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Tech Data Corp  (NASDAQ:TECD)
Q4 2019 Earnings Conference Call
March 07, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to Tech Data Corporation's Fiscal Year 2019 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct the question-and-answer session. (Operator Instructions) Today's conference is being recorded, if you have any objections you may disconnect at this time.

Now I will turn the meeting over to Arleen Quinones, Corporate Vice President of Investor Relations. Ma'am, you may begin.

Arleen Quinones -- Corporate Vice President of Investor Relations

Good morning, and welcome to Tech Data's Earnings Conference Call and Webcast to review our financial results for the fourth quarter and fiscal year 2019. I am joined this morning by Rich Hume, Chief Executive Officer; and Chuck Dannewitz, Executive Vice President, Chief Financial Officer.

For a detailed look at our results, please review our financial highlights summary slide presentation posted this morning on the IR portion of our website located at www.techdata.com/investor. Unless otherwise specified, all growth comparisons made on today's call relate to the corresponding period of the previous fiscal year.

Before we begin, I would like to remind all listeners that today's earnings press release and certain matters discussed on this call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the Company's current expectations and are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, those factors identified in the press release and in our filings with the Securities and Exchange Commission and our most recent Annual Report on Form 10-K, which identify risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.

Please be advised that the statements made during today's call should be considered to represent the expectations of management as of the date of this call. The Company undertakes no duty to update any forward-looking statements to actual results or changes in expectations.

Also throughout this conference call, we will reference to both GAAP and non-GAAP financial measures. Non-GAAP measures exclude certain items contained in our GAAP financial results. Detailed reconciliations between results reported in accordance with GAAP and non-GAAP financial measures can be found in the press release and on the Investor Relations portion of our Company's website.

In addition, this call is the property of Tech Data and may not be recorded or rebroadcast without specific written permission from the company.

I will now turn the call over to Tech Data's Chief Executive Officer, Rich Hume.

Richard T. Hume -- Chief Executive Officer

Thank you, Arleen. Good morning, everyone, and thank you for joining our call today. I'm very pleased to report that our teams delivered an excellent Q4, capping a strong finish to a record year for Tech Data. Fiscal year '19 worldwide sales grew to more than $37 billion and non-GAAP operating income and earnings per share increased by double-digits, to the highest level in Tech Data history.

In addition, we generated $380 million in cash from operations, earned an adjusted return on invested capital north of 13%, paid down $200 million of debt and returned $107 million to our shareholders through our share repurchases. Among our Company's most notable achievements during fiscal year '19 is the completion of our major integration efforts and the attainment of the synergies we committed to when we announced the TS deal 2.5 years ago. And to cap off the year, Tech Data was once again named one of the world's most admired companies by Fortune Magazine for the 10th consecutive year. It's a tremendous honor to be recognized, let alone be part of this prestigious group for the past decade.

I would like to thank my Tech Data colleagues around the globe for delivering outstanding Q4 and fiscal '19 results and congratulate them on a job well done. Our worldwide teams executed exceptionally well during fiscal '19 capitalizing on a more robust IT demand environment than we anticipated entering the year, driven by a combination of strong economies and employment levels, low interest rates and the need and desire for businesses of all sizes to transform digitally.

In addition to the strong financial performance, fiscal '19 was a year of strategic progress. As you may recall, our four pillar strategy includes investing in next generation technologies, strengthening our end-to-end portfolio, transforming Tech Data digitally and optimizing our global footprint. We summarize our strategy as moving to higher value, this means delivering higher value solution offerings to our channel partners, providing our colleagues with enriching opportunities and creating value for our shareholders through an enhanced financial profile and emphasis on cash flow and return on invested capital.

During fiscal '19, we continued to invest in our strategic priorities including next generation technologies. You may have seen our recent announcement launching our cloud solutions factory, as businesses of all sizes strive to digitally transform their increasingly investing in cloud solutions.

Through the cloud solutions factory, we deliver unique value to our partners by simplifying some of the most time consuming and complicated parts of cloud deployments, including automating complex processes, such as full infrastructure platform and software-as-a-service deployments and building connections, configurations and integrations. Additionally, we are able to consolidate different billing models like subscription and consumption into a single bill for the partner. The result is a suite of reliable solutions that help our partners reduce costs, maximize efficiency and demonstrate more competitive value.

Our cloud solutions factory clearly illustrates the evolution and the future of IT distribution, including both carrying out physical transactions and aggregating high value cloud-based solutions.

Tech Data's position at the center of the IT channel positions us to serve both traditional and born-in-the-cloud vendors and the global network of conventional customers, as well as new customers such as ISVs and MSPs. This partner ecosystem together with our StreamOne platform gives us high value-added capabilities to deliver end-to-end next generation IT solutions, solutions that will enable our channel partners to scale in multiple markets serving a multitude of customer needs.

As we continue to evolve our business and move to higher value, we also have an opportunity to leverage the powerful combination of Tech Data's global scope and local expertise. We recently took another important step in strengthening our next generation technology offerings with the formation of two new global practices. One focused on security solutions, the other focused on analytics and IoT solutions. These global practices will bring together subject matter expertise from across our business to build on our current offerings and allow us to further accelerate our next generation technology value proposition across our three regions.

From a financial perspective, moving to higher value means being highly prescriptive in managing our business to enhance our long-term profitability, generate strong cash flows and optimize return on invested capital. Tech Data has always managed business in a disciplined manner. Going forward, we will heighten this focus by ensuring we are getting the right returns from the capital we deploy. As we move to higher value and accelerate growth in higher return businesses, we will be more deliberate in our portfolio optimization actions to optimize return on invested capital across our book of business and in turn creating value for our shareholders.

In summary, our fiscal '19 results demonstrate that our differentiated end-to-end portfolio and skills and capability are strengthening and expanding our position as a trusted partner to the world's leading technology vendors while serving our customers better than any other company in our space. Our past year's performance also reveals the enhanced financial profile of the new Tech Data, delivering strong earnings growth, generating solid cash flow and an industry-leading return on invested capital.

Looking ahead, the IT demand environment is expected to continue to be healthy, and we expect to grow organically at the rate of the overall IT market for the current fiscal year. We expect this growth to be offset in part by targeted portfolio optimization actions, which will allow us to free up related working capital and enable us to accelerate our move to higher value.

Our Q4 results are evidence that these actions are already under way as we execute our portfolio optimization strategy throughout fiscal '20, we expect revenue growth to moderate but our mix of higher value businesses to improve setting us up to drive better returns for our shareholders.

Additionally, throughout the fiscal year, our global business optimization program will yield significant cost savings. Approximately half of which we plan to invest in strategic initiatives, to ensure we continue to be well positioned for future growth. As a result, we anticipate adjusted non-GAAP operating income growth of mid single digits and adjusted non-GAAP earnings-per-share growth of approximately 10%. In support of our commitment to enhancing shareholder value and as a reflection of our Board's confidence in our business, today we are announcing a $100 million increase to our share repurchase program.

I want to stress that we are confident in our strategy and in the many opportunities that exist. Despite a number of macroeconomic uncertainties and headwinds that we face in fiscal '20, we also have a high level of confidence in our team's ability to execute and capture the market opportunities as demonstrated by this past year's performance. As we look ahead, we will continue to focus on what we can control, knowing that our flexible business model allows us to adjust relatively quickly to the realities of the market.

We will remain disciplined in managing our growth, pursuing opportunities that are aligned with our strategy of moving to higher value and that deliver enhanced returns to our shareholders.

Before I turn the call over the Chuck, I want to once again thank my colleagues for their hard work and dedication, as well as our channel partners for their support and commitment to Tech Data throughout the year.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Thank you, Rich. Good morning, everyone, and thank you for joining us today. As Rich mentioned, we are very pleased with our Q4 results and with the strong execution by our teams. Q4 worldwide sales were $10.5 billion, an increase of 4% and 8% in constant currency. Worldwide gross profit increased 5% to $649 million and gross margin expanded to 6.2% compared to 6.15% in the prior year quarter. The gross margin improvement is primarily due to vendor price increases in anticipation of a change in trade policy. Absent this benefit, our margins were stable on a year-over-year basis.

Non-GAAP SG&A expenses, which excludes $23 million of acquisition related intangibles, amortization expense, decreased $13 million or 3%. As a percentage of sales, non-GAAP SG&A expenses decreased 29 basis points. Worldwide non-GAAP operating income was $261 million, up $45 million or 21%, significantly above our sales growth rate. Non-GAAP operating margin improved 34 basis points to 2.49%.

Our GAAP effective tax rate in Q4 was 12%. During Q4, we have finalized our analysis of the one-time transition tax related to US tax reform and reduced our provisional estimate by $25 million. Our non-GAAP effective tax rate in Q4 was approximately 25%. Non-GAAP net income was $171 million, an increase of $36 million or 27% and non-GAAP earnings per diluted share increased by 30% to $4.55.

Turning now to our regional results. The Americas region delivered an exceptional Q4 performance, with sales reaching $4.2 billion, an increase of 10% and 11% in constant currency. The growth in the Americas was broad based with significant growth in cloud, storage, networking and notebooks. The Americas non-GAAP operating income was $125 million, an increase of $40 million or 47% and as a percentage of sales improved 74 basis points to 2.95%.

Our European region reported sales of $5.9 billion, essentially flat on a reported basis and 5% growth in constant currency. We experienced growth in constant currency across both Endpoint and Advanced Solutions. Sales growth in these portfolios was fueled by cloud, security, servers, storage, networking and mobility.

Europe's non-GAAP operating income grew to $133 million, an increase of 2% and 7% on a constant currency basis and as a percentage of sales improved 4 basis points. And in our Asia-Pac region, sales increased 8% to $328 million and 13% in constant currency, with strong growth in networking, servers and cloud. Non-GAAP operating income in Asia-Pacific grew 30% to $10 million and as a percentage of sales improved 52 basis points.

Our Asia-Pacific region has underperformed relative to our original expectations. Progress in the region has been slower than expected, primarily due to challenging operating environments in certain countries, as well as higher than anticipated investments and infrastructure to grow and operate our business in the region. As a result, we recorded a non-cash goodwill impairment charge of $47 million.

The Asia-Pacific market definitely remains important to our overall strategy. We are committed and plan to continue to invest in the region and are forecasting continued operational and financial improvements.

Turning now to some of our balance sheet and cash flow metrics. Our team's continued focus on working capital resulted in a cash conversion cycle of 15 days, lower by one day compared to the prior year. We generated $231 million of operating cash flow in Q4, bringing our fiscal year cash flow from operations to $380 million and we exited the quarter with a cash balance of $799 million. And for the trailing 12 months, we earned an adjusted return on invested capital of 14%. Excluding a $25 million one-time benefit realized in Q3, related to a collection of accounts receivable balance previously considered uncollectible, our adjusted return on invested capital was 13%. This is well above our weighted average cost of capital of approximately 9%.

During Q4, we purchased approximately 808,000 shares for $63 million. During Q4, we purchased approximately 808,000 shares of our stock for $63 million. Since October 2018, when we announced our current authorization through January 31, we repurchased a total of 1.4 million shares for $107 million at an average cost of approximately $75 per share.

As Rich indicated, our Board has approved an incremental $100 million share repurchase authorization, which demonstrates our Board's confidence in our strategy, capital structure and financial performance. This brings the remaining amount to be purchased to $193 million under the existing authorization.

Our capital allocation objectives are to maintain our existing investment grade credit rating, have adequate liquidity to fund our growth, invest in selected M&A and to return excess free cash flow to shareholders via buybacks. We will continue to maintain a balanced approach in the use of our free cash flow, accelerating our strategy through selective M&A and returning cash to our shareholders through share repurchases, the mix and pace of which will depend on the opportunities available within the market.

Turning now to our guidance for the first quarter ending April 30, 2019, we expect sales to be in the range of $8.3 billion to $8.6 billion and non-GAAP earnings per share to be in the range of $1.80 to $2.10. This guidance assumes an effective tax rate in the range of 24% to 26%. This guidance also assumes an average US dollar to euro exchange rate of $1.14 to EUR1.

Currency is expected to be a significant headwind in Q1, impacting year-over-year sales growth by approximately 4% and non-GAAP EPS by approximately $0.07. From a seasonality standpoint, we want to remind you that our first quarter is historically our lowest sales and earnings quarter.

In addition to our quarterly guidance, we thought it would be helpful to provide you with high level assumptions you may wish to consider in your fiscal year '20 modeling of our financial performance. Please note this is not to be considered annual guidance and we currently do not intend to provide updates, other than our normal quarterly guidance throughout the year.

For fiscal '20, we expect low single-digit revenue growth, this assumes growing organically at the rate of the overall IT market, partially offset by the targeted portfolio optimization actions that Rich discussed previously.

We anticipate adjusted non-GAAP operating income growth of mid single digits, as we execute the GBO program to drive cost efficiencies while investing in our strategic initiatives to accelerate our move to higher value. We expect annual interest expense to be in the range of $100 million to $105 million and an effective tax rate between 24% and 26%. We expect adjusted non-GAAP EPS growth of approximately 10% as a result of the improved operating performance and shares repurchased during fiscal 2019.

As a reminder, the adjusted non-GAAP operating income and earnings-per-share growth rates provided exclude the Q3 fiscal year '19 benefit from the recovery of the accounts receivable balance. This item favorably impacted fiscal year '19 operating income by $25 million and earnings per share by $0.47.

For our cash conversion cycle, we plan to be relatively consistent with last year with variability between quarters depending on the product mix and related asset velocity. We expect capital expenditures of $90 million to $100 million and an adjusted return on invested capital of 13% to 14%. These modeling assumptions also assume an average US dollar to euro exchange rate of $1.17 to EUR1. In terms of seasonality, in line with our historical performance, we expect higher earnings in the back half of our fiscal year.

We would now like to open it up to questions. Operator?

Questions and Answers:

Operator

We'll now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Ananda Baruah with Loop Capital. Please go ahead with your question.

Ananda Baruah -- Loop Capital -- Analyst

Hi, guys. Hey, appreciate you guys taking the question. Hey, just a couple if I could, the first is, I had another earnings call, so I jumped on about 5 minutes after 9 this morning, could you just walk back through and maybe provide a little greater detail in the sort of the remarks around the move to higher value, what's incremental to some degree you've been doing that for a while now. So what's incremental and maybe what's the -- kind of what's the strategic target there, strategic vision there? And then I have a follow-up as well. Thanks a lot.

Richard T. Hume -- Chief Executive Officer

Sure, Ananda. This is Rich. Good morning to you. So a couple of things. Number one, when you take a look at the strategy and we've talked about this on multiple calls, we're interested to move where there is higher levels of growth within the overall industry. So read that as cloud, analytics, IoT and security, are the place that we're investing in as we move forward.

I think when you talk about incremental and what has changed, we have always been very focused on our portfolio and managing the health of our portfolio. But as we move forward, we're going to be more deliberate in terms of calling out those things that do not provide a good return for our Company or our shareholders.

Typically when we work on those things, there are one of three reactions. The first reaction is, we work with the vendor community and we get a better set of margin opportunities for ourselves. The second, would be that we could increase our prices and, in fact, perhaps lose a little bit of business but, overall, have a better financial return. Or the third is that we don't find a way forward, and then we ultimately divest some segments of our business.

So I think that the outcome of that will provide us with better overall financials, better cash to be deployed into the areas that we're focused on going forward. And again, this is where the growth is more accelerated relative to the average of the industry.

Ananda Baruah -- Loop Capital -- Analyst

That's helpful. Okay, I appreciate that. And then the follow-up is just with regards to some of the modeling comments that you guys made, so just for clarification, fiscal year '20 rev growth low-single digits. Longer term, do you think you can outgrow the IT market with this move more toward higher value from mix? And if not, why wouldn't that be the case?

And then just with regards to the mid-single-digit operating profit dollar growth and the 10% EPS growth, is that both the fiscal '20 and long-term modeling guideline, or is it really a fiscal year '20 guideline? Thanks a lot.

Richard T. Hume -- Chief Executive Officer

Yeah. Let me handle the first part of the question and then I'll send it over to Chuck for the second part of the question. So depending on which industry analyst you are following, I think that the guide is that for the coming year, the market is going to be somewhere between a 3% to 5% market. Clearly, we fully intend to execute our core within that span of the market opportunity and then it will offset some of that growth, if you will, by being more prescriptive as it relates to the portfolio actions that we take.

Long-term, I think that you can look at our history and expect Tech Data to have the same type of performance relative to the market that you have seen in the past. There will be a period here where we work the portfolio, and again, we'll offset some of that growth, but we are very confident in the operating plan that we've got for fiscal '20 and we are feeling really good about our future. And I think that, if you take a look at our Q3 and Q4, some of this activity in terms of being more deliberate with the portfolio is under way. So this is not a cold start or something that's new. It's something that we began and then really built into our operating plan moving forward. And I'll turn it over to Chuck now to talk about the modeling assumptions provided.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Good morning, Ananda. The one thing that I would add that you asked, this is guideline specific to fiscal year '20. I would also add that our market growth we intend to grow faster in the segments that are strategic to us and be at market with the rest of it and then offset by our portfolio actions. So, it really is a mixture really what we're getting after. And it really goes to our strategic direction of our overall company. And we're very confident that we're moving in the right direction for our shareholders.

Ananda Baruah -- Loop Capital -- Analyst

That's very helpful, guys. Okay, excellent. Thanks so much.

Richard T. Hume -- Chief Executive Officer

Thank you, Ananda.

Operator

Our next question is from Adam Tindle with with Raymond James. Please proceed with your question.

Adam Tindle -- Raymond James & Associates -- Analyst

Okay. Thanks, and good morning. I just wanted to start Rich on a kind of a high level strategic question. Following the TS acquisition and I'll probably do a poor job of summarizing, but I think your world view seemed to be that it was important to get bigger, the industry might consolidate down to a couple large distributors and vendors would really value an end-to-end portfolio. Here we are a couple years later talking about parsing the portfolio, deselecting business to improve ROIC. So I am just hoping you can help me understand what changed in the initial thesis, why the pivot now? And secondly, why you are still committed to Asia in light of this? It would seem to be a region that would be tough to have an attractive ROIC based on what you have seen so far.

Richard T. Hume -- Chief Executive Officer

Sure. Adam, thanks for your question. So, number one don't over-read the portfolio. We will likely participate in most of the segments, if not all of the segments we're in today. There are particular relationships within those segments that deliver a lower overall return than others. So the end-to-end idea of our value proposition is absolutely in fact. And I think that when you take a look at the capabilities that we deliver in that end-to-end portfolio, they'll continue well into the future. So I would just suggest that you think about in the context of the overall portfolio things that provide little or no return are the things we are getting after and we are going to use that cash to really fuel our future in terms of where there is more growth within the market.

Again, I want to reiterate that this is something that we've done for many, many years but we are going to just be a little bit more aggressive as it relates to those actions. I mean, we feel as if we've got a great set of assets on the ground and we want to get a fair return for all of the value that we bring to the market. Secondly, on your question on Asia-Pacific, we actually had to make more investments in that piece than we had carried out when we were thinking about making the TS acquisition, we ended up having to make, again, more investment to place that asset to where it needs to be for the future. We see really good opportunities in selected markets in Asia-Pacific going forward and we are absolutely committing to continue to invest where we see those opportunities.

Adam Tindle -- Raymond James & Associates -- Analyst

Okay. And maybe if I could just get one quick follow-up maybe for Chuck on the high level assumptions for the fiscal year. When we consider the GBO cost savings benefit, it would seem to suggest pretty minimal growth in operating profit dollars, almost none, and I am considering the AR benefit in that statement. I know you are parsing the portfolio, but revenue is growing based on that high level assumption and we are used to Tech Data generating some operating leverage on that revenue growth, mix should be moving in your favor as you are getting more selective. So maybe just help us understand why there wouldn't be much profit dollar growth outside of the cost savings in fiscal 2020.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Adam, there really is growth in there, and when we take these portfolio actions, there is some operating income that does come out, but it doesn't compare, it's very low as compared to the amount of capital deployed for those opportunities. And so it makes sense to take that operating income off the table, harvest that cash and reinvest in the business, whether that be through additional organic growth in our strategic areas or through selective M&A or through our share repurchase program. We're set up to deliver the best value for our shareholders.

Richard T. Hume -- Chief Executive Officer

Think about this, when we look at our portfolio, we look at the GP dollars that an opportunity can generate, we take a look at the SG&A we need to invest and the capital we need to deploy. And those are the elements that help guidance relative to where we really want to accelerate growth or where we really want to moderate our business, then reinvest that cash or those dollars in areas of higher growth or better financial opportunity overall.

Again, when you take a look, it's not going to be, you use the word parsing the portfolio, I think that that probably goes a little bit too far. I think that we are in major categories of mobility, within laptops, within desktops, within datacenter, right down the list, we will continue to support all of those categories. We're just going to be more selective relative to where we can get the best returns for our overall business and our shareholders.

Adam Tindle -- Raymond James & Associates -- Analyst

That's helpful. Thanks.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

And Adam, just one more point just to clarify, the growth that we have in our modeling assumptions does take into account the one-time benefit of the AR collection this last year. So I just want to make sure everybody is clear on the modeling assumption.

Adam Tindle -- Raymond James & Associates -- Analyst

Got it.

Operator

Thank you. The next question is from the line of Matt Sheerin with Stifel. Please proceed with your question.

Matt Sheerin -- Stifel -- Analyst

Yes. Thank you. Just following-up on Adam's question, just regarding the assumptions. Yeah, it looks like apples-to-apples, you are going to see at least mid-single digit basis point improvement in op margin based on your assumptions. Is that going to come from gross margin improvement on the mix and I know modeling gross margin quarter-to-quarter is very difficult given the back-end loaded nature of the tech solutions business rebates, et cetera. But how should we think about gross margin versus SG&A percentage given the fact that you do have OpEx cost but it sounds like there's investments offsetting that?

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Right. I mean, we don't give specific guidance in regards to gross profit margin percentages and SG&A percentages, but it's safe to say in our modeling that we would see gross margins ticking up, as we are more selective and move to higher value. I think that'd be a fairly safe assumption. But I tell you, we do have vendor partners and opportunities where margins are lower than what our average is but they provide SG&A funding.

And the return on invested capital on those opportunities is significant. And so that model is a very good model and if we grow faster on that, that would have a negative impact on our gross margin percentages. We really need to get back to what Rich was saying earlier, which is gross profit dollars, how much SG&A is involving, obtaining those gross margin dollars. And then the capital deployed to earn net operating income and the return for our shareholders.

And importantly, strong cash flows that we intend to have a balanced approach between selective, targeted M&A, as well as share repurchases for to drive value. It's important to note that our modeling assumptions do not include share repurchases that we'll be making throughout this next year.

Matt Sheerin -- Stifel -- Analyst

Okay. Thank you. That's helpful. And just a question just on the demand outlook, your guide for Q1 suggests sort of flat year-over-year, I know there is OpEx -- I mean, sorry, FX in there as well, but also implies a better second half. I know we still have some tailwinds with the PC notebook upgrade cycle and servers that appears to be getting in the leader innings there. So could you just give us a view of the hardware refresh cycle and then the differences you're seeing in your macro terms in terms of Europe versus US and North America?

Richard T. Hume -- Chief Executive Officer

Yeah. Matt, it's Rich. Thank you. Good morning. So couple of thoughts. Number one, I believe if you go to the midpoint of our guidance in constant currency, it's about a 3% revenue growth, there is about a four point headwind in 1Q on our global revenue associated with the currency change predominantly euro to dollar. So that's pretty big headwind overall, I think that when I look at the regions globally, it feels as if Europe is slowing a little bit overall. And I think that the Americas are still reasonably healthy from my insights or what I have been able to discern or read. So that's the way I see it currently from a geographic perspective.

And then I think that when you take a look at the guide from the PC concentrated vendors, relative to last year they're growing but the growth is lower than it was in the calendar '18 for them. And so I think that, our guide sort of reflects the same, sort of, alignment, if you will, on a year-to-year basis, as the PC vendors are calling out.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

And I would add just a couple quick comments in regards to FX and the headwind, it really does moderate as we move throughout the year. In fact, that becomes a slight tailwind, instead of a headwind. The euro was at $1.23 for Q1 of last year versus our $1.14 guide. If you look back at last year, then it drops off, as we move throughout the year it goes to $1.17 in Q2, is what we experienced and then all the way down to $1.14 in this last quarter. So it is a headwind during this first quarter.

I'll also say that we are off to a good start in regards to the investments we are making in our business to accelerate our growth and we are continuing what we did in the last half and the first half of last year and you are seeing the results coming through this year. So we do have a high level of investments already in Q1 included in our guidance.

Matt Sheerin -- Stifel -- Analyst

Okay. Thank you.

Operator

The next question is from the line of Param Singh with Bank of America Merrill Lynch. Please proceed with your question.

Param Singh -- BofA Merrill Lynch -- Analyst

Hi. Thanks for taking my question. Firstly, it looks like you had some really good performance in Americas op margin this quarter, but based on the guide that seems to be falling off again and the year-over-year growth is going away. So can you delineate what really drove the op margin this quarter and why is it falling off and then what gives you confidence that that's going to recover to get to your full year fiscal '20 EPS expectation?

Richard T. Hume -- Chief Executive Officer

Yeah. Param, good morning. This is Rich, I'll start then I'll turn it over to Chuck. So you're right. I think all three geographies had a really good quarter but Americas had an exceptional quarter in Q4. When you take a look at the full year modeling assumptions at mid single-digit earnings growth and then doubled, approximately 10% earnings-per-share growth, that's pretty much where we're locked in and committed. So I really don't see it as necessarily a falloff, perhaps a moderation versus the 47% growth they had in operating income in Q4. But I think that the results are strong and consistent and provide good shareholder return as we move into FY '20. So I think -- to answer your question relative to Q4, number one on the list is excellence in execution. Then we did have some help that we've called out relative to, in other vendor price increases related to a regulatory change, that helped our margins in around 5 basis points on a global basis. So there was a little bit of help associated with that.

And then with our GBO, we were fortunate enough to accelerate some of those savings into our Q4 as well. So, it was the combination of excellent execution. And then execution as well with regards to the GBO, and then that one pricing opportunity that we were able to take advantage off.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

The only thing that I would add as well is that, a big piece of the accelerated operating income benefit has to do with leverage. So we have a certain amount of cost that we incur, Q1 is typically our weakest quarter throughout the entire year. You saw that happen last year and we said it was going to be back-half loaded, we're making the same call this year, Q1 is our weakest quarter and you will see a big uptick, we anticipate in the back half of the year.

Param Singh -- BofA Merrill Lynch -- Analyst

Right. So just to be clear then fiscal '19 and '20 are more leveraged to the back half than you've seen in prior years. Is that a fair assumption?

Richard T. Hume -- Chief Executive Officer

No.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

No, not at all.

Richard T. Hume -- Chief Executive Officer

No. So, I think, we told you last year that we expect to do 40% of our business in the first half of the year, 60% in the second half of the year. And I think Chuck is just basically saying that that same sort of paradigm that we have historically seen will be the way we see it as we move through this year.

Param Singh -- BofA Merrill Lynch -- Analyst

Got it. But, I mean, if I just look at the numbers you had 60% in the back half in fiscal '18, it's about I guess 65% in fiscal '19 ex the $0.47 benefit. So just trying to get a sense of that confidence you are getting. But if you still think that 60/40 is the right number to think then that's helpful. The other thing I want to ask is it looks like HP, Inc. fell off as a Top 10 vendor this quarter and then Apple was pretty weak on a year-over-year basis as well. Is it because you are diversifying furthermore(ph) into other vendors or is there topline headwinds that you are facing here in addition to your strategic choices?

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Param, this is Chuck, we don't comment about specific vendors, but I'll say this in regards to who's in and who's out of the 10%. As you broaden and we're broadening our overall portfolio of vendors, our vendor partners, just the overall size of our business and our other partners will dilute that. So that in itself will take some out of over the Top 10 to under the Top 10.

And then, just in regards to our mobility practice, we can comment on overall, we had a good quarter and we'll leave it at that for Q4.

Richard T. Hume -- Chief Executive Officer

Yeah. Q4 mobility had grown as a segment.

Param Singh -- BofA Merrill Lynch -- Analyst

Got it. And do you expect mobility to grow year-over-year into the next quarter in your guide?

Richard T. Hume -- Chief Executive Officer

Look, we're not going to get into the sub-segments of the business, but you should assume that, mobility will be a healthy business.

Param Singh -- BofA Merrill Lynch -- Analyst

Got it. Thank you so much for the color, guys. Really appreciate it.

Operator

Our next question comes from the line of Tim Yang with Citi. Please proceed with your question.

Tim Yang -- Citi -- Analyst

Good morning. And thanks for taking the question. I guess my first question is on the revenue impact of your target portfolio optimization, can you maybe just give us some color on how should we quantify the impact of our revenue and maybe our operating profit dollars as well?

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Yeah. No, we're not going to comment on the exact dollar amount, but you can kind of back into it based upon what we're growing everything else at market and then we're calling low single digits, you can kind of track and do the overall number.

Tim Yang -- Citi -- Analyst

Got it. And then you mentioned some trade policies contributed to some offside of your results. Can you maybe just elaborate a little bit on what are the change and versus a quarter ago and how that change actually in trade policy impact your sales outlook and operating margins? Thanks.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Right. During Q4, we did see a benefit from the vendor price increases related to the tariffs as they raise prices to us, we had inventory on hand and we sold that through and there was a pickup in Q4.

Richard T. Hume -- Chief Executive Officer

And it was about 5 basis points.

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Right.

Tim Yang -- Citi -- Analyst

Got it. That's all my questions. Thank you.

Operator

Our next question is from the line of Shannon Cross, Cross Research. Please proceed with your question.

Shannon Cross -- Cross Research -- Analyst

Thank you very much for taking my questions. I am curious we just met with a large vendor and they were talking about shifting some of their channel programs from rebating to more upfront support, which theoretically I guess should drive some upside revenue. I am curious if this is sort of an industry trend or more of a one-off with regard to this vendor and just in general anything you've seen in terms of shifts and how your partners are working with you?

Richard T. Hume -- Chief Executive Officer

Sure. Not exactly sure, which vendor you're relating to, but I can tell you having been around the industry for a long, long time, these dialogs at front-end and back-end and how to mix it from a vendor perspective are something that happen on a continuous basis. They all are trying to make those decisions based on optimizing their position relative to competition etcetera, etcetera. So I would tell you that, the activity has been there and will continue to be there as we look into the future. But there is no big move with all vendors heading in one direction that we're aware of. We see more of a I think a continuum of the ebb and flow the way vendors negotiate.

Shannon Cross -- Cross Research -- Analyst

Okay. Yeah. And I was just curious since things are slowing a bit in Europe if there was more of an industry trend to drive revenue or not, it doesn't sound like it. And then, I guess, my second question is just as you think about the product launches this year and then, obviously, some of the issues that have happened with regard to Intel's processors on the PC side and then in theory the Win 7 End of Life in January of 2020. I know you are talking sort of 60/40, I am just curious if there is a potential do you think if you look back to what happened maybe with XP for a bit more of a flush through of demand in the second half of the year. And then, again, when I think about some of the product launches from some of your partners that maybe even more back-end loaded this year. So I am just curious as we think about it how much conservatism you've probably built into your numbers given everything is going to happen from June probably until December? Thank you

Richard T. Hume -- Chief Executive Officer

Yeah. So a couple things. Number one is, take on the Intel question first, as you read some of the PC ecosystem concentrated vendors, they do talk about perhaps some revenue impact relative to their business in the tactical frame. I'd say that we also deal with that, I think they've done a good job managing through that process so far. I do believe that the Windows transition has provided a really good growth opportunity that stems back into last year and then as you point out will complete by 2020. But I don't know, my own personal opinion is, will there be a surge in the back end of the year relative to that? I don't have that crystal ball, but I tend to believe that it's more of a continuum of transition. So I would not anticipate a big burst in the back half of the year would be my speculation.

Shannon Cross -- Cross Research -- Analyst

Okay. Thank you.

Operator

Our next question is from the line of Keith Housum with Northcoast Research. Please proceed with your questions.

Keith Housum -- Northcoast Research -- Analyst

Good morning, guys. I want to understand a little bit more about some of the portfolio changes you guys are suggesting here, because if I think about how you guys have talked about the portfolio over the years, it's always been continuously about moving -- in using your working capital dollars effectively. So are you guys suggesting that you're going to have more drastic changes in portfolio construction part of the whole construction that you guys have done previously? Or is this really an extension of what you guys have done all along?

Richard T. Hume -- Chief Executive Officer

So great question, Keith. Clearly you can do this as an extension of what we've done all along. Let me kind of generalize on an evolution. If you roll back two years or three years, four years, we were probably dealing with things in our portfolio that had negative returns. And then as you move forward, you deal with things that have marginal returns and it's just going to be an extension now of getting up into the next level of areas of the business that frankly are below our average weighted cost of capital.

So it's a matter of, I think, a continuum taking on some of those lower returns. We've made a lot of progress through time, but we will be a little bit more deliberate and you could use the word aggressive in managing sort of lower return stuff. In the long-term,

it's going to absolutely free up cash, which will allow us to make investments where the growth is within the market and where we see good opportunities. So I almost think of it as parallel as keeping yourself healthy, right? So we are moving to the next level of staying physically fit.

Keith Housum -- Northcoast Research -- Analyst

So, I guess --

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Yes. One further comment, Keith, and that is we're looking at portfolio actions on those pieces of the business that are significantly below our weighted average cost of capital. That's one point. The second thing is, is that we're going to use that cash as it's freed up to reinvest in the business through selective M&A, very targeted selective M&A, as well as our share repurchases. If you look back at the period of time before we did the TS acquisition, the 10-year period before that, we had a very balanced approach and was about 50% or greater of our free cash flow that we allocated to share repurchases and about a similar amount, a little under 50% to tuck-in acquisitions that were strategic to our business. So this portfolio action, it frees up additional cash flows to go after those two opportunities.

Keith Housum -- Northcoast Research -- Analyst

Okay. I guess that begs the question, two, three years ago, when you guys were accepting some of business that was in the low end. Is that because of the efforts that you guys have made on the data analysis side has really helped you more fine-tune the sales you should be accepting?

Richard T. Hume -- Chief Executive Officer

I think process management system and visibility is a lot better now relative to our overall business than it was maybe five years ago. So, yeah, clearly, we've made some investments, which allow us to better segment, have better clarity and visibility, and pinpoint actual return at a pretty granular level. So I think you said it right, Keith, I mean, the way you should think about this is we are on a continuum of managing our portfolio and we're just going to take the next step there.

Keith Housum -- Northcoast Research -- Analyst

Okay. And then final question for you, and change gears over to the Asia Pacific region. Help me understand, are you guys going to actually exit any of those markets that you are currently in? And is this just going to require additional investments in the top ones you guys already made into that business where you think you need to get to?

Richard T. Hume -- Chief Executive Officer

Yeah. With this announcement of Asia-Pacific, we aren't exiting any businesses at this time. We always look at our portfolio and take a look at back to the portfolio actions as to where we are healthy, where we have needs improvement type of thing. So that's a continued evaluation. But at this point in time, no, the footprint will stay as it is and we continue to make investments in Asia-Pacific. To give you an example, when we had taken the asset over, we wanted to improve, if you will, the e-commerce capabilities and then establish the cloud capabilities through StreamOne in Asia-Pacific. So this is one of not backing off, but rather being more aggressive relative to investment within the region and getting it more aligned with what we wanted to do strategically.

Keith Housum -- Northcoast Research -- Analyst

Great. Thank you.

Operator

Thank you. This concludes Tech Data Corporation's fiscal year 2019 fourth quarter earnings conference call. A replay of the call will be available in about one hour at techdata.com. Thank you for attending today's conference call and have a great day.

Duration: 55 minutes

Call participants:

Arleen Quinones -- Corporate Vice President of Investor Relations

Richard T. Hume -- Chief Executive Officer

Charles V. Dannewitz -- Executive Vice President, Chief Financial Officer

Ananda Baruah -- Loop Capital -- Analyst

Adam Tindle -- Raymond James & Associates -- Analyst

Matt Sheerin -- Stifel -- Analyst

Param Singh -- BofA Merrill Lynch -- Analyst

Tim Yang -- Citi -- Analyst

Shannon Cross -- Cross Research -- Analyst

Keith Housum -- Northcoast Research -- Analyst

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