Amazon Still Can't Get This 1 Thing Right

Amazon (NASDAQ:AMZN) is still growing revenue at a double-digit rate in its U.S. e-commerce unit, its web services unit, and in international markets. Yet at its physical retail stores, sales have stalled out.

While the e-commerce giant's overall revenue rose 20% in the fourth quarter -- a rate that has some analysts worried about its slowing growth -- its brick-and-mortar locations posted a 2.7% year-over-year revenue decline.

Data source: Amazon.com quarterly SEC filings. Chart by author.

Whole Foods is most of the story

The decline is noteworthy because Q4 provided the first year-over-year comparison for sales at Whole Foods Market after Amazon bought it in late 2017. The high-end grocer's almost 500 stores provide the bulk of sales in Amazon's physical store segment, which encompasses Whole Foods, Amazon Books, Amazon Go, Amazon 4-star, and a number of pop-up stores. Amazon, however, doesn't break out the revenue from any of its store concepts.

It's also important because Amazon believes that Whole Foods has shed its "Whole Paycheck" image effectively enough that the company can stop adding locations to the 365 discount grocery chain, and instead focus more effort on bringing Whole Foods stores into new markets. But consumer surveys don't necessarily back up that view. Furthermore, recent reports say that Whole Foods will raise prices on hundreds of items to keep up with rising costs from suppliers, which will only reinforce the "Whole Paycheck" stereotype.

Image source: Whole Foods Market.

Expanding the number of Whole Foods locations probably won't result in higher comparable sales growth. If customers are not shopping as much at its existing stores -- arguably because of the enduring belief that Whole Foods stores are expensive -- then adding more locations isn't going to change that.

Further, Amazon is targeting a lot of brick-and-mortar growth that may not be justified. The company reportedly plans to open up to 3,000 Amazon Go convenience stores in less than three years. However, there's not much evidence yet that Amazon's retail plan is working, so embarking on a massive expansion may be premature. And if Amazon is to meet its ambitious goal, it will need to accelerate its efforts, because there are only 10 Amazon Go stores in operation now.

The competition responds

The physical retail marketplace may be more challenging than Amazon expected. It's also possible that Amazon didn't anticipate how competitors like Walmart (NYSE:WMT) and Target (NYSE:TGT) would respond to the threat posed by its ever-expanding empire.

Walmart, for example, has invested billions of dollars upgrading its online and digital presence to become a leader in e-commerce, and laid out billions more on acquisitions designed to thwart Amazon's encroachment. It bought online retailer Jet.com in 2016 for $3 billion; Shoes.com, Moosejaw, and Bonobos for a combined $431 million in 2017; and last year acquired a controlling stake in Flipkart for $16 billion in a bid for e-commerce dominance in India.

Target, too, has made several key acquisitions, most notably spending $550 million on Shipt to enhance its delivery services.

Target and Walmart now have much more cohesive physical retail and e-commerce operations. Walmart in particular has made its stores a point of differentiation by employing them as pickup points for online orders. The "buy online, pick up in store" option is only growing in importance for retailers.

Time will tell

Amazon says that Whole Foods' sales decline last quarter can be explained partially as a result of realigning Whole Foods' fiscal calendar with Amazon's, which added five more sales days to the fourth quarter of 2017. Also, when consumers place their orders through Prime Now and then pick up their groceries at Whole Foods, the revenue is credited to the online unit, not the physical location.

Amazon Chief Financial Officer Brian Olsavsky said that if you compare the results "on an apples-to-apples basis," Whole Foods saw a 6% sales increase in the quarter. The company expanded Prime Now grocery delivery from Whole Foods to more than 60 markets, while Prime Now Pickup was expanded into more than 20 markets.

It may take a few more quarters to get fully comparable numbers, but Whole Foods hasn't been the hot growth story many had envisioned. And with heavier competitive pressure coming at the same time that the rest of Amazon's growth is slowing, there could be more difficult comparisons ahead.

ONE Gas Inc (OGS) Q4 2018 Earnings Conference Call Transcript

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ONE Gas Inc  (NYSE:OGS)Q4 2018 Earnings Conference CallFeb. 21, 2019, 11:00 a.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Good day, and welcome to the ONE Gas Fourth Quarter and Year-end 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brandon Lohse. Please go ahead, sir.

Brandon Lohse -- Director, Investor Relations

Good morning, and thank you for joining us on our fourth quarter and year-end 2018 earnings conference call. This call is being webcast live and a replay will be made available later today. After our prepared remarks, we will be happy to take your questions.

A reminder that statements made during this call that might include ONE Gas expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Security Acts of 1933 and 1934. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings.

Joining us on the call this morning are Curtis Dinan, Senior Vice President and Chief Financial Officer; Caron Lawhorn, Senior Vice President, Commercial; Sid McAnnally, Senior Vice President, Operations; and Pierce Norton, President and Chief Executive Officer. Curtis?

Curtis L. Dinan -- Senior Vice President, Chief Financial Officer and Treasurer

Thanks, Brandon. Good morning, everyone, and thank you for joining us today. Beginning with our fourth quarter 2018 results. Net income was $45 million or $0.84 per diluted share compared with $47 million or $0.89 per diluted share for the same period last year. Our fourth quarter results reflect new rates in Texas and Kansas, residential customer growth in Oklahoma and Texas and colder weather compared with 2017, offset partially by higher operating costs.

Our fourth quarter results were also impacted by revenue deferrals and related rate adjustments due to tax reform. However, the impact was offset by lower income tax expense. Operating costs for the fourth quarter were $124 million compared with $120 million in the same period last year, primarily due to the one-time deferral of previously accrued manufactured gas plant cost, resulting from a December 2017 accounting authority order we received in Kansas, offset partially by a decrease in employee-related costs.

For full year 2018, net income was $172 million or $3.25 per diluted share compared with $163 million or $3.08 per diluted share for 2017. Our full year results included the benefit from new rates in Texas and Kansas, higher volumes from transportation customers, residential customer growth in Oklahoma and Texas and higher sales volumes net of weather normalization from colder weather in 2018.

Full year results were also impacted by revenue deferrals and related rate adjustments due to tax reform that was offset by lower income tax expense. Operating costs for the full year were higher than 2017, primarily due to higher employee-related expenses and the previously mentioned manufactured gas plant deferral. While employee costs were higher, this was partially mitigated by lower outside service costs as we insourced some of our previously contracted services.

And now for an update on tax reform. In compliance with the accounting authority orders in each of our jurisdictions, recall that we established a regulatory liability for the difference in federal taxes resulting from the drop in statutory income tax rates. The establishment of this regulatory liability and related rate adjustments from completed filings resulted in a $42 million reduction to our revenues for the full year ended 2018. This was offset by a reduction in our income tax expense.

In the first quarter of 2018, we disclosed that the timing difference between the revenue deferral and the reduction in our income tax expense had created a positive $0.13 impact on earnings that has now fully reversed over the last three quarters of the year. The effect from the change in tax rates has now been reflected in regulatory filings across all of our jurisdictions including our recent orders in Oklahoma and Kansas and has been included in our 2019 earnings guidance. The orders in Kansas and Oklahoma also address the return of excess deferred income taxes to our customers. Including those two orders and an estimate of the impacts in Texas, we expect to credit approximately $23 million to our customers in 2019 as indicated in our guidance. While this will impact cash flow, the adjustment is earnings neutral as it affects both revenue and income tax expense. These credits will continue in future years although the amount will vary from year-to-year.

Recall that the loss of bonus depreciation has accelerated the timing of when we start paying cash taxes. After utilizing our net operating loss carryforwards, we now forecast our cash taxes to be approximately $25 million in 2019, increasing to approximately $44 million by 2023. Last month, the ONE Gas Board of Directors declared a dividend of $0.50 per share, an increase of $0.04 or 8.7% compared with the previous dividend of $0.46 per share. We expect the average annual dividend increase to be 7% to 9% between 2018 and 2023 with a targeted dividend payout ratio of 55% to 65% of net income.

Also in January, we announced our 2019 earnings per share guidance of $3.27 to $3.57 per share with an expected earned ROE of 8.3%. Our 2019 capital expenditures are projected to be $450 million including asset removal costs. Please note the inclusion of asset removal costs as this is a change from previous CapEx disclosures. Both CapEx and asset removal costs increase rate base. Going forward, our practice will be to combine the asset removal cost and CapEx as it more clearly demonstrates the significant items that increase rate base over time. Our 2019 capital spending will remain predominantly focused on maintaining the safety and reliability of our systems and extending service to new areas. We will also continue to make investments in technology to improve efficiencies.

Embedded in our five-year financial guidance is a forecasted average annual O&M increase of 2% to 3% from 2018 to 2023. Authorized rate base, reflecting the recently completed regulatory activity in Oklahoma and Kansas, is approximately $3.33 billion. Authorized rate base is defined as the rate base reflected in our latest regulatory proceedings including full rate cases and interim rate filings.

We project that for 2019, our estimated average rate base, which is defined as authorized rate base plus additional investments in our system and other changes in the components of our rate base that are not yet reflected in approved regulatory filings, will be approximately $3.61 billion with 42% in Oklahoma, 29% in Kansas and 29% in Texas. ONE Gas ended 2018 with approximately $400 million of capacity in its revolving credit facility, and we do not anticipate any equity or capital market needs in 2019. From 2020 to 2023, we anticipate net financing needs of $500 million to $550 million with approximately one-third of that need being in the form of equity.

And now I'll turn it over to Caron Lawhorn, our Senior Vice President of Commercial to provide you with a regulatory update. Caron?

Caron A. Lawhorn -- Senior Vice President, Commercial

Thanks, Curtis, and good morning, everyone. Let's start with our regulatory activity in Oklahoma. In January 2019, the Oklahoma Corporation Commission issued an order for our 2018 performance-based rate change or PBRC filing, requiring a prospective reduction in customer base rates of $11.3 million annually beginning in February 2019. This reduces base rates to the 9.5% midpoint of the company's authorized return on equity.

In addition, the order requires that any earnings in 2018 that were above the 9.5% midpoint, as determined in the next PBRC filing, be returned to customers. Our next filing will be made by March 15, 2019.

As Curtis indicated, our 2018 earnings results and 2019 guidance reflect the impact of this final order. Following the 2019 PBRC filing, we will have one more PBRC filing in 2020 before a full rate case is required to be filed in 2021.

Moving on to Kansas. In February 2019, the Kansas Corporation Commission, or KCC, issued an order related to Kansas Gas Service's June 2018 general rate case filing. The order provided for a net base rate increase of $18.6 million. Kansas Gas Service is already recovering $2.9 million through the Gas System Reliability Surcharge or GSRS. Therefore, this order combined with our GSRS recovery, represents a total base rate increase of $21.5 million and reflects an amortization credit for the refund of excess accumulated deferred income taxes. In addition, the pre-tax carrying charge for future GSRS filings will be 9.1%.

Bill outstanding is whether Kansas Gas Service will be required to refund to customers the amount of the tax reform regulatory liability accrued pursuant to the KCC accounting order. In accordance with Kansas law, the KCC has until Monday to rule on the tax refund. Looking ahead in Kansas, we plan to file our next GSRS in August for the period covering September 2018 through June 2019. The new GSRS legislation that was passed last year, which expanded the definition of eligible capital expenditures, will apply to all expenditures included in the filing.

As previously mentioned, the recent commission orders in Oklahoma and Kansas address the regulatory liability associated with our excess accumulated deferred income taxes resulting from tax reform. In Texas, we will address this issue during 2019 through either separate filings or rate cases in each of our jurisdictions.

With that, I'll turn it over to Pierce Norton to wrap up our discussion. Pierce?

Pierce H. Norton II -- President and Chief Executive Officer

Thank you, Caron. With the arrival of February, our company celebrated its fifth anniversary. I'd like to spend a few minutes taking a brief look back at what we accomplished and how that sets the company up for the next five years.

When we first spun off as a new company, we were near the second and third quartiles for the three AGA, American Gas Association, industry standard safety metrics, those being the total recordable incident rate, days away, restricted or transferred, or DART, which is the measure of severity of our injuries and preventable vehicle incidents. We are now in the first quartile for all three metrics and recently achieved the top DART performance for large utilities in the United States. While we're proud of those achievements, we're striving for zero incidents.

We begin the next five years as focused as ever by continuing to put processes in place to give us the best chance to achieve zero. Since 2014, we've replaced 1,485 miles of vintage pipe, spent nearly $2 billion on capital expenditures to improve system integrity and reliability, helped found the Environmental Protection Agency's challenge, methane's challenge to reduce emissions, published our first ESG report and added over 60,000 new customers. While I could go on, we can't sit still. There's always more to do and improvements to be made. But it is important to stop every now and then and reflect on how we come and where we come from.

As I look forward to the next five years, we will continue executing on our same strategy, a 100% regulated utility. Our focus remains to provide the safest, most reliable natural gas service to our customers, that is our core business. We expect to replace the last remaining cast iron pipe in our system by the end of this year. Our asset replacement program will continue to follow an advanced risk-based modeling approach to ensure prioritization of our pipeline replacement projects. We will also deploy capital to expand our customer base.

And finally, to close, I would like to acknowledge our more than 3,500 employees for their committed focus and achievements over the past year and during our first five years, as we continue to deliver safe and reliable natural gas service for our more than 2 million valued customers.

Thank you all for joining us this morning, and we look forward to seeing you in the upcoming events as we're out of the office and visiting with you in the future. Operator, we're now ready for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) We will now take our first question from Aga Zmigrodzka from UBS. Please go ahead.

Agnieszka Zmigrodzka -- UBS -- Analyst

Good morning. My first question is about the higher earnings per share long-term growth outlook. Could you please discuss key drivers of that higher long-term growth above your expected rate base growth? Thank you.

Pierce H. Norton II -- President and Chief Executive Officer

Thank you. Aga, and good morning to you as well. I'm going to let Curtis kind of walk us through what those key drivers are.

Curtis L. Dinan -- Senior Vice President, Chief Financial Officer and Treasurer

Good morning, Aga. Really there's two primary things, the biggest being our CapEx growth that were a little bit higher than our CapEx and asset removal costs over this five-year period compared to our previous guidance. And then the second item is we have better clarity on the return of the excess deferred income taxes to our customers. So as you know, deferred income taxes are treated as a reduction in rate base. So as you return those deferred income taxes, that also creates growth in your rate base. So a combination of those two factors are driving the rate base growth being a little bit higher and the earnings growth being a little bit higher.

Agnieszka Zmigrodzka -- UBS -- Analyst

But could you provide more color why earnings-per-share growth is higher than your rate base growth?

Curtis L. Dinan -- Senior Vice President, Chief Financial Officer and Treasurer

Well, it's many of the factors we've talked about from continuing to look at investments in technology that make us more efficient that we continue to look at process changes, both of which allow us to drive cost out of the business to what we call sustainable levels. So as we get more efficient, it's not all just about the top line growth of revenue, it's controlling what's happening with our expenses as well. So really a combination of all those factors.

Pierce H. Norton II -- President and Chief Executive Officer

And Aga, this is Pierce. I want Sid to give you a tangible example of some of the -- of one of those efficiency efforts. So Sid?

Robert S. McAnnally -- Senior Vice President Operations

Thank you, Pierce. And Aga, there are a number of these examples, but specifically, let me give you one that looks at a system that we optimized in 2018. Last year, we focused on optimizing the system that routes our customer service technicians to customer appointments. Without additional spending or additional headcount, we were able to recognize significant gains on on-time appointments. We had smoother execution of our compliance orders and we also had a significant decrease in the total miles driven by our customer service technicians, which served to reduce cost, but also serves the safety goals that Pierce mentioned earlier. So as Curtis mentioned, there are a number of these systems that we still think we have the opportunity to optimize without significant cost increases.

Agnieszka Zmigrodzka -- UBS -- Analyst

Thank you for that color. And one more on the Kansas rate case. Could you please provide more color on approved ROE and equity or capital structure?

Pierce H. Norton II -- President and Chief Executive Officer

Hey, Aga, I think Caron has joined us. She's the head of our regulatory area and commercial, so I'll let her answer that question.

Caron A. Lawhorn -- Senior Vice President, Commercial

Good morning. So in Kansas, we have a black-box settlement. So there is no stated ROE or capital structure associated with that. However, going forward for GSRS, our approved rate is going to be 9.1% and that equates to roughly an ROE of about 9.25% and equity of about 56% in the capital structure.

Agnieszka Zmigrodzka -- UBS -- Analyst

Thank you for that additional color. And thank you for taking my question.

Pierce H. Norton II -- President and Chief Executive Officer

Thank you, Aga.

Operator

(Operator Instructions) Our next question comes from Chris Sighinolfi from Jefferies. Please go ahead.

Christopher Sighinolfi -- Jefferies LLC, Research Division -- Analyst

Hey, good morning, guys.

Pierce H. Norton II -- President and Chief Executive Officer

Good morning, Chris.

Christopher Sighinolfi -- Jefferies LLC, Research Division -- Analyst

Curtis, I joined a little late and there was another earnings call I was joining from, and I joined at a point when you were talking about financing. I could wait and review the transcript when it comes out, but I figured then to have you. Can you just remind me of what you had said in total in terms of the five-year outlook and the equity portion you're projecting? I guess a related question is can you also remind me, do you have an ATM program? Or how would you think about accessing equity markets?

Curtis L. Dinan -- Senior Vice President, Chief Financial Officer and Treasurer

Chris, good morning. Good to hear from you. A couple of points. One, no external needs in 2019. So we had the bond offering later in 2018, which pre-refinanced our $300 million bond maturity, plus added $100 million of liquidity at that point, so nothing needed in 2019. From 2020 through 2023, we anticipate net financing of $500 million to $550 million in total, and then about a third of that would be in the form of equity. We do not have an ATM program, but that would most likely be the approach to raising that equity, and none of those years is that significant of a raise that we would need to do, so that's really a pretty efficient way to go about that.

Christopher Sighinolfi -- Jefferies LLC, Research Division -- Analyst

Yes. Okay. No, that's really helpful. And I guess as we think about how you'd manage it -- and I appreciate that this is a bit down the road and that it's not a driver of any sort for the present year, but are there either debt levels or debt-to-cap levels? I mean, how do you think about where and when you might pull that in as needed?

Curtis L. Dinan -- Senior Vice President, Chief Financial Officer and Treasurer

So really several factors go into that. Certainly, how we approach our regulatory strategy is a piece of that and wanting to make sure our balance sheet is as efficient as it can be as we go into those filings is one. The second one is how do we maintain our capital structure from a credit standpoint. So the raises that we need there to help keep our balance sheet in the right order and to be able to meet the various credit metrics that we're rated on.

Christopher Sighinolfi -- Jefferies LLC, Research Division -- Analyst

Okay, great. Thanks for the added color. And Pierce, I heard you mentioned about the five-year anniversary. We saved down the old models. I go back to '14, I mean it looks like a totally different company, so really nice job all around.

Pierce H. Norton II -- President and Chief Executive Officer

Thank you very much, Chris.

Operator

There are no further questions currently signaled. (Operator Instructions) As there are no further questions, I will now turn the call back to your hosts for any additional or closing remarks.

Brandon Lohse -- Director, Investor Relations

Thank you all again for your interest in ONE Gas. Our quiet period for the first quarter starts when we close our books in early April and extends until we release earnings in early May. We will provide details on the conference call later date. Have a great rest of your day.

Operator

That will conclude today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

Duration: 23 minutes

Call participants:

Brandon Lohse -- Director, Investor Relations

Curtis L. Dinan -- Senior Vice President, Chief Financial Officer and Treasurer

Caron A. Lawhorn -- Senior Vice President, Commercial

Pierce H. Norton II -- President and Chief Executive Officer

Agnieszka Zmigrodzka -- UBS -- Analyst

Robert S. McAnnally -- Senior Vice President Operations

Christopher Sighinolfi -- Jefferies LLC, Research Division -- Analyst

More OGS analysis

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Arizona State Retirement System Grows Stake in AK Steel Holding Co. (AKS)

Arizona State Retirement System grew its position in AK Steel Holding Co. (NYSE:AKS) by 6.2% during the 4th quarter, according to the company in its most recent disclosure with the Securities and Exchange Commission (SEC). The institutional investor owned 485,931 shares of the basic materials company’s stock after acquiring an additional 28,239 shares during the quarter. Arizona State Retirement System’s holdings in AK Steel were worth $1,093,000 as of its most recent SEC filing.

Several other hedge funds and other institutional investors have also recently added to or reduced their stakes in AKS. Flagship Harbor Advisors LLC lifted its position in AK Steel by 124.1% during the fourth quarter. Flagship Harbor Advisors LLC now owns 31,570 shares of the basic materials company’s stock worth $71,000 after buying an additional 17,480 shares in the last quarter. Tower Research Capital LLC TRC lifted its position in AK Steel by 1,136.9% during the third quarter. Tower Research Capital LLC TRC now owns 22,956 shares of the basic materials company’s stock worth $113,000 after buying an additional 21,100 shares in the last quarter. MML Investors Services LLC lifted its position in AK Steel by 105.9% during the third quarter. MML Investors Services LLC now owns 25,343 shares of the basic materials company’s stock worth $124,000 after buying an additional 13,037 shares in the last quarter. Exane Derivatives purchased a new position in AK Steel during the third quarter worth approximately $143,000. Finally, HRT Financial LLC purchased a new position in AK Steel during the third quarter worth approximately $146,000. Institutional investors and hedge funds own 65.71% of the company’s stock.

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In other AK Steel news, CEO Roger K. Newport bought 10,000 shares of AK Steel stock in a transaction on Tuesday, November 27th. The shares were bought at an average price of $3.03 per share, for a total transaction of $30,300.00. Following the completion of the transaction, the chief executive officer now directly owns 461,297 shares of the company’s stock, valued at $1,397,729.91. The purchase was disclosed in a document filed with the SEC, which is available at the SEC website. 1.13% of the stock is owned by insiders.

NYSE:AKS opened at $3.12 on Wednesday. AK Steel Holding Co. has a 52 week low of $2.05 and a 52 week high of $6.05. The company has a current ratio of 1.95, a quick ratio of 0.69 and a debt-to-equity ratio of 4.64. The firm has a market capitalization of $940.32 million, a price-to-earnings ratio of 4.88, a price-to-earnings-growth ratio of 1.06 and a beta of 2.73.

AK Steel (NYSE:AKS) last posted its earnings results on Monday, January 28th. The basic materials company reported $0.16 EPS for the quarter, beating the Zacks’ consensus estimate of $0.11 by $0.05. AK Steel had a return on equity of 54.01% and a net margin of 2.73%. The company had revenue of $1.68 billion for the quarter, compared to the consensus estimate of $1.70 billion. During the same quarter in the previous year, the business earned ($0.06) earnings per share. The company’s revenue for the quarter was up 12.1% on a year-over-year basis. On average, research analysts predict that AK Steel Holding Co. will post 0.56 EPS for the current fiscal year.

A number of brokerages recently commented on AKS. Longbow Research downgraded AK Steel from a “buy” rating to a “neutral” rating and set a $2.77 price objective on the stock. in a research report on Wednesday, January 30th. Cowen began coverage on AK Steel in a research report on Tuesday, January 8th. They set a “market perform” rating and a $2.50 price objective on the stock. Zacks Investment Research upgraded AK Steel from a “hold” rating to a “buy” rating and set a $3.25 price objective on the stock in a research report on Tuesday, February 12th. Macquarie downgraded AK Steel from an “outperform” rating to a “neutral” rating and set a $3.00 price objective on the stock. in a research report on Tuesday, January 29th. Finally, Morgan Stanley set a $5.00 price objective on AK Steel and gave the stock a “buy” rating in a research report on Wednesday, November 7th. Four analysts have rated the stock with a sell rating, nine have given a hold rating and two have issued a buy rating to the company’s stock. The stock presently has an average rating of “Hold” and an average price target of $3.76.

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About AK Steel

AK Steel Holding Corporation, through its subsidiary, AK Steel Corporation, produces flat-rolled carbon, stainless, and electrical steels, and tubular products in the United States and internationally. It produces flat-rolled carbon steel products, including coated, cold-rolled, and hot-rolled carbon steel products; grain-oriented specialty stainless and electrical steels; and carbon and stainless steel tubing products.

See Also: Ex-Dividend

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Analysts Expect Iqvia Holdings Inc (IQV) to Announce $1.49 EPS

Wall Street brokerages forecast that Iqvia Holdings Inc (NYSE:IQV) will post earnings of $1.49 per share for the current fiscal quarter, Zacks Investment Research reports. Three analysts have provided estimates for Iqvia’s earnings, with estimates ranging from $1.44 to $1.59. Iqvia posted earnings per share of $1.34 in the same quarter last year, which would suggest a positive year over year growth rate of 11.2%. The firm is scheduled to issue its next earnings results on Wednesday, May 1st.

According to Zacks, analysts expect that Iqvia will report full-year earnings of $6.25 per share for the current fiscal year, with EPS estimates ranging from $6.11 to $6.37. For the next year, analysts anticipate that the business will post earnings of $7.09 per share, with EPS estimates ranging from $6.72 to $7.37. Zacks Investment Research’s EPS averages are a mean average based on a survey of sell-side analysts that that provide coverage for Iqvia.

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Iqvia (NYSE:IQV) last issued its quarterly earnings data on Thursday, February 14th. The medical research company reported $1.50 EPS for the quarter, beating the consensus estimate of $1.47 by $0.03. Iqvia had a return on equity of 13.69% and a net margin of 12.29%. The company had revenue of $2.69 billion for the quarter, compared to analyst estimates of $2.62 billion. During the same period last year, the company earned $1.40 earnings per share. Iqvia’s quarterly revenue was up 6.6% compared to the same quarter last year.

IQV has been the topic of several research analyst reports. Goldman Sachs Group raised Iqvia from a “buy” rating to a “conviction-buy” rating in a report on Friday, January 11th. Jefferies Financial Group raised Iqvia from a “hold” rating to a “buy” rating and raised their price objective for the company from $136.00 to $150.00 in a report on Friday, January 18th. Royal Bank of Canada raised their price objective on Iqvia to $137.00 and gave the company an “outperform” rating in a report on Tuesday, October 23rd. Barclays raised their price objective on Iqvia from $130.00 to $140.00 and gave the company an “overweight” rating in a report on Tuesday, October 23rd. Finally, Piper Jaffray Companies raised their price objective on Iqvia to $131.00 and gave the company a “neutral” rating in a report on Tuesday, October 23rd. Three analysts have rated the stock with a hold rating, thirteen have issued a buy rating and two have assigned a strong buy rating to the company. The company has a consensus rating of “Buy” and a consensus target price of $143.38.

Shares of IQV opened at $141.85 on Friday. The company has a current ratio of 1.09, a quick ratio of 1.09 and a debt-to-equity ratio of 1.41. Iqvia has a 12 month low of $91.57 and a 12 month high of $143.42. The company has a market capitalization of $28.38 billion, a price-to-earnings ratio of 32.53, a price-to-earnings-growth ratio of 1.63 and a beta of 0.88.

In other news, major shareholder Canada Pension Plan Investment sold 3,164,388 shares of Iqvia stock in a transaction that occurred on Tuesday, December 4th. The stock was sold at an average price of $123.72, for a total value of $391,498,083.36. The sale was disclosed in a document filed with the SEC, which can be accessed through this link. Also, Director Ronald A. Rittenmeyer sold 3,840 shares of Iqvia stock in a transaction that occurred on Tuesday, February 5th. The stock was sold at an average price of $130.00, for a total value of $499,200.00. The disclosure for this sale can be found here. Insiders sold 6,751,273 shares of company stock worth $835,335,596 over the last ninety days. Corporate insiders own 6.00% of the company’s stock.

Large investors have recently modified their holdings of the company. Barings LLC boosted its stake in Iqvia by 74.1% during the third quarter. Barings LLC now owns 18,962 shares of the medical research company’s stock worth $2,460,000 after buying an additional 8,070 shares during the last quarter. State Treasurer State of Michigan boosted its stake in Iqvia by 1.0% during the third quarter. State Treasurer State of Michigan now owns 48,300 shares of the medical research company’s stock worth $6,266,000 after buying an additional 500 shares during the last quarter. BP PLC boosted its stake in Iqvia by 5.0% during the third quarter. BP PLC now owns 21,000 shares of the medical research company’s stock worth $2,725,000 after buying an additional 1,000 shares during the last quarter. DNB Asset Management AS boosted its stake in Iqvia by 0.3% during the fourth quarter. DNB Asset Management AS now owns 111,722 shares of the medical research company’s stock worth $12,979,000 after buying an additional 300 shares during the last quarter. Finally, Morgan Stanley boosted its stake in Iqvia by 14.6% during the third quarter. Morgan Stanley now owns 1,392,583 shares of the medical research company’s stock worth $180,673,000 after buying an additional 177,638 shares during the last quarter. 93.62% of the stock is currently owned by hedge funds and other institutional investors.

Iqvia Company Profile

IQVIA Holdings Inc provides integrated information and technology-enabled healthcare services in the Americas, Europe, Africa, and the Asia-Pacific. It operates through three segments: Commercial Solutions, Research & Development Solutions, and Integrated Engagement Services. The Commercial Solutions segment offers a range of cloud-based applications and related implementation, real-world insights, and reference information services; and strategic and implementation consulting services, such as advanced analytics and commercial processes outsourcing services.

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Crack Open The Vault With 5 REITs Yielding 7% Plus

&l;p&g;&l;img class=&q;dam-image getty size-large wp-image-1130070415&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1130070415/960x0.jpg?fit=scale&q; data-height=&q;746&q; data-width=&q;960&q;&g; Cash Money safe deposit box isolated on white

The other day, I introduced you to a handful of investments that &l;span&g;&l;a href=&q;https://www.forbes.com/sites/bradthomas/2019/02/12/5-reits-yielding-6-plus&q;&g;generate 6% income&l;/a&g;&l;/span&g; in the Real Estate sector&a;hellip; from five publicly-traded Real Estate Investment Trusts (REITs).

No, these are not those K-1 thingy&a;rsquo;s you have to wait for, and delay filing your tax return, or make you wait to get a refund.

Nope. These&a;hellip; are some of the battle-tested, portfolio-worthy, income-paying investments whose dividends hit your account every quarter. Some even can deliver the cash (or reinvest) every month &a;ndash; and I&a;rsquo;ll share about one of those monthly-payers, today&a;hellip;

Please recall that REITs, by law, under an act of Congress (circa 1960), must distribute most of their taxable income (at least 90%), paid out directly to investors, in the form of dividends. That&a;rsquo;s a nice way to participate in profits and returns, when owning Real Estate.

&l;p class=&q;tweet_line&q;&g;So, let&a;rsquo;s crack open the vault and find some REITs that can &a;ldquo;show you the money&a;rdquo; - at a level of 7% and more.&l;/p&g;

(To whet your appetite, we&a;rsquo;ll reach for some &a;ldquo;Great 8s&a;rdquo; &a;ndash; commendable REIT investments, paying 8% plus&a;hellip; in an upcoming article.)

But for today, let&a;rsquo;s get you thinking about these five players, and how they might fit into your portfolio.

Reminder: as editor of &l;a href=&q;https://esp.forbes.com/subscribe?PC=VE&q; target=&q;_blank&q;&g;&l;em&g;Forbes Real Estate Investor&l;/em&g;&l;/a&g;, with over three decades of real-world real estate experience as a developer, landlord, investor, analyst, and writer, I enjoy applying my experience, education, and hard-won lessons, to confidently offer these recommendations. Of course, you shouldn&a;rsquo;t bypass your own due diligence, to discover how these might work for you&a;hellip;

&l;em&g;(Note: the market, in general, has been enjoying a run-up in 2019, so in some instances, valuations may be a tad richer when buying at today&a;rsquo;s levels. Newsletter readers can consult our Intelligent REIT Investor Lab, for our Current Value price recommendations.)&l;/em&g;

&l;strong&g;Outfront Media, Inc.&l;/strong&g; (OUT) connects brands with consumers outside of their homes through one of the largest and most diverse sets of billboard, transit, and mobile advertising &a;amp; outreach assets in North America. The company is also implementing digital technology to enhance the ways advertisers engage people on-the-go. Q3-18 AFFO (adjusted funds from operations) came to $86.4 million (an increase of 10.5% over the same prior-year period) from increased local advertising revenues, a return to growth in national client spending, and double-digit increases in revenue from digital products.

Reported billboard revenues increased 6.7%; transit and other revenues increased 3.0%, due to growth in digital transit displays. Clients include the New York Metropolitan Transportation Authority. We currently recommend OUT as a STRONG BUY; not surprising - just before Christmas, its share price hit a 52-week low. The current dividend yields 6.74% (as of Friday&a;rsquo;s close).

&l;strong&g;Blackstone Mortgage Trust, Inc. &l;/strong&g;(BXMT) primarily originates and purchases senior mortgage loans collateralized by properties in the U.S. and Europe. The company is managed by Blackstone (BX), a private equity world leader in alternative assets with nearly $472 billion in assets under management (AUM); of that, $136 billion AUM is within the real estate sector. Blackstone&a;rsquo;s dominant platform in equity and debt provides valuable real-time proprietary market data that enables them to identify mispriced and/or out-of-favor asset classes more rapidly than competitors; and BXMT&a;rsquo;s relationship with &q;big brother&q; Blackstone Real Estate offers the commercial mortgage REIT thorough access to proprietary deal flow, and property and market information.

Last week&a;rsquo;s Q4-18 and Full-Year results showed BXMT grew the portfolio 42% in 2018 to a record $15.8 billion, with $10.7 billion in originations during the year (52 loans), and generating $2.90 of Core Earnings per share. Their Loan-to-Value averages 62%; and 96% of loans are floating rate, LIBOR-based, insulated from the valuation impact of rising rates. Credit facilities are also LIBOR-indexed and match fund assets. Blackstone Mortgage&s;s portfolio credit quality remains high, and I like having a piece of many trophy assets around the globe. BXMT is a BUY, with a dividend yield of 7.39%.

&l;strong&g;VEREIT Inc.&l;/strong&g;&a;nbsp;(VER) is a net lease REIT poised to profit. About a year ago, the company sold Cole Capital, its non-traded REIT business, to an affiliate of CIM Group. Significant, because it eliminated some of the complexity overhang surrounding the company&a;rsquo;s competing businesses, and thus simplified its core business model &a;ndash; to focus on its large, diversified single-tenant real estate portfolio. VEREIT owns about 4,000 free-standing buildings, totaling $15.5 billion in assets, leased to a variety of retail, restaurant, office, and industrial tenants. The company is internally-managed with a structure that provides stable and predictable rent stream payments. VEREIT&a;rsquo;s other lawsuits have been dissipating, and the company has substantial liquidity to use for settlements, and to reduce debt.

Last week, VEREIT settled with additional shareholders who&a;rsquo;d opted out of the remaining class action lawsuit, having to do with restated financial statements from 3 to 4 years ago. Investors, however, can benefit, as VEREIT shares are trading substantially below its bellwether peers, such as Realty Income&a;nbsp;(O), National Retail Properties (NNN), and W.P. Carey (WPC). Investors can take further comfort that VEREIT&s;s dividend is well-covered by AFFO (76% payout ratio), with a solid 6.65% dividend yield (as of Friday&a;rsquo;s close). VER is a BUY.

&l;strong&g;Apple Hospitality REIT, Inc.&l;/strong&g; (APLE) &l;em&g;,&l;/em&g; owns more than 30,800 guest rooms, in 88 markets throughout 34 states. Franchised with industry-leading brands, the company&a;rsquo;s portfolio consists of 241 hotels - 114 Marriott-branded, 126 Hilton-branded, and one Hyatt. It&a;rsquo;s one of the largest portfolios of upscale, select-service hotels in the United States, serving business and leisure travelers, in high-quality hotel properties with attractive upside potential, in urban, high-end suburban and developing markets. Q3-18 results were impacted by restoration activities related to prior year Hurricanes Harvey and Irma, Mid-Atlantic Hurricane Florence in September, and competitive pressures in markets.

The company also contracted the sale of 17 hotels for approximately $181 million; sold two hotels in Columbus, Georgia, for $10 million (breakeven), and repurchased over 1.6 million shares of stock since quarter end. Apple Hospitality spent approximately $43 million in capital expenditures the first nine months of 2018, with another $25 to $30 million anticipated for the rest of the year - including renovation projects for approximately 20 to 25 properties. Although we are underweight in the Lodging sector, we believe Apple offers investors an attractive dividend of 7.33% (paid monthly). We maintain a BUY.

&l;strong&g;Ladder Capital&a;nbsp;Corp &l;/strong&g;(LADR) provides fixed-rate and floating-rate commercial mortgages, mezzanine financing, and preferred and direct equity to partners. Since Q1-15, the company has generated an impressive 8.5% CAGR (compound annual growth rate) - a return unique among its peers; assets now total over $6.4 billion. Q3-18 generated $63.4 million of core earnings, with a core after-tax return on average equity of 17.1%; the company also originated $676.7 million of loans, and its portfolio of balance sheet loans increased to $3.8 billion - almost $1 billion over the prior four quarters.

Ladder is the only internally managed commercial mortgage REIT; insider ownership exceeds 12%. With a low payout ratio, and special &q;true up&q; dividend in recent years from profitable equity deals with one-time power boosts, Ladder rewarded investors several weeks ago with a special dividend of $.23 per share (on top of the regular Q4-18 dividend of $.34 per share). As 2018&a;rsquo;s top-performing commercial mortgage REIT, Ladder is also my 2019 top choice in the category, due to its strong earnings, dividend growth record, and best-in-class management team. LADR&a;rsquo;s dividend yields 7.4%. We maintain a BUY.

Seeking recommendations and data on other publicly-traded REITs? We watch over 100 of &a;lsquo;em, like no one else - with RE news, interviews, and valuable insights you can&a;rsquo;t find anywhere else. Get &l;a href=&q;https://esp.forbes.com/subscribe?PC=VE&q; target=&q;_blank&q;&g;&l;em&g;Forbes Real Estate Investor&l;/em&g;&l;/a&g;. Twelve monthly issues, fairly priced. &l;span&g;&l;a href=&q;https://www.bradtom.com/&q; target=&q;_blank&q;&g;Just click here&l;/a&g;&l;/span&g;.

I am long OUT, BXMT, VER, APLE, and LADR.&l;/p&g;

Zebra Technologies (ZBRA) Q4 2018 Earnings Conference Call Transcript

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Zebra Technologies (NASDAQ:ZBRA) Q4 2018 Earnings Conference CallFeb. 14, 2019 8:30 a.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Good day, and welcome to the fourth-quarter and full-year 2018 Zebra Technologies earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mike Steele, vice president of investor relations. Please go ahead.

Mike Steele -- Vice President of Investor Relations

Good morning. Thank you for joining us today. Before we begin, I need to inform you that certain statements made on this call are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and are subject to risks and uncertainties.

Actual results could differ materially due to factors discussed in our filings with the Securities and Exchange Commission. During this call, we will make reference to non-GAAP financial measures as we describe our business performance. You can find reconciliations of our GAAP to non-GAAP results in today's earnings press release and at the end of the slide presentation. This presentation will include prepared remarks from Anders Gustafsson, our chief executive officer; and Olivier Leonetti, our chief financial officer.

Anders will begin by discussing our fourth-quarter and full-year highlights. Olivier will then provide more detail on the financials and discuss our 2019 outlook. Anders will conclude with progress made on Zebra's strategic priorities. Following the prepared remarks, Joe Heel, our senior vice president of global sales, will join us as we take your questions.

Also, throughout this presentation, unless otherwise indicated, our references to sales growth are year over year on a constant-currency basis and exclude results from the recently acquired Xplore Technologies business. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Now, I'll turn the call over to Anders.

Anders Gustafsson -- Chief Executive Officer

Thank you, Mike. Good morning, everyone, and thank you for joining us. Our team delivered exceptional fourth-quarter results. We executed well, driving strong profitable growth across the business and extended our lead in the market.

Sales, EBITDA margin, and earnings per share all exceeded our outlook. As you can see on Slide 4, we are pleased to report net sales growth of nearly 11% or 9% on an organic basis and adjusted EBITDA margin of 21.1%, a 120-basis-point year-over-year improvement; non-GAAP diluted EPS of $3.10, a 33% increase from the prior year; and free cash flow of $309 million. We achieved strong performance across our business, including double-digit sales growth in North America, Asia Pacific, and Latin America. We grew each of our major product and service categories, including mobile computing, data capture, special printing, supplies, and support services.

Demand was solid through the channel and from our direct customers. We saw particular strength in healthcare, manufacturing, and retail and e-commerce. Our record Q4 results cap an outstanding full-year financial performance of 11% organic sales growth, 20.7% adjusted EBITDA margin, and $721 million of free cash flow. We continue to build on our industry-leading offerings by investing in our people, operations, and technology to drive sustainable growth.

We have strong momentum entering 2019, supported by our order backlog and pipeline of opportunities. With that, I will now turn the call over to Olivier, to review our financial results and to discuss our 2019 outlook.

Olivier Leonetti -- Chief Financial Officer

Thank you, Anders. Let us begin with a walk through the P&L. As you can see on Slide 6, net sales grew 10.8% in the fourth quarter, which translated to 9.1% on an organic basis before the impacts of currencies and acquisitions. We saw solid growth in each of our reporting segments and across all regions.

Enterprise Visibility & Mobility segment sales increased 11.6%, led by especially strong demand in data capture and mobile computing products. Asset Intelligence & Tracking segment sales increased 4.3%. Turning to our regions. North America sales grew 11%, driven by double-digit growth across our mobile computing, data capture, and printing categories.

We saw particular strength in healthcare, retail and e-commerce, and manufacturing. Sales growth to small and mid-sized accounts was exceptional. The EMEA sales increased 6% with relative strength in data capture, mobile computing, and printing supplies. Sales in our Asia-Pacific region were up 12% with strength across major product and service categories.

Our China business grew mid-single digits and most countries grew double-digits. Latin America sales increased 10% as economic and political conditions stabilized. We saw particular strength in printing solutions. All sub-regions grew, including Brazil.

Adjusted group profit increased $72 million or 15%. Adjusted gross margin increased 190 basis points, primarily driven by continued improvement in our go-to-market execution, favorable business mix shift in the EVM segment, and favorable foreign currency exchange impacts. Adjusted operating expenses as a percentage of net sales increased 10 basis points from the prior period, reflecting higher incentive compensation expense due to improved business performance. Fourth-quarter 2018 adjusted EBITDA margin was 21.1%, a 120-basis-point increase from the prior-year period.

In addition to EBITDA margin expansion, the decreased tax rate and lower interest cost from our debt restructurings drove non-GAAP earnings per diluted share to $3.10, a 33% year-over-year increase. Turning now to the balance sheet and cash flow highlights on Slide 7. In 2018, we paid down $657 million of debt principal supported by strong free cash flow of $721 million. The $293 million increase in free cash flow, as compared to 2017, was primarily driven by increased operating profitability, lower acquisition and integration cost, and exceptional working capital management.

We ended this year with $1.6 billion of debt on the balance sheet. Slide 8 shows the path to our 1.8 times net debt-to-adjusted EBITDA ratio as of year end. We reduced the leverage ratio by approximately 1.4 turns in the past year, leaving us well-positioned to continue to invest in the business. We have updated our target range for net debt leverage to be between 1.5 to 2.5 times.

This expands the lower end of the range by a half turn to allow for additional flexibility in our capital structure. Let us turn to our outlook on Slide 9. We entered 2019 with a solid order backlog and strong end-market demand for our leading portfolio of solutions. We expect Q1 2019 net sales growth to be between 6% and 9%, which assumes an approximately 1.5 to 2-percentage-point positive impact from the acquisition of Xplore Technologies and approximately 1-percentage-point negative impact from foreign currency changes.

We believe Q1 2019 adjusted EBITDA margin will be approximately 21%, which assumes operating expense leverage offset by lower gross margin as compared to the especially favorable gross margin in the prior-year period. Non-GAAP diluted EPS is expected to be in the range of $2.75 to $2.95. We expect full-year 2019 net sales growth to be between 4% and 7%, which assumes an approximately 1-percentage-point positive impact from the acquisition of Xplore and approximately 50 basis point negative impact from foreign currency changes. Full-year 2019 adjusted EBITDA margin is expected to be slightly higher than 21%, an improvement from 2018 as we continue to drive operating leverage in the business.

We believe that full-year 2019 free cash flow will exceed $625 million. We expect to drive higher EBITDA than 2018. And unlike 2018, we are assuming that working capital will be a use of cash in 2019. Also note that our 2019 outlook assumes a modest level of tariff on certain products, accessories, and components that we source from China.

It's a [Inaudible] situation and our teams have been working diligently to address the tariffs that have been enacted to date. You can see other full-year 2019 modeling assumptions on Slide 9. Note that our 2019 outlook does not include any projected results from the acquisition of Temptime Corporation, a recently announced transaction that we expect to complete soon this quarter. Temptime's annualized sales exceeded $40 million.

The acquisition is expected to generate approximately $0.15 to $0.20 of annualized adjusted EPS accretion. Anders will discuss the acquisition in a few moments. With that, I will turn the call back to Anders to discuss progress on our strategic priorities.

Anders Gustafsson -- Chief Executive Officer

Thank you, Olivier. We are very pleased with the progress we made in 2018. Slide 11 shows our key strategic areas of focus. Successful execution on these priorities drives our industry leadership and value for all stakeholders.

First, we continue to drive market share gains through our innovation unmatched scale and strong relationships with customers and partners. We saw exceptionally strong broad-based demand for our products and solutions in 2018. We are capitalizing on technology trends in the industry, including the transition to the Android operating system in mobile computing and ongoing transitions in data capture to 2D and RFID. We are also addressing underpenetrated market segments in geographies.

We had a record number of launches across our product and solutions categories in 2018. Our mobile computer, data capture, and printing portfolios have never been stronger. This investment will continue to benefit us in 2019 and beyond. Second, we are focused on driving growth in attractive markets where we can leverage our competitive advantages.

We plan to scale existing categories where we are underpenetrated and at the new markets that advance us as a solutions provider. We expect to gain traction in these markets through both organic and inorganic investments. This includes highly selective acquisitions that will accelerate our strategy to advance our enterprise asset intelligence vision. We target high-growth near adjacencies where we have a right to play, seeking businesses with a differentiated value proposition, which can transform work flows.

As a proof point, on January 28, we announced our intention to acquire Temptime Corporation. Temptime is the leader in designing and manufacturing a time temperature monitoring portfolio that meets the strict specifications of the largest global health organizations' vaccination programs. This acquisition is a great fit and will advance the integration of smart supplies into our enterprise asset intelligence vision as we incorporate these new capabilities. We have the unique ability to scale this technology deeper into the healthcare industry as well as drive it into other key opportunities such as food safety that can benefit from increased asset visibility.

Third, we are advancing our enterprise asset intelligence vision to enable every frontline asset and worker to be visible, connected, and optimally utilized. Our expertise in workflow solutions across our primary vertical markets enables us to continue to strengthen and expand relationships with our customers and partners. I will elaborate further in a minute. Lastly, we have enhanced Zebra's financial strength and flexibility by increasing cash flow and optimizing our capital structure.

Our financial flexibility remains a key priority as we invest in the business to accelerate our traction in high-growth adjacent areas. Now turning to Slide 12, Zebra provides a digital view of the entire enterprise to enable enterprise asset intelligence. Our products and smart infrastructures sense information about assets, products, and processes. The information, including status, location, and condition is then analyzed in real time to determine the best possible operational action.

The result is reduced friction in work flows, improved productivity, and greater insight into business operations. I'd like to spend a minute on how hardware, software, and the cloud are essential to our solutions. Our products are ultra-rugged and reliable with purpose-driven designs that are tailor made for the frontline and its work flows. There is no one size fits all solution.

Every device specification is designed to maximize productivity and safety for a particular use case. In addition to the hardware, software is a critical differentiator for us. Our products include software that make them easy to integrate and intuitive to manage. We call this our DNA software layer, which is integrated across our mobile computing, data capture, and printing portfolios.

Additionally, we have been developing new software applications and tools that improve automated data collection and analysis, maximize device security, and enhance ease of use, all of which are increasingly critical to our enterprise and government customers. The innovation starts with our team. Nearly two-thirds of our engineers specialize in software, systems, and user interface development. Our growing team continually works to enrich our portfolio of smart products and solutions.

Another integral part of our solution's ecosystem is Savanna, which is our intelligent edge platform that powers our cloud-based data driven solutions such as MotionWorks, SmartPack trailer, and Workforce Connect with real time data. We have been collaborating with an increasing number of our independent software vendor partners to accelerate the use of Savanna to deploy new solutions that solve problems for our customers and improve their performance edge. As a thought leader in our industry, we are at the forefront of this opportunity just as we have been with other key transitions, including enterprise, Android adoption, cloud-based printing, RFID, and 2D barcode scanning. We are seeing evidence of our EAI vision as we help businesses across many industries digitize their operations.

We are a driving force in advancing key technology megatrends, including cloud computing, mobility, automation, and the proliferation of smart devices, each of which are critical components to this transformation. Slide 13 highlights the primary vertical markets that we serve, manufacturing, healthcare, transportation and logistics as well as retail and e-commerce, which all grew double digits in 2018. We are leveraging our strong commitment to innovation and deep industry expertise to deliver innovative end-to-end solutions for our customers to compete effectively in an evolving marketplace. In manufacturing, our customers need to know where their equipment, material, and people are in real time across their supply chain.

They are looking for trusted partners, who can increase their operational visibility while reducing cost and complexity. Recently, a global automotive manufacturer purchased a wide variety of our latest generation mobile computers and tablets for their assembly line warehouse and quality control processes. Data security and product life cycle management were the customers' other key considerations as they transitioned to an all-Android enterprise operating system environment. Our ability to facilitate seamless system integration and guarantee operating system upgrades and security patches for the life of our products were differentiators that helped us win this business.

In healthcare, our solutions track essential clinical equipment and enable care providers to monitor patients while being mobile, which translates into increased patient safety and reduced cost. We recently received our largest healthcare order ever from one of the most prominent healthcare organizations in the world. This customer will be using our purpose-built TC51 mobile computer to consolidate various communications tools to streamline collaboration and provide an improved level of patient care. In the transportation and logistics business, our offerings provide real time visibility of assets at every point in their supply chain, including the loading dock, warehouse, and point of delivery.

The increasingly on-demand economy and shortage of labor has pressured enterprises to invest in innovative solutions to drive productivity. We recently expanded our relationship with a longtime global customer by implementing a locationing solution that compliments their existing SmartPack installation. The total solution assesses real-time aircraft container utilization and facilitates more efficient staging and loading of shipments. In retail and e-commerce, we have been driving transformative solutions to address increasingly complex challenges.

Last month, at the National Retail Federation Expo, we showcased 20 innovative solutions that help retailers execute on omnichannel fulfilment, sales floor effectiveness, and elevate the overall in-store experience. Walgreens had a prominent presence at our booth this year as they are in the process of rolling out our ET50 tablets and TC51 mobile computers to all of their U.S. stores. This initiative complements their existing ecosystem of Zebra scanners and printers.

At our booth, Walgreens demonstrated how it's assisted selling and inventory management applications run on Zebra's products to boost the productivity and improve the customer experience while connecting its associates and customers nationwide. We are seeing a trend at Walgreens and many other retailers to equip all of their associates with mobile tools that empower collaboration and with co-workers and customers. In summary, we are helping enterprise customers to successfully address their increasingly complex business challenges. Now, I'll hand the call back over to Mike.

Mike Steele -- Vice President of Investor Relations

Thanksm Anders. We'll now open the call to Q&A. [Operator instructions] 

Questions and Answers:

Operator

[Operator instructions] And our first question comes from Jason Rodgers of Great Lakes Review. Please go ahead.

Jason Rodgers -- Great Lakes Review -- Analyst

Good morning. Wanted to ask a question about the EBITDA margin guidance. You beat last year's guidance by over a point and your initial guidance for this year is actually targeting less margin improvement than you were forecasting a year earlier. So wonder if you could discuss why that is and factors that could lead to similar outperformance in the margin for 2019.

Olivier Leonetti -- Chief Financial Officer

So, good morning, Jason. So, we are planning indeed to have -- for the full-year a higher EBITDA margin, slightly higher EBITDA margin, and we're guiding Q1 at about 21%. You have some mix elements, which could impact one performance in a particular quarter. But as we have demonstrated over now, a number of quarters, we believe we have the ability in the year to leverage OPEX but also to leverage gross margin, but you could have an anomaly in one quarter and another.

So, nothing specific in terms of trend, Jason.

Jason Rodgers -- Great Lakes Review -- Analyst

And then just looking at the top line, as far as your guidance, you have the first quarter there, but you'll be facing increasingly difficult comps as the year progresses. Do you think you can continue at that mid- to high-single digit organic growth rate as you look past the first quarter?

Anders Gustafsson -- Chief Executive Officer

We feel good about the business. We have been driving profitable growth for a long time now and our solutions have moved from being more viewed as tactical productivity tools by our customers to more enablers of our customer strategies. So, I think we're moving up in the kind of hierarchy of importance for the customers. We have a strong track record of execution and I think the outlook is prudent, so we feel that we have -- we are well-positioned for 2019.

We entered the year with good momentum, a solid portfolio of products and solutions. It's the most competitive portfolio, I think, we've ever had and we continue to gain share in the markets. So, we feel pretty good about where we are.

Olivier Leonetti -- Chief Financial Officer

And let me give you a bit of additional colors on the year. So, we have obviously a strong Q1 guide. We have more visibility for Q1. We are well within the quarter.

We entered the quarter with a solid backlog. And regarding the full year, we would consider this guide as actually being prudent based upon the visibility we have regarding our business. And an important point, Jason, this is no different than another year and we're still confident about our end markets and our ability to compete.

Jason Rodgers -- Great Lakes Review -- Analyst

And if I could just squeeze one more in, just the outlook for the large deals on a mobile computing side and your latest estimate for how many devices are still left in the field that need to convert.

Anders Gustafsson -- Chief Executive Officer

Yes, we still see approximately 10 million legacy Android devices to be -- in the field today waiting to be refreshed and upgraded to Android. In the last several years, we have had a strong performance of our larger deals. But if you look at 2018, I'd say we had a balanced portfolio there. We saw good growth from our larger deals, but we also saw good growth from our channel, and we saw also good growth from our small and medium businesses now.

So, we certainly have many different avenues to pursue in order to drive that growth. Joe, any assumptions?

Joe Heel -- Senior Vice President of Global Sales

Yes. I would add, especially in the visibility toward large deals, you are right. We had a substantial number of large deals in particular in the retail space in 2018. But we do -- in those 10 million legacy devices that are still out there, we see opportunity for continuing momentum in areas such as logistics and warehouse coming up in the next months and year as well as new used cases that our customers are beginning to realize can be deployed on our devices such as consolidating multiple technologies they have today onto our device or expanding used cases from the handheld form factor to other form factors like tablets and larger screens.

So we see continued opportunity for large deals, Jason.

Jason Rodgers -- Great Lakes Review -- Analyst

Very good. Thank you.

Operator

Our next question comes from Jim Ricchiuti of Needham & Company. Please go ahead.

Jim Ricchiuti -- Needham and Company -- Analyst

Hi. Good morning. Thank you. Looking at your R&D spend in the last couple of quarters, and we're seeing a little bit of a bump up in that area, and I wonder if you could comment on that.

And as it relates to new product development, if we're going to be seeing a faster pace in terms of product introductions? Thank you.

Olivier Leonetti -- Chief Financial Officer

Let me take the first part and then Andres and Joe would take the other one. So indeed, we have increased the level of spending in R&D. And the composition of the R&D spend is -- has changed some. We are investing more, if you were to look into the details, into also future capabilities and we believe that this investment has paid off for the company and part of the gaining share's top-line performance is a result of this investment.

Joe Heel -- Senior Vice President of Global Sales

Yes. I think that we certainly feel that we have made a very productive investments in R&D. Our products -- portfolios -- our solution portfolios are the most competitive that have ever been. We launched more new products in 2018 than we've done in any other year in the history of the company.

So I think we feel very confident that the investments we made in R&D are delivering a solid ROI. It has been supporting our growth. It's been supporting our market share gains.

Jim Ricchiuti -- Needham and Company -- Analyst

And my follow-up question just relates to EMEA. It appears that you're seeing some moderation in the growth rate there, and I'm wondering is that a case of just tougher comps, tougher comparisons or are you seeing any signs of slowing, which some companies have alluded to?

Anders Gustafsson -- Chief Executive Officer

So, first, starting a little bit broader, so say, we had strong broad-based strength across all our product segments, regions, vertical markets in Q4. Asia Pac, North America and Latin America were each up double digits in Q4 but all regions, including Europe, was up double digits for the full year. We saw -- all major product categories were up. Health care, retail, manufacturing, they were all up double digits, and all four vertical markets were up double digits for '18.

So, I think it's very broad-based performance there. In Q4, we continued to execute very well and we -- from everything we've seen, we believe we continue to extend the lead in the market that we have, and our competitive position is strong and getting, I would say, stronger based on the strength of our portfolio. And end markets were strong both channel and direct for -- on the back of our valuable proposition, which resonates with our customers. Specifically, to Europe, I think we had -- we would consider it to be a solid growth.

It had moderated a little bit from earlier part of 2018, but it was still good growth and we see that momentum carrying on into 2019. We saw particular strength in Europe on our scanning portfolio and mobile computing as well as supplies. And retail continues to be the strongest vertical for us in Europe, and our personal shopping solutions are a big driver for that.

Jim Ricchiuti -- Needham and Company -- Analyst

Thank you. Congratulations on the year.

Olivier Leonetti -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Brian Drab of William Blair. Please go ahead.

Brian Drab -- William Blair and Company -- Analyst

Hi. Good morning. Maybe this will be a waste a question, but I'm just thinking about the 10 million figure. And the last three quarters, you've said it's been about 10 million, but I was wondering if you could just give us some insight or maybe a more specific estimate there as to how many devices are selling annually in the marketplace across the industry? And how -- what percentage of those roughly are Android? And shouldn't we be getting kind of -- somewhat below 10 million at this point?

Anders Gustafsson -- Chief Executive Officer

So, I think we -- few years back, we started talking about, I think about 17 million. I'm going off memory now, 17 million devices. So, we've always been able to convert a number of those. But the reason it's not going down faster is that, on the one hand, we are shipping a lot of Android devices.

The vast majority of our devices are now Android, but it's still a meaningful amount of all the Microsoft devices that we are shipping too. But our -- I'd say most other industry players are still predominantly shipping Microsoft devices. So, while we kind of eat into the 10 million from one end, it's getting replenished on the other end from other players. So, it's not going down as fast as you might perceive.

It should do based on the volume of devices we ship, but it's -- so still a good amount of devices to go after here. And we expect that by -- the vast majority of these devices will be upgraded to Android by 2020 or late 2020.

Brian Drab -- William Blair and Company -- Analyst

OK. All right. I'll follow-up more later on that one. And then for my second question, maybe I'll make it a two-part question, if I could.

So, with respect to your guidance, could you possibly rank order how you're thinking about end markets in terms of contribution to the growth rate in 2019, retail, manufacturing, healthcare, transport? And then, maybe the second part of the question, could you do the same, take a stab at rank ordering where you're expecting the most growth out of the product lines in terms of data capture or mobile computing printers? Thank you.

Anders Gustafsson -- Chief Executive Officer

It's still hard to rank order each of these, but I can give you some indications of where we see particular strength or if there's anyone we feel would be -- maybe lagging here. So, on the vertical markets, which was, I think, your first question healthcare grew the fastest for us in Q4. I would expect healthcare to be over to -- not just 2019, but over the next several years, the fastest-growing vertical market but we do see a fairly -- similar growth rates across the -- our four verticals. If you look in 2018, we had double-digit growth in all four of our verticals, so we don't expect that any one of them will kind of standout and carry the load for the company.

A few years back, retail was maybe more pronounced as the driver, but now we see it more balanced. Manufacturing was a little weaker earlier but we see the Android adoption to kind of pickup in manufacturing this coming year, particularly around the warehouse. And from a region's perspective, again, we had double-digit growth in all four regions this past year. So, we see them all performing well.

Asia Pacific will be the one we would expect to grow the fastest over the kind of the foreseeable future, not just the next quarter or a couple of quarters, but over longer term can be a bit variability within quarters, but North America has performed very well too. Europe was a little weaker than the average in Q4 but we still see good growth for Europe as we go into 2019. I hope that helps.

Brian Drab -- William Blair and Company -- Analyst

OK. Yes. Thanks. And I'll follow up more later, but congratulations on a great 2018.

Olivier Leonetti -- Chief Financial Officer

Thank you, Brian.

Operator

Our next question comes from Richard Eastman of Robert W. Baird. Please go ahead.

Richard Eastman -- Robert W. Baird and Company -- Analyst

Yes, good morning, Anders.

Anders Gustafsson -- Chief Executive Officer

Good morning.

Richard Eastman -- Robert W. Baird and Company -- Analyst

And Mike. Just -- and Joe. Just a quick question, first question, it was around gross margins. I mean again, if you look certainly in the quarter and for the full year, both the AIT and EVM segments saw 100 plus basis points of gross margin improvement for the year, and I'm curious how you view that.

How structural is that? The gross margins here in both segments, is it -- are you thinking that as somewhat of a baseline here moving forward? And maybe you could just give a little bit of color around both pieces as to how and -- you deliver that gross margin from is quite impressive.

Olivier Leonetti -- Chief Financial Officer

So, we have been increasing gross margin significantly, as you said, year on year by about a point. We have been highly focused as a team on gross margin. Every element of the value chain add a role, manufacturing, procurement, product design, go-to-market, and we believe that that would keep being the case going forward. We believe we have the ability to increase gross margin as a business.

And we actually don't think we play -- we're playing our best game today and we think that the two main segments should follow directionally the same pattern and have the ability to expand gross margin rate.

Anders Gustafsson -- Chief Executive Officer

As Olivier said this is a companywide activity. I think if there's one number or ratio that is deeply ingrained in our culture, it's -- or two, that would be growth and gross margins. So, it's something that is -- that the entire company is paying attention to and working on.

Richard Eastman -- Robert W. Baird and Company -- Analyst

Is price -- did price play a significant factor in either of the two segments?

Anders Gustafsson -- Chief Executive Officer

I would say, our commercial discipline has improved. We are paying more attention to what appropriate commercial terms would be. So, I think we're a little bit more scientific in how we go about doing that.

Olivier Leonetti -- Chief Financial Officer

Mix is a play -- mix, sorry to interrupt, Richard. Mix would be a play and also us being able to add solutions to our offering is also a driver of enhanced gross margin performance.

Richard Eastman -- Robert W. Baird and Company -- Analyst

Awesome. And then just a quick question as a follow-up -- my follow-up is just as it relates to the EBITDA improvement that you're kind of forecasting for '19, I think in difference to the first question, again, it appears as though maybe you're looking for 50 basis points of adjusted EBITDA improvement. So, putting that together in the same equation with the gross margin maybe plus 100 bps, is the thought here that we drive gross margin up and redeploy into R&D and maybe feed on the Street or the channel? And are we kind of settling into the Zebra's business model maybe being a 50-point -- 50-basis-point a year type of target for EBITDA margin improvement?

Anders Gustafsson -- Chief Executive Officer

There's a lot there, but --

Olivier Leonetti -- Chief Financial Officer

No. No, indeed. So again, Richard, ability to improve both gross margin rate and OPEX, including, by the way, as we invest dollar in R&D, we believe we are good to be able to scale R&D dollars as a proportion of revenue dollars. We are prudent as a company, and the improvement we have in term of EBITDA rate in the year, we believe, is in the category of being balanced and prudent.

I'm not too sure I would necessarily agree with the flaws and so on you are mentioning.

Anders Gustafsson -- Chief Executive Officer

I think one of -- as Olivier mentioned earlier, having leverage across the P&L is a key part of our philosophy of how we manage it. So, we want to drive improvements in gross profit. We want to see leverage in the OPEX side and certainly we want to see that translate into higher EBITDA margins.

Richard Eastman -- Robert W. Baird and Company -- Analyst

OK. All right. Great. Well, thank you and tremendous year.

Anders Gustafsson -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Paul Coster of JP Morgan. Please go ahead.

Paul Coster -- J.P. Morgan -- Analyst

Yes, thanks for taking my questions. So, backlogs pipeline is up as well. Can you give us some sense of how much visibility the backlog gives you either in sense of the quarter or even the year? And as for the overall backlog-plus pipeline, what's in the mix there that just points to trends in your business? Thank you.

Anders Gustafsson -- Chief Executive Officer

Yes. So, the pipeline that we have as we enter a quarter is -- gives us, obviously, a better -- much better visibility into the quarter. It doesn't necessarily tell us much about the second half of the year. But having a bigger backlog as we go into quarter gives us a lot more confidence, obviously, about the outlook.

The pipeline is more what drives the longer-term outlook, and we have a very diligent and disciplined process to work with our sales teams and our direct customers, our channel partners to develop pipelines for all the direct customers, but also for different segments and doing bottom up and top down and triangulate in a variety of ways. So, that's what gives us the more of -- the visibility for the, say, the second half or the out quarters. And maybe, Joe Heel, you want to add something?

Joe Heel -- Senior Vice President of Global Sales

Yes. Both our backlogs, which we have continuously building and have contributed significantly to the success we had in 2018 as well as the pipelines have geared toward the visibility of about two quarters at a very granular level. Now, to give us visibility beyond that, we have expanded for our largest customers and for large deals in particular a visibility to -- three years, where we look at how we expect our business with individual customers to evolve over a three-year time period. So, that gives us a longer term -- although it's more of a qualitative view of where things are evolving.

If you look at trends that we can see in that, one of the trends that we already talked about earlier is the fact that of those remaining 10 million devices that we see out there, a significant portion of them are in the logistics, warehouse, and manufacturing space. We also see in terms of trend, the opportunities in areas that we called adjacencies in the earlier comments, things like tablets and RFID, are showing up quite prominently in that visibility we're getting from that pipeline discipline.

Paul Coster -- J.P. Morgan -- Analyst

Excellent. The other question I have is, it sounds like the small-to-medium size customers are even stronger in North America, the enterprise customers, can you comment on that -- why that might be?

Joe Heel -- Senior Vice President of Global Sales

The -- a similar trend that we just talked about in terms of manufacturing and P&L, there's a correlation between these, is that the first adopters of the Android solutions that we put out were large customers. And now medium size and smaller customers are adopting those solutions as well. Now, Android is only one example in the area where this takes place. This is also true for some of the other innovations that we've brought to market, some of the solutions we've brought to market.

And I think we're seeing now that some of these solutions are well established in the market that are SMB customers supported by our channel partners and our channel ecosystem are now gaining the confidence to also adopt those solutions, which is giving us a second wave of growth for many of those.

Anders Gustafsson -- Chief Executive Officer

And I would just emphasize that the strength in the SMB market didn't just happen to us. That's a consorted effort. We have developed a number of initiatives to help boost our business at the, say, lower end of our market to help penetrate that more deeply because that was an area that we felt we were not as well-penetrated as we were in some of the higher-end markets.

Paul Coster -- J.P. Morgan -- Analyst

Thank you.

Operator

Our next question comes from Keith Housum of Northcoast Research. Please go ahead.

Keith Housum -- Northcoast Research -- Analyst

Good morning, guys. I appreciate the opportunity and congratulations on the call -- on the quarter and the year. Can I ask you, is it possible to prioritize, I guess, some of the growth drivers are for, not necessarily the mobile computer business, but they did a capture in the printing business? I think you guys covered a lot of the growth drivers in the mobile computers, but I want to understand how the other two segments are still growing very strong as well?

Anders Gustafsson -- Chief Executive Officer

Yes, there is a number of -- I'll start by just some strong secular growth trends that are driving growth across all our product lines. The e-commerce is one, the omni-channel piece, the on-demand economy, those are all broader secular trends that are requiring more track-and-trace type technologies. So it helps us under the mobile computing side, but it also helps us on printing, on scanning supplies, so all of those areas. Then we see when we get into these new, say, newer areas that once we deploy our first rollout, the customers sees the flexibility of many of our new products by being so much more connected.

So, if that's a mobile computer or a printer they can do a lot more with it. So, they see more and more new used cases that they can apply. If I go back again to the old Microsoft days, I think that an average mobile computer will probably run a couple two, three applications. Today, we routinely see customers running 30 applications on one of our devices.

So, those are great drivers for it, and I will say the competitiveness of our portfolio is very strong today. We launched more new products in 2018 than we've done in the history of the company, and they're all ramping up nicely and helping us to extend our lead into markets and driving growth.

Keith Housum -- Northcoast Research -- Analyst

Great. Thanks. In my follow-up, Olivier, can you just kind of share us some of your logic in terms of expanding the range for your leverage target from 2 to 2.5 down to 1.5 to 2.5?

Olivier Leonetti -- Chief Financial Officer

We want to have flexibility to manage our cash. We want to invest in priority in the business either organically, we mentioned R&D, go-to-market would be another one or through M&A. And we are in the process of finalizing a new acquisition with Temptime after Xplore. Another one we discussed, Keith, in prior calls, once we reach the bottom of our range, we believe that share buyback would become a consideration.

So, that's a bit of a rationale for the range as it is set up now.

Keith Housum -- Northcoast Research -- Analyst

Great. Thank you.

Anders Gustafsson -- Chief Executive Officer

Thank you, Keith.

Operator

Our next question comes from James Faucette of Morgan Stanley. Please go ahead.

James Faucette -- Morgan Stanley -- Analyst

Great. Thank you very much for the frank conversation this morning. I wanted to dig in really quickly a little more on pipeline and visibility. How would you compare the visibility in pipeline that you have today versus, say, a year ago, both in terms of REIT, but also in terms of makeup? It seems like there's been a lot of conversation about more small and medium-sized businesses.

Are they also making up a greater proportion of your pipeline and visibility? And I'm just trying to get a little bit color on how it may vary today versus a year ago.

Anders Gustafsson -- Chief Executive Officer

So, I'll start, and then I'll have Joe provide some more detail. But I'd say, the overall visibility from our pipeline is probably similar to what it was a year ago, maybe a little better, but it's more balanced and will probably be the biggest change. We were going into 2018, I would say, our mobile computing and retail segments were -- we were more dependent on those pipelines to support kind of the growth. Today, the -- it's much more balanced.

We expect our scanning portfolio to have a very good year, printing to a very good year as well. Not that they didn't have it last year, but we have a stronger pipeline for those areas. So, similarly across the vertical markets, we have -- we ended up with a very balanced growth in 2018 and we see healthcare, P&L, manufacturing driving more growth this year. And equally on the geographic side, we're very diversified and we have a good pipeline for each of our geographies that supports the outlook.

Maybe, Joe?

Joe Heel -- Senior Vice President of Global Sales

Yes, I would say, from a sales perspective, increasing pipeline visibility is an ongoing quest, and one that we've invested in quite significantly in the last year to improve our capabilities on a number of dimensions. One dimension is to improve visibility, in particular, in the printing and scanning areas where the deals are smaller, to get that visibility sooner and at a more granular level, and second would be to get more visibility out to longer term, right. With the growing importance of large deals in our business mix, having visibility to those is extremely important for both our planning purposes, internal as well as guidance we give and other things like that. So, we have invested in both of those and it is helping us.

Olivier Leonetti -- Chief Financial Officer

I mean, James, an additional color yet, if I may, we have been very intentional over the last more than two years to really diversify the business, and you see this diversification being reflected in the financial performance of the company and in the guide as well.

James Faucette -- Morgan Stanley -- Analyst

Great. I appreciate that Olivier. And then, just a follow-up question for you Olivier. And when you look at -- I appreciate, and I think we all appreciate the clarity as to the type of headwind you're expecting from FX, but can you give us a little bit of insight into how you formulate that, kind of what the exposures are and then what you're using as reference points to come up with your expected headwind for this year?

Olivier Leonetti -- Chief Financial Officer

So, FX in the second half of '18 started to be neutral to the financial performance of the company. It will be a slight headwind in '19. The reason for this is that we're edging against the euro, which is the only currency really against which we have some exposure, but we have many levers to manage our P&L. FX is one of them, and we believe that we have enough levers to be able to adjust to different effects and still deliver a good financial performance.

James Faucette -- Morgan Stanley -- Analyst

That's great. Thank you so much.

Operator

And our last question will come from Saliq Khan of Imperial Capital. Please go ahead.

Saliq Khan -- Imperial Capital -- Analyst

Great. Thank you. Hi, Anders, Olivier. Guys, two quick questions on our end.

The first one being is, what did you hear at the NRF conference that gives you a bit more confidence that many of these retailers are willing to open up their wallets, invest in your retail technologies? Are you seeing improved purchasing decisions on their part as well?

Anders Gustafsson -- Chief Executive Officer

I think we saw -- first, maybe I think NRF was a great show for us this year. We had a very exciting booth and we had record traffic through the booth, we had record number of meetings with customers, and the feedback we got was very, very good. So, we certainly felt that was a great show and it helped to give us some confidence for the year. I'd say, the larger retailers, particularly say in the U.S., have largely been committed to an omnichannel e-commerce type strategy for the last couple of years, and we've seen quite a few orders from that.

But what we're seeing is the -- that trend is moving kind of further down into Tier 2, Tier 3 retailers. So, we see more customers, more retailers wanting to make this -- a kind of similar type of investments in new solutions to enable them to execute on their omnichannel strategy and compete against the e-tailors. So -- and the -- but I think our types of technologies are essential to their thinking. We -- they see us as a partner who can help enable them to pursue those strategies and help them realize those strategies.

So, it was a great show from all aspects for to us. And, Joe?

Joe Heel -- Senior Vice President of Global Sales

Yes, I might add some of the things we mentioned earlier were very prominent at NRF and did give us a lot of confidence. For example, what we talked about already with the new use cases that we're seeing, retailers are embracing those. For example, the voice collaboration between their associates since one of those, giving a device to everyone of their workers, not just a few selected that are involved in inventory management. Those types of trends give us confidence.

And another very important trend that we see support for is that the first wave of adopters, who went into deploying mobile computing solutions on an Android operating system are early on, for example, with our MC40 device are thinking of refreshing those at this point. So that means there is longevity and continued opportunity in the retail space.

Saliq Khan -- Imperial Capital -- Analyst

Got it, guys, and thank you. And this was my follow-up to that, what did you change over the past year within your either your sales or your channel strategy? Especially in this type of growth rate, are you seeing a faster service and software versus hardware sales as well within that vertical?

Anders Gustafsson -- Chief Executive Officer

So, generally speaking, we saw faster service and software revenue growth in Q4 than we've done before. There was a very -- we're very pleased with the performance we saw there. And generally, the software content in our solution is going up and up and up. We've -- if you think of the history of the company, we started off with, say, relatively dumb devices that could read a barcode and transfer that information to another system that would do something with it to, say, our Android devices, where you read it, you can manipulate the data, you can gain actions from it, you can do a lot with that.

Next step now is to have much more smart infrastructure. So, things that can automate the data capture that can automate the dispensing of actions, too. So, software is becoming a bigger and bigger part of what we do and how we develop new solutions to add more and more value to our customers.

Olivier Leonetti -- Chief Financial Officer

A few additions to things we've changed and done in our sales and channel strategy over the course of the last year. One is we have invested some of the improvements that we've had in our economics. We have reinvested those into go-to-market resources, both internally as well as with our channel partners. Our commitment to our channel has continued to expand and the importance of our channel program has only increased as we have expanded the benefits and membership in that program.

The membership in our program has grown quite significantly over the last year. We've also invested structurally in the organization in sales and go-to-market in a dedicated solutions group, sellers that are specialized and focused on selling the solutions that make up the core of our intelligent edge to realize our EAI strategy. So, we have a dedicated group of that now in every one of our regions. So, those are some of the highlights of changes.

Saliq Khan -- Imperial Capital -- Analyst

Perfect. Thank you, guys.

Operator

This concludes our question-and-answer session. I would like to turn the conference back to Mr. Gustafsson for any closing remarks.

Anders Gustafsson -- Chief Executive Officer

Thank you. Yes, as we wrap up, I want to thank the Zebra team and our partners for another great quarter and an exceptional 2018. We are off to a strong start to 2019 and see a solid year ahead. We look forward to welcoming the Temptime team once we close the transaction.

Have a great day, everyone.

Operator

[Operator signoff]

Duration: 60 minutes

Call Participants:

Mike Steele -- Vice President of Investor Relations

Anders Gustafsson -- Chief Executive Officer

Olivier Leonetti -- Chief Financial Officer

Jason Rodgers -- Great Lakes Review -- Analyst

Joe Heel -- Senior Vice President of Global Sales

Jim Ricchiuti -- Needham and Company -- Analyst

Brian Drab -- William Blair and Company -- Analyst

Richard Eastman -- Robert W. Baird and Company -- Analyst

Paul Coster -- J.P. Morgan -- Analyst

Keith Housum -- Northcoast Research -- Analyst

James Faucette -- Morgan Stanley -- Analyst

Saliq Khan -- Imperial Capital -- Analyst

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