group, Australia’s largest retail drinks network. We will deliver our cloud-hosted point-of-sale software, hosted loyalty solution, store insights and edge infrastructure via our commerce platform for over 4,000 lanes across more than 1,600 sites. In addition, we will provide professional and implementation services for Endeavor Group.
We also demonstrated traction in our mid-market business this quarter, signing a new multiyear software and services agreement with Speedy Stop, a regional convenience and fuel chain in the US Under the agreement, we will deploy our point of sale and self-checkout software in addition to our edge infrastructure on Speedy Stop’s existing third-party hardware devices which will be able to significantly reduce their downtime and improve reliability. This win reflects our early success in our new go-to-market strategy. Lastly, we renewed and expanded our agreement with a large US specialty closing store. In addition to converting this point-of-sale software customers to our cloud native commerce platform, we will also provide our loyalty and marketing solutions for their entire store footprint, which spans more than 1,500 lanes across 400 sites.
Before I turn the call over to Brian, I would like to elaborate on my comments related to our go-to-market approach for next year. While much of the first half of 2024 was consumed with executing two major transactions for the company. The sale of the digital banking business and our hardware ODM agreement, a parallel restructuring effort was also underway to address top line software and services group. Prior to 2024, the company’s sales strategy was partial toward cross-selling and upselling the base versus attracting and signing new software and services customers.
We have now aligned our focus to drive balance between upselling existing customers and capturing market share through new customers. Additionally, we have taken various steps to better align our organization to drive long-term growth in 2025 and beyond. The five key revenue growth actions underway are as follows: First, beginning in 2025, we will have restructured our sales teams and implemented a revised incentive compensation plan to address new customer growth and to expand market share across our channels. Second, to support our go-to-market sales efforts, we are using a portion of the digital banking proceeds to invest in our solution sets for both restaurants and retail, which will accelerate our speed to market for our enhanced cloud solutions and enable us to capitalize on growth opportunities.
Beginning in Q1, we will expand Aloha Cloud to a broader segment of the domestic restaurant market. During the year, we will continue to add feature rich capabilities to our Aloha platform. In retail, we are investing in edge and next-gen point-of-sale and sub-checkout software solutions to acquire new customers and accelerate our efforts to migrate our existing customer base. This acceleration will free up engineering resources managing legacy solutions to be redeployed elsewhere, lower our future capital spend and enable stickier customer relationships over time.
Third, we’re launching an aggressive program to expedite the contract renewals for existing customers while also converting their legacy software to our market-leading cloud solutions. This will be a multiyear initiative, which has been well received thus far. The fourth and fifth pillars of our growth strategy relates to changes we have made to strengthen our senior organization, which will be critical to our sales execution, product delivery and customer satisfaction. Beginning with executive leadership.
As I stated earlier, Darren Wilson has been appointed president, international. With Darren leading our businesses in Europe, Japan and Asia Pac, it will also allow us to have enhanced attention on our largest market, the Americas, as we focus on driving growth and expanding market share. And finally, we have attracted additional proven leaders to fill key roles across the broader organization. Since Q2, we have replaced the three sales leaders in our US restaurant segment, hired a proven head of development for our retail product group and most recently added a seasoned payments professional to lead our expanded payment initiative next year.
In summary, while work remains, we have advanced plans to align our resources, products and incentives to position the company to return to growth. With that, I will turn it over to Brian.
Brian Webb-Walsh — Chief Financial Officer
Thank you, David, and good morning, everyone. With the sale of digital banking, our full year results will reflect only the continuing operations of our retail and restaurant segments. Digital banking will be reflected as discontinued operations. We will continue to support the digital banking business on a transitional basis for up to two years from closing.
My comments today will focus on our normalized results which exclude the impact of the digital banking divestiture, along with spin-related items and other completed divestitures. For the quarter, reported revenue was $711 million, and normalized revenue was $708 million reflecting a decline of 11%, driven primarily by an unusually weak year in hardware sales. Reported and normalized software revenue was $245 million, which decreased 2% versus prior year but increased 2% when excluding the onetime software true-up from Q3 2023. This increase was driven by attachment to the cloud-native platform.
Reported and normalized services revenue was $271 million which decreased 3% due to lower hardware installations. On a normalized basis, adjusted EBITDA for the quarter was $101 million, while EBITDA was lower versus prior year due to spend related to synergies we demonstrated a sequential improvement from Q2. We will lap these dyssynergies in Q4, however, at which point we expect to show growth year over year. As reported adjusted EBITDA of $93 million was adversely impacted by $6 million of stranded costs related to digital banking that did not qualify for discontinued operations and $2 million from delayed country exits related to the spin.
Adjusted EBITDA margin was 13.1% as reported and 14.3% on a normalized basis. Let’s turn to our segment results for the quarter. Beginning with restaurants, reported and normalized software revenue was $87 million, which was flat to prior year. Reported and normalized services revenue was $75 million, down 1%.
Total segment revenue of $211 million declined 7% on a normalized basis, reflecting the continued declines in hardware. Adjusted EBITDA of $66 million increased 27% and margin of 31.3% expanded more than 800 basis points on a normalized basis. This was primarily driven by increased efficiencies and sales mix. Turning to retail, reported and normalized software revenue was $153 million, which declined 3% due to the onetime software true-up of $10 million in Q3 2023, excluding this impact, software revenue increased 3%.
Services revenue was $193 million, a decrease of 3% due to lower onetime hardware installation services. Total revenue in retail declined 12% on a normalized basis due to a 28% decline in hardware sales. Adjusted EBITDA of $108 million declined 12% and margin of 22.2% was flat on a normalized basis, driven by hardware declines in the onetime software true-up. Excluding the impact of a true-up adjusted EBITDA declined 4% and margin expanded 140 basis points.
Lastly, normalized corporate and other expenses for the quarter were $73 million, which included $21 million of spend related to synergies. Turning to the sale of digital banking. As we announced on September 30, the company completed the sale receiving $2.45 billion in gross proceeds. In conjunction with the closing, we utilized $1.84 billion to pay down our debts as follows: $1.195 billion was used to pay down a portion of the bonds, $192.5 million to pay up our term loan A and another $200 million was used to pay down the revolving credit facility.
And finally, $251.5 million to pay off our accounts receivable facility. We ended the quarter with 1.6 times net leverage based on the $430 million of pro forma 2024 adjusted EBITDA we shared on our last call. This leverage calculation excludes $375 million of cash for estimated digital banking-related cash tax payments. Our net leverage has significantly improved since the second quarter, at which point our leverage was 4.1 times.
For the quarter, free cash flow with a use of $25 million which included approximately $80 million of fees related to the digital banking transaction and other strategic initiatives. Following the debt paydown subject to market conditions, we intend to use approximately $100 million of the proceeds from digital banking to complete the repurchase of common stock under our share repurchase program. In addition, the sale proceeds allow us greater opportunity to invest in our solutions to support the strategic objectives David described earlier. We have allocated up to $20 million over the next one to two years to accelerate the launch of our next-gen cloud solutions to achieve our go-to-market initiatives.
Turning to our outlook. We are maintaining the 2024 revenue and EBITDA guidance provided on our Q2 call. While we were modestly ahead of expectations in Q3 on both revenue and adjusted EBITDA, this was due to timing. We continue to expect revenue for the year to be between $2.805 billion and $2.860 billion and adjusted EBITDA to be between $355 million and $375 million.
As a reminder, we will reinstate free cash flow and adjusted EPS guidance in 2025. Before I conclude, I’d like to draw your attention to the supplementary pro forma information we have provided in connection with our earnings materials today. This information contains year-over-year comparisons to assist with modeling the company on a go-forward basis. Our 2025 performance will be compared to these pro forma 2024 results.
The 2024 pro forma financials include $170 million of free cash flow. This does not include the $20 million of proceeds that we are allocating toward NextGen product acceleration nor does it include the working capital benefit from the ODM model. Our ODM model frees us off from purchasing finished goods inventory, which at the end of the third quarter was $89 million. This benefit will start in January 2025, where the ODM agreement is expected to become effective.
With that, I will turn the call over to the operator to begin the question-and-answer session. Operator?
Operator
[Operator instructions] Your first question comes from Mayank Tandon with Needham. Your line is open.
Mayank Tandon — Analyst
Thank you. Good morning. David, I wanted to just touch on the platform strategy since I know that’s been a big focus for you, and you highlighted several conversions. So if I have my numbers right, I think you’re at about 20% in terms of platform across both retail and restaurants.
I just wanted to get a sense on how do you drive that conversion up over time. What’s the realistic target based on customer feedback as you’ve been having these conversations with customers? And then maybe you could square that with the impact on the P&L relative to the more traditional model of selling hardware, software and services?
David Wilkinson — Chief Executive Officer
Good morning, Mayank, the platform strategy, as we’ve described in our previous releases and what we’ve seen in the results in terms of the platform side growth is performing. Well, it’s really a couple of things that we’re driving. As customers need new capabilities, all the new capabilities that we’re delivering through our platform. So when we do the platform attached, we’re not only seeing increased customer satisfaction and their ability to upgrade and use new capabilities, but we’re also seeing an uplift in our ARR when we make that attachment.
We are at about 20%. We’re working aggressively. In my prepared remarks, I talked about one of the investment pillars. We’re aggressively going after renewals and conversions of our existing installed base to try to accelerate that platform conversion.
So more to come on that. But we’re seeing the economics play out in terms of when we look at the cohorts of the customers that are coming on board, we’re seeing the uplift upon immediate sign on. And then over time, we’re seeing that increase in ARR with each customer.
Brian Webb-Walsh — Chief Financial Officer
Yes. And I would just add that we get the ARPU benefits and the ARR benefits, but we also get a margin benefit, because software is our highest margin part of the business, but within software, the subscription of platform revenue has the highest margin.
David Wilkinson — Chief Executive Officer
And it’s a small percentage of the total revenues now and that’s why you’re not seeing it drive the whole number yet, Mayank. But as we aggressively move that more to the platform, you see that have a bigger impact through ARR.
Mayank Tandon — Analyst
That’s helpful. I will stay tuned on that. And then maybe for Brian, any directional guidance for fiscal ’25 what type of seasonality we should be reflecting in our models, both on the top line and also in terms of margin trajectory. So any color you can provide on how we should frame 2025, given all the puts and takes, that would be helpful.
Brian Webb-Walsh — Chief Financial Officer
Yes. So we’re going to give guidance for ’25 in February on our Q4 call. But consistent with what we said on the last call, we believe off the pro forma 2024 we’ve been describing that we can grow off that next year. and we’ll provide more details as we get into next year.
Mayank Tandon — Analyst
Got it. OK. Thank you.
Operator
Your next question comes from Will Nance with Goldman Sachs. Your line is open.
William Nance — Analyst
Hey, guys, appreciate you taking the question. I appreciate all the details on some of the go-to-market restructuring and kind of growth-related investments that you guys are making. I was wondering if you could maybe talk about how you think about the time lines to seeing those sort of play out and how we on the outside what we should be looking for in terms of KPIs over the next few years to kind of measure the success of the go-to-market investments and next-gen investments that you’re making? Thanks.
Brian Webb-Walsh — Chief Financial Officer
The timing of those changes will be — we’re making those changes internally. We started the process in the beginning of the year. We accelerated that as we get closer to the end of the year after digesting the other two strategic initiatives that were underway. So now all the management team’s effort and attention is focused on those items that we outlined.
We’ll enter next year with that in place. So we’re executing the remainder of those changes through the balance of the year, and we’ll be in that formation or however you want to describe that going into next year. The KPIs I look at are similar or the same as what we’ve described these — our new go-to-market model will incent our frontline sellers to drive new customer acquisitions. It will have the right incentives to drive attachment to the platform.
So you can look at that. It will drive renewal of existing contracts and then will drive add-ons of existing services. So we feel like looking at new sites, payment sites, ARR will still be the right key metrics to continue to look at. I would just add that internally, as we make investments, we’re very focused on our ROI and so that’s a key metric for us.
William Nance — Analyst
Got it. That’s helpful. I appreciate that. And just maybe if you could give any context on how you’re thinking about capital allocation over the next year, understanding the share repurchase today from the net proceeds from the sale.
How are you thinking about organic cash flow generation and capital allocation next year?
David Wilkinson — Chief Executive Officer
Yes. So we’re pleased with what we’ve talked about today in our prepared remarks, how we have used the digital banking proceeds to pay down debt and improve our leverage. We have leverage where we want it, and we see that staying around two turns or a little lower. We also today announced as you just mentioned, the share repurchase and the $20 million of investment to accelerate our next-gen offerings.
So we will execute those things that we announced today. And then going forward, we see consistent with what we’ve been talking about, making sure we’re investing in our products, software offerings to drive growth internally. And then considering tuck-in acquisitions, if there’s something we can go out and buy versus build that will be a consideration. And then future share repurchase, we’ll work with our board to evaluate and consider.
Right now, I think the focus is executing what we’ve announced and then driving the cash flow in 2025.
William Nance — Analyst
Got it. Appreciate all the color. Thanks, guys.
Operator
Your next question comes from Matt Summerville with D.A. Davidson. Your line is open.
Matt Summerville — Analyst
Thanks. A couple of questions. First, maybe can you talk about what you’re anticipating from an inflection standpoint with respect to hardware, specifically the dynamics you’re seeing play out in the self-checkout market, as well as market share therein. And then what customer feedback has been on Voyix migrating to the ODM? And then I have a follow-up.
Thank you.
David Wilkinson — Chief Executive Officer
So the hardware market, Matt, we see has been significantly down this year overall in the total market. So we see that going into next year that a lot of that demand will push into next year, the capital projects that were on hold this year, we think some of that will carry over. So we thought about hardware as a market demand being flat to maybe down a little point of sale being probably more down than self-checkout. We see self-checkout demand strong.
As we’ve described in the past, self-check-out for us is a lot more than just hardware. It’s the software and the intellectual property that goes around how you as a retailer use that device to be your point of service for your customers. So as our customers are continuing to look at new ways to check out their customers and create experiences in the store, we think our new self-check-out, I’ll call it, the platform is well positioned to do that. It creates a lot of flexibility, speed of testing out new capabilities and offer.
So we’re seeing a lot of strong demand for our self-checkout software. I think we’ll get some refresh self-checkout hardware revenues that will pull some services through with it as well. So we’ll describe that. We think that it’s probably not going to fully recover, but we think flat, maybe slightly down.
When I think about the reaction of our customers to the ODM model, I’ve had several customers, I’ve heard from the teams that have been in front of our largest customers that there’s been no negative impacts. It’s all been positive. They understand what we’re trying to get done. They like the focus that we have on software and services.
And they largely see this as the next evolution from where we were before having outsourced manufacturers just taking that logical next step. So they still look to us to provide a complete solution and then we’ll leverage Ennoconn to fulfill against that hardware.
Matt Summerville — Analyst
Got it. And then just as a follow-up, can you talk about in both retail and restaurants, particularly on the enterprise side of the business, what your net site count looks like, whether you’re net adding customers and sites or net losing customers and sites based on your performance year-to-date and in the third quarter?
David Wilkinson — Chief Executive Officer
Yes. Overall, we’re adding sites, so net adding in all of our segments. So I would tell you, as we described the new go-to-market model, we want to accelerate that rate, but it’s a net add. We haven’t seen any upticks in customer attrition and the analysis that we’ve done.
We’re continuing to add new customers in both of the businesses. We continue to migrate customers to the platform with renewals. So we feel good about what we’re doing in terms of the net add. I would like to see that accelerate.
Matt Summerville — Analyst
Thanks, David.
Operator
Your next question comes from Matt Roswell with RBC Capital Markets. Your line is open.
Matt Roswell — Analyst
Good morning. Sort of following up on the hardware discussion. Could you just sort of remind us of the current relationship between software and services growth and hardware and how that will change going into ’25 with the ODM contract?
Brian Webb-Walsh — Chief Financial Officer
Yes. So what I would say right now, the part of services that gets impacted by hardware in the lower hardware refresh that we’ve seen this year is what we call the TS or installation revenue that we get from implementing the hardware that’s 20% of services. That’s the nonrecurring part. The 80% that’s recurring is the ongoing support of our customers.
So it’s really that 20% that becomes under pressure when we’re not refreshing and doing install projects.
David Wilkinson — Chief Executive Officer
And on the software, I’d say on the linkage between hardware and software, we are breaking that linkage between hardware and software and our customers and the enterprise space specifically have really moved those almost independent decisions, and we’re supporting that move with our edge platform and all of our next-gen software capabilities being hardware agnostic. So that’s irrespective of the hardware fulfillment model, that was an industry trend. That’s where we were headed strategically anyway. I think the heart of Ennoconn allows us to do is stay focused on that software and then provide them our high-level specs and they can design the best hardware for the industry that we serve with faster lead times, potentially lower price points and the highest quality possible.
So we announced in the retail side, the Speedy Stop announcement was one where we’re using their existing hardware helping sweat the assets, and we see that as part of our ongoing strategy moving forward.
Matt Roswell — Analyst
Switching over to expenses. You had a great sort of margin quarter, especially in restaurants this year. I’m wondering how much expense savings do you see remaining, especially now that kind of all the noise is sort of moving away? And then where would you expect to see any savings? Would it be in the segment line or would be down corporate and other?
Brian Webb-Walsh — Chief Financial Officer
Sure. So on the Q2 call, we announced our $105 million cost-cutting program that cut across payroll costs, nonpayroll costs and then terminating our AR facility, saving us bank fees from doing that. Those actions have largely been implemented and are behind us, and that’s why we saw the pickup in EBITDA. One of the reasons from Q2 to Q3.
We had a sequential improvement in EBITDA driven by those cost savings. In the year, we’re getting about $35 million of the benefit from those actions and the rest we’re building into the pro forma view of ’24 that we provided. That’s how we get to the $430 million of adjusted EBITDA. When we think about the geography of those cuts, it’s helping the segments and it’s helping corporate and other.
We expect the corporate and other expenses to be both reported and normalized about $60 million in Q4. So we’ll start to see improvements there. But the actions really cut across all areas of the business. And we’re currently working on additional plans for next year, mostly around nonpayroll costs where we’re going to do further vendor reductions.
A lot of that’s going to be from in-sourcing certain functions. So not only do we save money, but we’ll have more control over some of those functions. We’ll talk more about that as we get into next year.
Matt Roswell — Analyst
Excellent. Thank you very much.
Operator
Your next question comes from Charles Nabhan with Stephens. Your line is open.
Charles Nabhan — Analyst
Good morning and thank you for taking my question. As we think about modeling the fourth quarter, I was wondering if you could give us a little color on the implied growth by segment?
David Wilkinson — Chief Executive Officer
Sure. Just some color overall, and then I’ll talk about the segment. So overall, software services, we expect to be near the midpoint of the guidance. When it comes to hardware, we expect to be toward the lower end even though we overachieved a bit in Q3, given the backlog and visibility we have in Q4, we expect hardware will be toward the lower end.
The good news on revenue overall, we still see the pro forma view that we gave on the last call, holding up for ’24 because even though hardware revenue is down, we’re getting a bit of a better margin on it, so that the commissions on a pro forma view will be very similar to what we provided in the past. When we think about EBITDA, we would expect EBITDA to be at the midpoint to slightly better than the midpoint of the range that we’ve given for the year. And that shows more sequential improvement from Q3 into Q4. When it comes to the segments, retail, software and services revenue is likely to be flattish in Q4 and EBITDA should be pretty consistent with Q3.
And for restaurants, we think 1% to 2% growth in software and services with EBITDA also consistent with Q3, a lot of the EBITDA improvement sequentially as we get into Q4 will come from corporate and other.
Charles Nabhan — Analyst
Got it. Super helpful. Appreciate that color. And then a follow-up, I wanted to ask about your payment initiative and get a better sense for what types of clients you’re targeting, what your value proposition is to those clients and whether you could compete on price with the acquirers, some of your larger customers might be using?
Brian Webb-Walsh — Chief Financial Officer
Overall, Chuck, our payment strategy, there’s twofold. I’ll say there’s one in the SMB space. So as we’ve described, SMB and mid-market, we have a high 90s, 97% last quarter a tax rate of payments. So we’re selling a complete solution.
So very common in that segment of the market, the value prop in that segment is one-stop shop, you get everything you need to run your small restaurant or your small stores with NCR Voyix.
David Wilkinson — Chief Executive Officer
Then when we think about moving up into the higher end of the mid-market or even to enterprise, our value proposition really becomes, again, that total solution. We think all of the handoffs between the point of sale, the payment acceptance device, the gateways, the processors, that whole ecosystem benefits well when you have a single provider doing that. We likely, in that case, are not going to be any cheaper on the payment rate itself, where we get a better total cost of ownership for our customers is owning that whole thing in to end with all the integrations and testing and certifications that need to be done. And like we’ve described in the past, in some cases, we’re leveraging our own processing capabilities.
In other cases, we’re leveraging partners. So we believe that leveraging partners is a good way to go. And in that case, we’ll be competitive on rate at the processing level, but when on ease of doing business and that total cost of ownership.
Charles Nabhan — Analyst
Got it. Super helpful. Thank you.
Operator
Your next question comes from Kartik Mehta with Northcoast Research. Your line is open.
Kartik Mehta — Analyst
Hey, good morning. David, I wanted to ask you, you talked a little bit about changing the comp initiatives for the sales force. And I know at times, something like that could have a negative impact in the short term but positive in the long term. And I’m wondering as you kind of implement that, if you’ve already implemented it, if you’ve seen any changes related to that, or what you’re anticipating or maybe how that might help with the forecast?
David Wilkinson — Chief Executive Officer
Yes, Kartik, we’ve implemented pieces of it. We are doing it in a way that minimizes impact to the fourth quarter results. The team is all very focused on delivering what we’ve described, what Brian just described as our fourth quarter commitments. The real changes will take effect as we turn the calendar into January, we’ll do a beginning of the year meeting with the sales teams.
We are normal processes to go through all of the realignment of compensation plans and November, December as we finalize our ’25 plan internally and with the board and then we’ll start to turn that into real quote. There’s another piece of work that we’re doing around the processes internally to support the sales team so that we get the sales team singularly focused on selling, and we can lift a lot of the support functions and move them to the right support teams internally. All that work is underway now with the two goals, as you just described, one, minimize disruption in Q4 and be ready to go in Q1. So I feel good about the change management activities that are happening inside the company and the teams are all over that.
Kartik Mehta — Analyst
It’s great to see Darren join, and I’m wondering where you see the best opportunity internationally or where Darren sees an opportunity, maybe geographically or from a product standpoint?
David Wilkinson — Chief Executive Officer
Yes. It’s early days for Darren, Kartik. I won’t tell you he’s got all this grand plan yet. He’s got a lot of great ideas.
I think when we look at what’s happening in Europe, what’s happening in Japan and then I separate Japan from Asia Pacific, I know geographically, but that’s the way we have the business separated. Then we’ve got a lot of opportunity in Japan. I mean, that’s our second largest country outside of the US and getting critically focused on that. We serve the largest retailers in Japan, so getting them moved to the platform strategy and driving that.
In Europe, we have a great installed base customers. Same thing in Australia. We really do well in the grocery market. So Darren is going to look at a couple of things.
We’ll look at how do we drive getting customers attached to the platform faster like we’ve described in the other areas. We’ll have both retail and restaurant responsibilities. So we’ll look at can we take our restaurant portfolio and expand it globally. We look for payment opportunities given Darren’s background, obviously, maybe some payment opportunities in the UK and other parts of the market, potentially even in Japan and then we’re exploring how do we get a mid-market offering.
Our mid-market offering has largely been a US-based mid-market offer. So how do we look for a mid-market expansion. And the team is strong in the rest of the world, too. So Darren can go look at some of those new avenues for growth while leveraging the existing team.
So everybody is excited about the add of Darren, I like the focus that it’s driving to get not only Darren focused on international, but Eric and Benny focused on what’s happening in the retail and restaurant business specifically focused on the Americas.
Kartik Mehta — Analyst
Perfect, thanks. Appreciate it.
Operator
Your next question comes from Erik Woodring with Morgan Stanley. Your line is open.
Erik Woodring — Analyst
Hey, guys, good morning. Thank you for taking my questions. I have two as well, and I apologize if one of these were asked, I just dropped off for a second. David, I’d love to understand the message that you are sending to prospective new customers on why they should move over to NCR Voyix, right? This is a new strategy or at least a change in strategy or at least a change in emphasis and I’m just wondering, what’s the value prop that you’re leading with? Is it in the end-to-end solutions? Or is it anything beyond that that you’re offering that maybe they couldn’t get from their existing providers? And then I have a follow-up.
Thanks.
David Wilkinson — Chief Executive Officer
When you look at our history and heritage and market share in these industries, our core businesses have been around retail and restaurants. So the one of the pieces of emphasis that we give is we’re back to our core businesses and extremely focused on delivering an end-to-end solution for retail and restaurant. We know the industry as well. We know there are challenges.
So when we talk to new clients, there’s one about the platform. We have a great tech that provides all the capabilities that are required for your business and to run your business. The other side of that is we have services capabilities that truly differentiate us. Most of our clients in the enterprise mid-market space are looking for a complete offering.
And then they don’t want to have to maintain it and make sure it’s up and running and don’t have the service capabilities and they need somebody that can scale with their business and grow with them as they grow, we grow with them, and they can trust us to continue to deliver the platform itself, I’ll talk a little about architecture. They believe in the architecture, the platform strategy, the open nature of how we’re delivering our solutions, and we allow not only our own technology, where we’re going to have great applications for things like loyalty and payments and self-checkout. They can also bring their own applications or we can plug in third party. So we have a good third-party ecosystem of partners that allow them to plug in.
So we get flexibility to our customers. We don’t have to lock them in, and it gives them a lot of opportunity to go explore and test out new offerings as they’re looking to compete on differentiated solutions to their customers to us as consumers. So we go into the full solution, the credibility and history of what we do and deep knowledge in our industries, along with the Greentech platform that’s open.
Erik Woodring — Analyst
OK. That makes a lot of sense. Maybe just as a follow-up. Can you maybe elaborate a bit on your capital allocation strategy.
Just obviously, you now pass the digital banking transaction, you’re looking at closing the hardware shift. Obviously, you talked about buybacks. Maybe just help us understand the pace of those buybacks and then maybe what comes next? What’s your leverage goal? How do we think about the capital allocation priorities.
Brian Webb-Walsh — Chief Financial Officer
So Erik, we covered this a little bit earlier, but I’ll just reiterate that using the digital banking proceeds, we have our leverage where we want it to be. We’ll keep it at or below two turns. We’ve announced today $100 million of share repurchase that will execute. And we also announced using $20 million of those proceeds to accelerate some of our offering investments.
So that’s the use of the majority of the digital banking proceeds. When we think about go-forward capital allocation, it’s really consistent with what we talked about before, continuing to invest internally to support our offerings in to drive growth. And then looking at tuck-in acquisitions where it might make sense to buy something versus build it ourselves. And then lastly, any future share repurchase will evaluate and consider with our board.
And that’s kind of what we talked about before. Right now, the focus is executing what we’ve announced and then generating the cash flow that we need to generate in 2025. Now, David, if you’d add anything?
David Wilkinson — Chief Executive Officer
No.
Brian Webb-Walsh — Chief Financial Officer
OK. So that’s the answer, Erik.
Erik Woodring — Analyst
Great. Thanks so much, guys. Sorry about the repeat question.
Brian Webb-Walsh — Chief Financial Officer
No worries.
Operator
Your next question comes from Ian Zaffino with Oppenheimer. Your line is open.
Isaac Sellhausen — Analyst
Hey, good morning, guys. This is Isaac Sellhausen on for Ian. I just had one on the initiatives and investments you mentioned in the restaurant and retail businesses. I guess specifically for restaurants, maybe if you could provide some higher-level thoughts on what the investments would entail and maybe how you’re looking to position the segment relative to your current market position and the enterprise and QSR space? Thanks.
David Wilkinson — Chief Executive Officer
The work that we’re doing on the portfolio for restaurants is really accelerating what we would have had in our original road map. So we’re pulling in some functionality to get a broader expansion, specifically in QSR in Q1. We’re looking to accelerate some of the value-added capabilities on the platform. So the customers that have connected to the platform are giving them more that they can do through the platform with our investments.
That is the focus. So you think about some of our capabilities like kitchen, payments, menu management, back office, those are the capabilities that we’re looking to accelerate. And when we say accelerate, that’s more of the cloud enablement. We’ve clearly got those capabilities on our legacy platform.
It’s really delivering those through our cloud platform and accelerating that migration to the platforms where we’re focused. And then some of that will come in the form of aggressive marketing and commercial packages to some of our customers to get them connected faster.
Isaac Sellhausen — Analyst
OK, understood. Thank you very much.
Operator
At this time, it appears there are no further questions. I’d like to turn the call back to NCR Voyix’s CEO, David Wilkinson.
David Wilkinson — Chief Executive Officer
I’d like to close with just a thank you to our employees at NCR Voyix, a great job of executing what is on paper, a really strong set of strategic initiatives and a solid performance for Q3. As we described, there’s a lot of work. So the teams will be very focused on delivering to our commitments to our customers. I also like to thank our customers for the confidence they have in us is entrusting us with their solution for enterprise clients and mid-market clients and are mission-critical to what they do every day.
We don’t take that lightly. So we appreciate the support we have from our clients. And lastly, I would tell you that I’m really optimistic on the strategy that we have. We laid out the pro forma in the last earnings release, and the focus that we’re driving as a company on software and services, the attention that we’re driving as a management team, the change that we’ve made in the leadership.
What we’re describing is going to set us up on a path in ’25, like we said, to grow off of that base. So we’ll provide more color on that when we get into February, but we feel good about the initiatives we’re executing, we feel good about the platform momentum that we have, and we appreciate our existing customers. So thank you for your time this morning.
Operator
[Operator signoff]
Duration: 0 minutes
Alan Katz — Vice President, Investor Relations
David Wilkinson — Chief Executive Officer
Brian Webb-Walsh — Chief Financial Officer
Mayank Tandon — Analyst
William Nance — Analyst
Will Nance — Analyst
Matt Summerville — Analyst
Matt Roswell — Analyst
Charles Nabhan — Analyst
Kartik Mehta — Analyst
Erik Woodring — Analyst
Isaac Sellhausen — Analyst
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