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Commscope Holding Co Inc (NASDAQ:COMM)
Q3 2020 Earnings Call
Nov 5, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the CommScope Third Quarter 2020 Conference Call. [Operator Instructions] I would now like to turn the conference over to your host Mr. Kevin Powers, Vice President of Investor Relations. Please go ahead, sir.

Kevin J. Powers -- Vice President, Investor Relations

Good morning, and thank you for joining us today, and welcome to our third quarter earnings call. I'm Kevin Powers, Vice President of Investor Relations. And joining me today are Chuck Treadway, President and Chief Executive Officer; Alex Pease, Chief Financial Officer; Morgan Kurk, Chief Technology Officer; and Bud Watts, Chairman of the Board. You can find the slides that accompany this call on our Investor Relations website. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Before I turn the call over to Chuck, just a few housekeeping items to review.

Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. All references during today's discussion will be to our adjusted results and reflect certain classification changes to align to CommScope's presentation. All quarterly growth rates described during today's presentation are on a sequential basis comparing the results of the second quarter of 2020 unless otherwise noted.

I will now turn the call over to our President and CEO, Chuck Treadway. Chuck?

Charles L. Treadway -- President and Chief Executive Officer

Thank you, Kevin, and thank you all for joining today's call. I'd like to start by talking about what brought me to CommScope and why I'm excited about the road ahead. Over the course of my career, I've developed a passion for problem solving, a deep insight into how to drive value and an understanding of what it takes for a business and its team to succeed. I maintain a strong focus on above-market revenue growth and meaningful shareholder value creation. What drew me to CommScope is the legacy of innovation and industry leadership that the team has built together. I joined CommScope after most recently serving as CEO of Accudyne Industries.

At Accudyne, I worked with my team to drive revenue growth through product innovation and increased investments in sales, marketing and R&D. I spent the last 17 years managing global businesses across a range of industries, including technology and industrial-focused businesses. And I'm excited to apply this background and my experience to my role as CEO. In addition, I was drawn to CommScope's focus and discipline around cost and cash management. This is congruent with companies I've led, having implemented initiatives focused on pricing, purchasing and G&A cost savings, resulting in significant EBITDA improvements. Over my next few months, I look forward to working closely with the dedicated Board and management team to thoroughly assess the business and our areas of strength as we work to build on our solid foundation.

While the pandemic has presented many challenges, this past year has also shown the world how essential network connectivity is and the vital role CommScope plays in keeping our connection strong. Whether it's keeping businesses running, maintaining our education systems with virtual teaching or helping people stay connected to their loved ones, COVID-19 has highlighted the power of network connectivity and the power of CommScope. Moving to slide three. My first month reinforced these great qualities I observed before joining the company. I spent the past few weeks visiting several of our sites in the United States, meeting with our senior leaders, touring our labs and centers of excellence and talking with our customers. Importantly, as we continue to manage the organizational challenges brought on by COVID-19, I've been very impressed with the rigorous health and safety protocols across our sites to maintain a focus on the safety for our fellow employees.

Our commitment to protecting the health and well-being of our team is unwavering, and the visits and conversations have been tremendously energizing. I'd like to share a few stories and initial impressions with you that I've gathered this first month. First off, I was struck by the level of employee commitment and the strong culture of teamwork and service. As I met with our Venue and Campus team, they highlighted our capabilities across DAS and small cell. This discussion highlighted the entrepreneurial spirit of the team and their purpose-driven nature to deliver innovative solutions for the customer, compete in the market and be a great partner to our customers. In each location I visited, without fail, the team was engaged, passionate about what they do and committed to driving growth for the company.

The team took me on a tour of the AT&T Stadium outside of Dallas, where I saw firsthand CommScope solutions serving as the backbone of the network, including a 5G DAS system. I was amazed at what seemed to be a very limited amount of physical product delivering such a profound level of service throughout the venue. I saw some before-and-after photos of prior deployments and it demonstrated how deep the technology expertise is in the team to have evolved technology so much in the past few years and provide such a strong service. In addition to spending time with our team, I've spoken to many of our customers and look forward to talking to even more. And I'm so proud to say that a common thread in those initial conversations and their feedback about the company has been about our character.

Our integrity shines through. Even in my short time at the company, I've recognized integrity is paramount in the CommScope culture and the expectation our customers appreciate. It's clear that the principles at Frank Drendel and Eddie Edwards instilled in our company are truly foundational, and I will work tirelessly to sustain that legacy and drive innovation for our customers. One specific way that our value of acting with integrity has been evident is through our diligence to keep our people safe. I have been immensely impressed with the measures in place to protect our people and sustain continuity of our supply chain.

More than ever, networks have proven to be the lifeblood to our economies, the education of our children and the element keeping us connected on a personal level. And while I'm just getting to know the people in the business, it's been a great start to a broad and deep exploration of our strategy, tactics and areas of opportunity to ensure CommScope reaches its full potential. To give you a look ahead at the trends impacting our industry and to share some business updates, I'd like to introduce our Chief Technology Officer, Morgan Kurk.

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Thanks, Chuck, and good morning, everybody. Across the entire business, we continue to innovate and push technology boundaries to solve key customer problems. We are driving essential programs to support our customers as they migrate to new architectures and face new hurdles. In our broadband networks, we are progressing in key development areas and our lineup of industry-leading sealing solutions under the NovuX brand for fiber-to-the-X applications are gaining traction. In addition, we are complementing our copper and fiber solutions with DOCSIS equipment advances to help our customers upgrade network capacity at the core and with node splits. Our next-generation DAA architectures of Remote PHY and Remote MAC-PHY are on track, and our virtualization efforts continue to gain features.

We are also working on DOCSIS 4.0 solutions, which will be deployed in future years. In Venue and Campus Networks, we are addressing indoor customers' needs with new product extensions. As indoor coverage becomes more critical with the introduction of new applications and continued bandwidth growth, we are seeing solid demand for our Ruckus Wi-Fi six and cloud control platforms, with a more than 25% of all access points sales now being Wi-Fi 6. Our solutions are enabling greater speeds for newer devices and greater capacity for existing devices. We now have a complete solution for both our cloud and on-prem based controllers, which provide better ease of monitoring and provisioning equipment.

Our OneCell small cell continues to prove its value as we introduce new software releases with feature enhancements, and we are developing a new virtualized 5G version of the solution. Finally, in hyperscale, our efforts to improve the speed of delivery and increased fiber connectivity flexibility continues to resonate with customers. And we delivered another record quarter with more than 25% quarter-over-quarter increase. Turning to outdoor wireless networks. We're making immense strides in expanding our flexibility across the breadth of product lines. For example, we're driving modularity into our pre-terminated HELIAX FiberFeed products, resulting in manufacturing efficiencies that dramatically improve customer delivery time. In addition, our PowerShift line has been extended from a macro tower to the metro cell.

And importantly, we are now demonstrating the capability to move kilowatts over kilometers. When PowerShift is deployed with hybrid fiber, it provides a cost-effective solution for the metro layer of a network with an estimated 50% reduction in installation costs as compared to an AC power grid and discrete fiber cabling. This will be critical to building the capacity layer of the network to support 5G. Lastly, on the macro tower, we are developing new techniques to minimize antenna size by making low-band elements invisible to high-band elements, which reduces the need for more tower space and addresses wind loading concerns. Finishing with Home Networks, we continue to see a drive toward streaming devices, and we are reacting quickly to reallocate resources to ensure we have a primary position as this transition takes place.

We also continue to develop and expand platforms for both retail and service provider for DOCSIS 3.1 gateways, which have become a critical element to improve the uplink and downlink capability of the network and help manage the huge shift to work from home and e-learning. New technologies like Wi-Fi six and 6E will give us even greater opportunities to support applications with our streaming devices in the future. Looking ahead to 2021 and beyond, our strategy is to leverage our technology to address the key trends that will reshape our industry. Before I turn the call over to Alex, I'll take a moment to highlight the ones that we think deserve our greatest attention. First, let's start with Spectrum. In the United States, we expect that the collection of Spectrum, including 2.5 gigahertz, which is owned by T-Mobile, CBRS, which was recently auctioned and the C-Band, which is being auctioned in December will become the foundation that enables 5G to reach its potential.

This spectrum will not only drive increased competition for consumer wallets between wireless operators for mobility, but also between wireless and fixed-line operators in the battle for the home. We expect these battles will not just occur in the United States, but in other parts of the world. As the impact of COVID-19 will likely impact the world throughout 2021, operators will need to enhance the fixed-line access, given how essential connectivity has now become in the home. Broadband networks were put to the test by the COVID crisis, particularly in the uplink, and we expect this demand to continue for the foreseeable future. Operators continue to focus on improving upstream bandwidth through a number of strategies, including node segmentation and increasing the available spectrum through mid splits and high split architectures.

While slow due to the focus on more urgent capacity expansions, we expect to see the continued migration to DAA and virtualization from existing technologies. This long-term migration includes DOCSIS 4.0 and is expected to provide the network capacity to support end user needs well into the future. This transition will take place over the next decade and will lead to consistent network investments for years to come. We also see PON fixed-line connectivity increasing for new builds. To that end, one of the most exciting market opportunities will be in the support of rural coverage. In the United States, the government is allocating $20 billion over the next decade for The Rural Digital Opportunity Fund, or RDOF, toward improving rural coverage.

This is creating significant competition between operators and technologies. Carriers, cable companies, wireless service providers and even satellite companies will be -- will compete for the funding to bring rural America broadband. While we're seeing the beginning of this with more local funding already, we expect to start mass deployment fairly soon, which will both impact wired and wireless product lines. Finally, the recent standardization of a new block of spectrum for unlicensed use in many countries around the world in the six gigahertz band aims to meaningfully change the capability of the Wi-Fi networks.

Wi-Fi 6E, which has all the features of Wi-Fi six but will add six gigahertz frequencies, will launch only 18 months after Wi-Fi 6. We expect to see quick adoption of this band as it solves capacity and interference problems and prepares for future wider channel bandwidths that will increase speed. All combined, this is driving a more predictable, higher bandwidth and higher availability systems that will meet the needs of the enterprise and the home for years to come. CommScope is well positioned to serve this increase in demand and connectivity needs around the world.

And now I'd like to turn the call over to Alex. Alex?

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Thanks, Morgan, and good morning, everyone. As a reminder, all changes referenced during my discussion will be on a sequential basis unless otherwise noted. You can find year-over-year comparisons and disclosures in our earnings presentation, press release and 10-Q. And so with that, let's turn to slide eight and review our third quarter results. Net sales of $2.17 billion increased 3%, which was in line with our expectations. Orders for the quarter were $2.14 billion with a book-to-bill of 0.98. Adjusted EBITDA of $342 million and adjusted EPS of $0.51 increased 22% and 59%, respectively. Profitability was ahead of our expectations, primarily driven by better-than-expected performance of our broadband networks segment, which benefited from a $25 million CMTS software license order that we expected to occur in the fourth quarter.

In addition, we remain focused on expense control and establishing a more efficient cost structure. For the quarter, we reported adjusted operating expenses below $442 million, also better than our expectations. Adjusted free cash flow of $176 million was also above expectations, and we've now generated about $350 million year-to-date. Turning to slide nine. I'll move to our segment highlights, beginning with broadband networks. Net sales of $821 million increased 22% and across all regions, led by North America. Sales improved in both network cable and connectivity as well as network and cloud. Adjusted EBITDA of $204 million increased 57%, primarily driven by higher volume and favorable mix from both the product line and a geographic perspective.

Cable operator demand remained very strong in the quarter as customers continue to maintain bandwidth capacity, given the increased demand at home. In addition, fiber cable and connectivity orders remain strong as upgrades continue with U.S. rural broadband funding support from the CARES Act and The Connect America Fund. Looking ahead to 2021 and beyond, we expect strong continued fiber, cable and connectivity spend with RDOF driving incremental demand and a key Tier one customer refocusing on fiber deployment as the core growth strategy. In response, we're prioritizing prudent investments to expand fiber, cable and connectivity capacity to meet these needs. While we've focused on C-Band and outdoor wireless, the impact extends across our portfolio to include broadband networks.

During the third quarter, we received over $50 million of orders associated with C-Band, conversion and reclamation, and we expect these benefits to continue throughout 2021. Turning to slide 10, in our Venue and Campus segment. Net sales of $512 million grew 7%, led by growth in Europe, North America and China. From a business unit perspective, growth was most pronounced in Ruckus with modest growth across the other BUs. Adjusted EBITDA of $56 million grew 47%, led by higher volumes and continued tight expense control during an uncertain end market environment. We continue to build hyperscale momentum with another record quarter as our market positioning strengthened and heavy cloud usage increases due to work-from-home dynamics.

We're leveraging our key capabilities to customize quick-turn, high-density fiber accounts for simultaneous global builds while leveraging our technological expertise, size and scale. Ruckus benefited from strong growth in Wi-Fi six and outdoor Wi-Fi deployments and increasing cloud subscriptions as connectivity continues to be an essential need. During the quarter, we also announced that Ruckus joined the Google Orion ecosystem as a Wi-Fi roaming partner, helping to ensure a simple and secure user experience for our customers. Moving to slide 11, in outdoor wireless. Net sales of $272 million declined 17%, primarily driven by weakness in North America, the Middle East and Africa, partially offset by growth in Central and Latin America.

From a business unit perspective, sales declined in both the macro and the metro layer. Adjusted EBITDA of $54 million declined to 29%, primarily driven by lower volumes and unfavorable geographic mix, partially offset by operating expense control. From a geographic perspective, 5G investments in Europe continue, and we are in active discussions with several operators on their network builds. Additionally, geopolitical dynamics may present market opportunities, and we are well positioned to gain share with our best-in-class portfolio solutions. Turning to North America. With most Tier one capital carrier plans -- carrier capital plans first half-weighted this year, net sales were soft as we expected.

However, this weakness was partially offset by ramping T-Mobile spend, which remains on track for the balance of the year. As we close 2020, we're looking forward to 5G investments at the edge of the network accelerating in 2021. As Morgan mentioned earlier, C-Band auctions in the U.S. begin next month and mark an exciting time for the industry. As new frequency bands become available for North American carriers, this creates an opportunity to design and implement the technologies that will shape the mobility landscape for the next decade and drive significant shareholder value for CommScope. Finishing up our segment highlights with Home Networks on slide 12. Net sales of $564 million declined 10%, slightly better than our expectations for the quarter. Declines were primarily driven by North America and partially offset by growth in Europe and Central and Latin America.

From a business unit perspective, we continue to see strong growth in broadband gateways, particularly in the retail channel. However, this was more than offset by continued declines in video. Adjusted EBITDA of $29 million declined 17%, driven by lower volumes, partially offset by the cost actions taken earlier in the year to rightsize the business given the challenging environment. Turning to slide 13. Our unique and proven business model continues to generate significant cash. During the quarter, we generated cash flow from operations of $172 million and adjusted free cash flow of $176 million, both are above our expectations. Of note, over the last 12 months, we've delivered cash from operations and adjusted free cash flow of $675 million and $673 million, respectively.

Once again, our strong free cash flow generation is a testament to the great execution from the team to drive profitability and focus on operating expense control. From a working capital perspective, we continue to see impressive performance on the collections front as our days sales outstanding was further reduced, driving the working capital benefit for the quarter. Looking ahead, we continue to see opportunities in driving working capital, particularly in inventory optimization. Turning to slide 14 for an overview of our liquidity and capital structure. As announced during our last earnings call, early in the third quarter, we took proactive actions to derisk the balance sheet by refinancing our 2021 and 2024 notes and extending maturities out to 2028.

This action, along with the more than $800 million in long-term debt repayments since the close of the ARRIS acquisition, reinforce our long runway with no significant maturities until 2024. Our overall liquidity remains strong, and we ended the quarter with over $580 million in cash on the balance sheet and total liquidity of over $1.3 billion. In addition, on August 21, we redeemed $100 million of our 6% unsecured notes due 2025. Subsequent to the end of the third quarter, on October 23, we redeemed an additional $100 million of the same 2025 notes. While leverage slightly increased to 7.2 times during the quarter, our priorities remain consistent. We are focused on deleveraging and assessing strategic market opportunities to manage the balance sheet.

With that, I'd like to turn the call over to Bud to discuss our guidance approach and long-term strategy in more detail. Bud?

Claudius E. Watts -- Independent Chairman of the Board

Thanks, Alex, and good morning, everyone. Before we open up the call to Q&A, I want to briefly touch on our outlook for the quarter and the full year. From a market and industry perspective, we don't see any meaningful changes from the third quarter to the fourth quarter. Additionally, I'm sure you all noted the large software license sale, which occurred earlier than expected. But with that said, given Chuck's limited time with the company as well as the significant economic uncertainty that we all see, we on the Board did not believe it would have been the best and highest use of Chuck's time to focus on the fourth quarter at the depth that would have been required for him to review and approve updated guidance.

Accordingly, we are not providing an update on our fourth quarter. Looking ahead and more broadly, we expect to reevaluate our policy for providing financial guidance, and we will address that policy with you all in greater detail next year. Let me add some further context. The Board views Chuck's arrival as a much needed opportunity for a reset in the way we look at and manage the business in the long term. As you've all heard this morning, there's a lot of good stuff going on at the company right now. But to state the obvious, our share price performance over the last two years has been unacceptable. The Board is focused on getting CommScope's financial performance and share price back on the right track, and we are confident that Chuck is the right leader to drive that process. For that end, Chuck is laser-focused on assessing the business, its strengths, its weaknesses, its challenges and its opportunities.

Once his assessment is complete, working together with the Board and the management team, his focus will shift to building a plan to significantly increase shareholder value. We on the Board are committed to giving Chuck the time necessary to learn and assess the business and to build an aggressive, credible plan. We expect that Chuck and his management team will present this plan and resulting outlook to you all in the third quarter of next year. In the meantime, Chuck and I will keep you up-to-date with how this work is progressing on our regularly scheduled earnings calls in February and May of next year. Thank you. And with that, I'll turn it over to the operator for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Jeff Kvaal from Wolfe Research. Your line is open.

Jeff Kvaal -- Wolfe Research -- Analyst

Yes. Thank you very much. And this may be a question for Bud as much as it is for Alex and Chuck. But I'm wondering if I caught that right, that you will be taking essentially three quarters to do a strategic review? That seems like an awfully long time. So, I'm just wondering if you could talk us through the thought process behind that. I mean, typically, we think of the 100-day grace period as opposed to a 270-day grace period or whatever. And then given that, that is a bit of a long time, I'm wondering if you could talk through what might have been items that were off the table under the previous leadership team that may now be back on the table under the new administration?

Claudius E. Watts -- Independent Chairman of the Board

So, I'll start, and then I'll turn it over to Chuck to say a few more words. But as I said, in my comments, first and foremost, the Board is committed to giving Chuck the time that he needs to really fully assess the business and build a plan. He's done this before, and we think he knows how long it will take, what the range of outcomes can be. And I'll let him comment further on that. In terms of what's on the table or off the table or coming on to the table or going off, there's -- I think all I'll say is there is nothing that's off the table. This is -- we expect this review to be comprehensive, and we're not going to put any constraints on Chuck's thinking. And I think beyond that, we don't want to say anything right now. Chuck?

Charles L. Treadway -- President and Chief Executive Officer

Yes. Look, I understand you may think that, Jeff. But when I think about it, it's an $8.5 billion business and we just need to take this thing step-by-step, right? And what I'm doing is getting down to the 17 different business units inside the company. Right now, it's really trying to understand value and what they're thinking and where they want to go and all that. And then we're going to loop back and prioritize and really think about what we have to do, as Bud said, to share with you as soon as we can, what do we need to do to make a step function change in this business. So, as Bud said, I've done it before, we just have -- it's just a step-by-step process. We may finish sooner, but right now, we're saying the third quarter.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

The other thing I'd say, Jeff, just to build on what Chuck said is, it's not as though we're going to be sitting on our hands for the next 270 days. I'm certain that Chuck will uncover things that become more immediate priorities in the context of building a more comprehensive plan. And when we discover those things, we'll act with all urgency.

Jeff Kvaal -- Wolfe Research -- Analyst

Okay. And so, do you all have a template for how you would like to communicate the intermediate term trajectory between now and then? Just to make sure that we don't either miss inflections one way or the other.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Yes. So, I think I'll take that and maybe Bud will want to build on it. So as Bud said, we're not undertaking to provide guidance until we have this comprehensive plan that Chuck's described. Bud also mentioned, which I think is important to underscore, that we don't see market changes in the market conditions from -- in Q4 from what we saw in Q3. And I think you can look at the earnings release of a number of our competitors and customers.

And I think you can -- and listen to what Morgan said. And I think you can feel like there's some nice tailwinds as we get into 2021, whether it's the C-Band auction or cloud and Ruckus or some other things, the growth in the hyperscale space. I think we have a lot of tailwinds that ought to help you get an outlook on what the next few quarters is going to look like. And then obviously, just don't overlook the normal seasonality patterns that we face. Q4 is typically seasonally weaker. Q1 is typically seasonally weaker and then Q2 and Q3 tend to be our strongest quarters. So, I hope that gives you at least some direction. And I don't know, Bud, if you'd like to build on that at all.

Claudius E. Watts -- Independent Chairman of the Board

No -- or yes, I would like to. I just -- look, we're going to be completely comfortable talking to you all about the environment that we're operating in. But to kind of cut to it, we just don't want Chuck and his team, head down, focused on pennies per quarter or something like that right now. We want -- as Chuck used the term, step change -- step function change, that's what we want Chuck working toward.

Jeff Kvaal -- Wolfe Research -- Analyst

Okay. We will sharpen our pencils. Thank you, everyone.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Thanks, Jeff.

Operator

Your next question comes from Simon Leopold from Raymond James.

Victor Chiu -- Raymond James -- Analyst

Hi, guys. This is Victor Chiu in for Simon Leopold. Can you help us quantify the size of the RDOF opportunity and maybe what you're expecting around the timing and trajectory of the contributions from this opportunity, given that you seem to be emphasizing the sizing of this as a fairly material opportunity for you guys going forward?

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Yes. Let me go ahead and take that from a quantitative standpoint, then Morgan will talk about how we expect this to sort of deploy over time. So, I think Morgan mentioned in his prepared remarks, it's about a $20 billion opportunity. So, it's a lot of money that's going to be projected into the system.

Now obviously, that's not all going to go to us. That will go to a number of competitors, and it's not all going to go directly to our products either. So we'll have a slice of that, but it will be meaningful. Also, as I think Morgan mentioned or maybe I mentioned, we are making a number of investments in our facilities to expand capacity to deliver on this demand. And we did see very strong demand in our network cable and connectivity product line even just this quarter before our DOCSIS spending happened. So, it's clear to us that this is going to provide a tailwind into 2021 and beyond. But Morgan, can you give some more details about how we expect it to deploy?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Absolutely, Alex. So, it will be going over the next decade. It is a large opportunity that really is not just in fixed-line access. It's in all sorts of access. The way the government is sending out this money depends on a number of users that you're actually going to cover. And so, various different geographies and various different -- well, various different geographies and various different populations will require various different pieces of coverage. So, it will impact virtually all of CommScope's product lines as our various customers compete in this area.

So, I can't quantify it specifically, but a significant portion of the $20 billion will go into installation, and a significant portion will go into types of equipment we make. And some of it will go into types of equipment that we don't make but similar to, say, a FirstNet build, it is a lot of money that the government then injects into the system, and that enables builds to go out that wouldn't ordinarily be built, which is why we consider this such a significant opportunity for the company.

Victor Chiu -- Raymond James -- Analyst

Do you expect it to ramp at a more gradual pace? Or are we going to see a sudden uptick at some point? Or how does the trajectory of that come in?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Sure. It's hard to say right now how the ramp will work. And I believe that it will vary based on the customer that is trying to capture these funds. So, I don't have a model yet that says here's how it ramps. Clearly, this does take time. So, it's not going to be a huge step function no matter what happens. And it takes time because the equipment needs to be installed and permitted and all the normal things that go on with this. So, it should take a bit to ramp up, and then I would say probably gated by installation. So, that means that it has some ramp-up time and then more of a steady state environment.

Victor Chiu -- Raymond James -- Analyst

Okay, great. Thank you.

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Thank you, the most aggressive typer I ever heard.

Victor Chiu -- Raymond James -- Analyst

Just trying to keep up a good work. Thanks.

Operator

Your next question comes from the line of Sami Badri from Credit Suisse. Your line is open.

Sami Badri -- a

Hi, thank you.My first question is for Chuck. And Chuck, I was hoping you're in the middle of what are some very large technological and telecom secular trends. You have Wi-Fi 6, C-Band. You have large 5G build-outs taking place as well, and you have hyperscale opportunities from a cabling perspective. I was just hoping if you could, without really kind of treading on the "guidance projection", but could you rank these trends as areas of focus for us just to understand what we should expect from like a thought process or decisioning criteria perspective over the next year or 2?

Charles L. Treadway -- President and Chief Executive Officer

I'll be kind of quick on that answer and then hand it over to Morgan. But I would say all of them are priorities for us. We haven't really had enough time to figure out how to rank them one, two or three, but they're all very, very important. So well, I'll hand it over to Morgan and see if he's got any color he can add to it.

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Yes, sure. So, I think that the -- I think you can say, historically, spectrum has been the lifeblood of the wireless industry. And competition has been the impediment to -- or the reason why people -- not the impediment to, but the reason why people build out is competition. And so, if I had to rank trends, the C-Band auction for me is one of the most important things for the industry as a whole, and therefore, has great importance to us. And it's twofold: one is that people will build out these networks and deliver on the promise of 5G, and that needs to be done fairly quickly because one competitor, T-Mobile, already has a good deal of mid-band spectrum.

The second reason why I consider this to be the most critical is that it leaves an opportunity for competition between wireless providers and fixed-line providers in that the amount of spectrum in the mid-band is enough to be able to deliver real broadband to the home as well as to the mobile. And that type of dynamic, that type of competition always leads to additional infrastructure build. So, if I have to rank it, that's probably my #1. The other two trends are very important. Additional spectrum for indoor wireless is critical as both indoor and outdoor try to cover both the enterprise and the home. And then RDOF funding, we talk about because, again, it opens up a new marketplace that wouldn't have been economically viable without some sort of government help.

Sami Badri -- a

Got it. One follow-up for you, Morgan, is when you think about what these cable companies and telecommunications providers are doing with your intellectual property, and you guys are executing the software sales against these, how many more of these big lumpy deals could we expect over the next couple of years? And if you were to maybe give us like a percentage of where these major providers are in the build-outs of their virtualized infrastructure, where are they, right? Are they like 20%, 30%? Are they going to come back five more times to CommScope for software sales? Can you just give us kind of like a frame of reference to how we should be thinking about these big lumpy deals?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Sure. So, I think that you -- I don't think that the lumpiness of the deals is anything unusual or anything that hasn't happened in the past. I think that these deals are actually based on the current architecture, not on the future architecture, the centralized architecture that exists today, adding capacity to the network. So, if we look at how people are migrating to the future, there will be opportunity for both hardware and software sales for the foreseeable future over the next decade as we build that out.

In terms of the capacity needs, this is really determined by the various businesses, and their particular interest in adding software augmentation and their ability to do that based on the hardware that they've already augmented. So, I don't have any sort of a road map that I can give you for how many of these large deals would be available, how many of them will be done over what period of time. Just to say that we expect it to continue as it has in the past.

Sami Badri -- a

Got it. Thank you. And then I can't wrap up my Q&A without asking Alex a question on cash flow. So, Alex, I appreciate you guys aren't trying to give guidance. But if we were to think about what you guys gave us in 2Q and then just the prior consensus trajectory modeling of operating cash and free cash flow for 2020, 2021, does anything look different today than when you guys last gave us this kind of framework for cash flow?

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Yes, let me -- I'll give you a few markers to work with. So, north of $350 million year-to-date. We generated, I think, adjusted free cash flow north of $175 million this quarter. Typical seasonality, would indicate that the second half of the year, particularly, the fourth quarter tends to be our strongest in terms of cash generation. And so, we continue to generate meaningful cash. I don't see that changing from now into 2021. But obviously, the biggest variable is going to be EBITDA growth. We did pull a lot of cash off the balance sheet this year.

We were able to leverage that very efficiently, both through a lot of the integration activity and then just normal operational discipline. And next year, will be largely about cost control and EBITDA growth to generate cash. But again, it's one of the reasons we're extremely excited about the leadership transition and Chuck getting onboard is because he will bring a fresh set of eyes and look under every rock, and we'll continue to demonstrate the same sort of discipline that we've demonstrated before but take it up to a whole new level.

Sami Badri -- a

Got it. All right. Thank you very much.

Operator

Your next question comes from the line of Amit Daryanani from Evercore. Your line is open.

Amit Daryanani -- Evercore -- Analyst

Good morning, and thanks for taking my question. I guess I have two as well. But maybe to start with, Bud, I would appreciate if you could just touch on when you or the Board look at the stock performance, and I think you said the stock performance has been unacceptable for the last two years, what do you or the Board really think why there are the two or three reasons why the stock has done what it has done the last couple of years?

Claudius E. Watts -- Independent Chairman of the Board

I think the single reason is financial performance. And that's what we're talking about addressing.

Amit Daryanani -- Evercore -- Analyst

All right. And I guess, maybe, I'll shift that out. The strength on the hyperscale side has been really notable. I think you folks talked about 25% growth on the hyperscale side. Could you just touch on how big is the hyperscale revenue stream today within Venue and Campus or just broadly for the company? And then importantly, how sustainable do you think this growth is? Because I guess, I think I'm trying to figure out, is this growth coming more from hyperscale CapEx and adjusting well? Or is it that plus you're picking up more market share?

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Yes. So, it's both. So hyperscale right now is, call it, low triple-digit millions. That's been growing double digits for probably the last four or five quarters. So, as you've heard us talk about a lot, if we roll back the clock about probably 18 months or so, we really didn't have a number of the capabilities to serve these players the way they wanted to be served. The things like the quick-turn manufacturing capability, the global footprint, or the ability to customize based on unique needs.

So, we really didn't have a lot of those capabilities. Through the Cable Exchange acquisition, we built that, plus we built Access to one of the big accounts. And then quite frankly, through the just hard work and operational discipline of both the supply chain team and the product line management team, we've built a fundamentally new set of capabilities.

And this is going to be one of the huge growth engines for the company. So, the reason you don't see it right now in the Venue and Campus segment, is because we have these headwinds that we're dealing with on the inside plant copper side. And currently, inside plant copper is bigger than our hyperscale business. But it's not going to be that way for long. I think we continue to see very, very strong growth in hyperscale. And at some point, that will overtake the secular declines in copper, and you'll see that the Venue and Campus segment begin to grow in addition to the Ruckus sub-BU also contributing to that growth. So, we're really excited about the momentum we've got here. The last part of your question, is it share or is it CapEx? And I would say, yes and yes.

We feel pretty strongly that we're -- we have a level of scale and capability that a lot of the smaller players don't, and we're being rewarded for that by some of our very important customers. And then the last point is on the strategic cloud side. You obviously will see all of that growth, which we classify as a different segment of the market. But strategic cloud is also very important with all the software-as-a-service applications that are being built out. So, overall, some pretty exciting progress.

Charles L. Treadway -- President and Chief Executive Officer

What I would add to that, Amit, is -- and good to talk to you again this morning. I have spent some time with that group. And what I could tell you and what excited me the most about this was just -- it was about focus. They segmented, segmented, found an application and said that's where we want to go. We dedicated the team to it and they went after it. And that was -- that's very exciting, and I believe we're going to see a lot more of that type of stuff.

Amit Daryanani -- Evercore -- Analyst

Perfect. Appreciate all the insight. Thank you.

Operator

Your next question comes from the line of George Notter from Jefferies. Your line is open.

George Notter -- Jefferies -- Analyst

Hi, guys. Thanks very much. I'd love to maybe start off with an RDOF question. Can you just tell us what the mix of your business looks like from rural operators? If you have that number by any chance?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

I don't have a mix -- go ahead, Alex.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

I was just going to say you'll provide additional color. We obviously don't disclose specific customer details. You will know from our disclosures, we have several of the very large Tier 1 operators make up, in many cases, 10% customers. But as Chuck has pointed out a number of times, even in these early days, we do have a very long tail of smaller customers in the Tier two, Tier three markets that we tend to actively cater to. But Morgan, you were going to add some color as well.

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

That's basically where I was going to go. It's both WISPs. It's the traditional wireless operators. It's the cable companies and it's everybody competing in this space, so it impacts most of our product lines.

George Notter -- Jefferies -- Analyst

Got it. Okay. And then when you talk about sort of the numbers of RDOF, you mentioned the $20 billion number. Are you netting out the prior subsidy program that RDOF is replacing, the CAF program?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

No. The $20 billion is what the new program is expected to bring in. It's not a net of the old program, but the old program was over a number of years and was significantly smaller. We also are not quantifying how much goes to us versus how much goes to things like installation and so forth. We haven't gotten to that detail.

George Notter -- Jefferies -- Analyst

Got it. Okay. And then one quick one for Bud. Bud, in your commentary, you mentioned strategic market opportunities to manage the balance sheet. Could you just talk about what you meant by that?

Claudius E. Watts -- Independent Chairman of the Board

I'm trying to remember my remarks. I don't think I said anything about that.

George Notter -- Jefferies -- Analyst

Maybe it was Chuck, I'm sorry. But I know it was -- that comment was put into the commentary. I'm just kind of curious about why that was in there and what you guys were looking at?

Claudius E. Watts -- Independent Chairman of the Board

Can you repeat that just to make sure we got it and understood it?

George Notter -- Jefferies -- Analyst

Yes. It's from my notes, "strategic market opportunities to manage the balance sheet."

Claudius E. Watts -- Independent Chairman of the Board

Those were my remarks. Sorry, it's just taken out of context. I wasn't sure. I think what we're talking about is -- was in relation to managing the cash on the balance sheet and the focus on deleveraging. And what we basically said is, right now, given the level of uncertainty in the market, the Board has directed the management team to maintain maximum financial flexibility, which is why we have so much cash on the balance sheet. But that is not any deviation from our commitment to continue deleveraging the balance sheet. So I think that -- does that clarify it?

George Notter -- Jefferies -- Analyst

Yes. Fair enough. Thanks very much, guys.

Operator

Your next question comes from the line of Meta Marshall from Morgan Stanley. Your line is open.

Meta Marshall -- Morgan Stanley -- Analyst

Great. Thanks. You noted in kind of your outdoor wireless business that you had expected that Tier 1s would be front-half-loaded, and that's what you're seeing. I just wanted to clarify that there were kind of no incremental changes in the quarter to kind of what you were expecting from Tier 1s for the remainder...

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

No, I'd say it was absolutely in line with our expectations. We've been communicating really all along the year that the outdoor wireless segment was going to be front-end-loaded. And we got a little bit of good news, with the completion of one of the operators' acquisitions, they've begun to ramp spending again. And that spending started really in Q3, and we expect that to ramp into Q4 and beyond. So, that was some positive good news. But I think this is directly in line with the expectations that we certainly had internally and we at least tried to communicate externally as well.

Meta Marshall -- Morgan Stanley -- Analyst

Got it. And then just maybe on OneCell, you noted a kind of growing success with that. I just wanted to get a sense, is that kind of growing customer footprint? Or is that growing deployments within specific customers? Just is the customer count growing? Or is it just growing deployments within certain customers?

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

So, it's a little bit of both. So, we're now qualified at a Tier 1 major North American operator, which is extremely exciting. We're working on gaining additional qualifications, which we think are -- the traction that we're getting in the market, we think will generate more success at additional North American operators. We also have deployments in Europe that we're excited about.

But really, what you're seeing here, Meta, is just as people are becoming increasingly aware of the criticality of the indoor wireless and the intelligent enterprise space, they're looking at indoor wireless propagation, how do you come up with a better solution. And OneCell, quite honestly, is just a -- it's a better solution, and it's going to be increasingly relevant as we get into 5G. And that, in conjunction with the Ruckus product line providing an unlicensed spectrum option, really creates a platform for us to serve the intelligent enterprise space that nobody else has.

Meta Marshall -- Morgan Stanley -- Analyst

All right. Thanks.

Operator

Your next question comes from the line of Jim Suva from Citigroup Investment. Your line is open.

Jim Suva -- Citigroup Investment -- Analyst

Thank you very much. I understand the need definitely to do the strategic review and take the necessary time. But you also mentioned that a lot hasn't changed other than things are progressing well compared to three months ago when you gave your -- not necessarily outlook or expectations, but more of a framework, where I think you said Q4 should be up sequentially from Q3.

And then in your comments though today, you said that, "Hey, remember, you had a software pull-in from Q4 to Q3 and remember seasonality." And if my memory is correct, seasonality -- the winter months or Q -- December quarter and March quarters are typically softer. So, I'm just trying to calibrate your remarks from three months ago to what you said today and consensus expectations. So, it seems like consensus is kind of calibrated up correctly because the strength of work from home for Q4? Or is it the software pull-in from Q4 to Q3, and the seasonal, we need to kind of resharpen our pencils on it? Just some better framework would be much appreciated.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Yes. And so, I'm going to try to not take the bait to provide guidance unintentionally because there's a reason why we aren't providing guidance for Q4. You will note that Q3 was an extremely strong quarter. Bud did mention and I mentioned that the license pull-in, which I think is important to consider. We do generally have a little bit of seasonal downturn in Q4 as the weather gets colder and crew deployments slow down. So, those are sort of issues to factor in.

You've also got accelerating spending at T-Mo. And I think we feel good about that. You've got continued mid split and high split node activity in the broadband segment. So, you have a number of puts and takes, but I think the important thing to really underscore is what Bud mentioned, that we don't see a material change in the market conditions between Q3 and Q4. So, really, there's nothing internal to the company or external to the market that led to the change in philosophy around guidance.

Jim Suva -- Citigroup Investment -- Analyst

Okay. That's useful. And then my follow-up question is, there's been times in cycles where pricing has gotten much better and pricing has gotten much worse. And given the work-from-home environment and COVID and demands on networks and such, can you talk a little bit about pricing, whether it be in broadband or your other products, about, are they getting better or stable or maybe less declines than normal? Or are your customers still kind of necessitating the normal average selling price declines? Thank you.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Yes. I mean, the way I'll answer the question is we operate in a very competitive market with very large customers. And price is something that we always pay attention to. As we've said previously, generally, we plan for about 2% price erosion in our legacy products, and that is offset by a combination of introducing new technologies with better value and different functionalities as well as just the ongoing supply chain excellence operations.

So, that's one of the reasons why you see the margin stability that you do is because we're able to take steps through new technology introductions as well as operational excellence to offset the natural price erosion. But I would say that's kind of the macro trend that we've seen as long as I've been with the business. At a more micro level, I would say, we aren't seeing anything fundamentally different now from a pricing environment than what I just described at a more macro level.

Jim Suva -- Citigroup Investment -- Analyst

Thank you so much for the details. That's great. I appreciate it.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Thanks for the question.

Operator

Your last question comes from the line of Samik Chatterjee from JPMorgan. Your line is open.

Samik Chatterjee -- JPMorgan -- Analyst

Hey, guys. Thanks for speaking with me here. Just a couple of questions. Firstly, just following up on outdoor wireless. Alex, you kind of appeared positive on the trend for that business into 4Q. And I don't want to ask you to guide, but just kind of if you can give me kind of your thoughts on how you're thinking about the environment for outdoor wireless into 2021, particularly just kind of try and look in between macro and metro sales, how do you think about the drivers there? And should we think of an impact -- How should we think that -- of that impacting segment margins as well given that mix?

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Sure. I'll start, and then I'll hand it over to Morgan. So, let me just detail a couple of things that we've seen. We mentioned the front end loading of the capital spending. The operators right now are in the process of developing their 2021 plans of record. You've certainly seen from a number of our competitors and peers in the space that there's a lot of excitement around 5G and what that portends for 2021 and beyond. There have been some delays at the metro layer as COVID is impacting permitting timeliness.

So, I would say a lot of what we've seen in 2020 is more transitory in nature, and we're still at the very early, early stage of this 5G wave, where 5G is largely -- currently -- are more of a software and a radio play. And that will evolve into more of an antenna play as new spectrum gets introduced. So, this is where Morgan's comments around the C-Band auction become really important. And then also the acceleration of capital spending from T-Mo becomes really important. Because this is the first real introduction of 5G spectrum into the market, which will create a level of competition to build out the networks. And Morgan, what would you add to that?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Yes. So you said it very well, Alex. What T-Mobile has been doing as they have started to build out the spectrum places additional pressure on their competitors to utilize whatever spectrum is available. So, one of their competitors spent a good deal of money, a couple of billion dollars on the CBRS spectrum. And it is expected that all of their competitors will and they themselves may bid for the C-Band licenses.

And the first of those C-Band licenses are expected to be available late next year, but that does not limit anybody from building the sites but not turning it on. So, I think that there is optimism toward everybody having to compete to build out these networks as quickly as possible so that they do not lose subscribers and, in fact, gain new applications in IoT, or for that matter, in the industrial segment or other segments that they're going after or to the home.

Samik Chatterjee -- JPMorgan -- Analyst

Okay. Got it. If I can just follow-up and end with a question on RDOF, and maybe this is more for Morgan. I understand like fiber connectivity is going to be the technology of choice to get that connectivity done. But any kind of play that you would have with your fixed wireless access business? Where is the portfolio today on that front? And is there any opportunity to -- maybe a certain part of that opportunity falls outside fiber and into fixed wireless, would you be able to kind of cater to that?

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Yes. So, I think you're absolutely correct. There will be a -- the trifecta. There will be predominantly fiber for new build areas, perhaps some hybrid fiber coax networks for expansion areas, but predominantly fiber, fiber to the tower and fiber to the home in these new build-outs as well as some satellite competition. For any of the fixed, wireless or for satellite, we have a variety of products that may be used in this. If you consider fixed wireless, it's likely to look a lot like a traditional cellular system. So, everything that goes on the tower, but the radio is fair game for us. And so, I think there's a good opportunity there. If the satellite industry matures, there's going to have to be rebroadcast of a satellite. It's not just to the home.

This money is for homes as well as for other ecosystems, I would say, so towns and cities. And that will enable a lot of other equipment on the other side of the satellite like Wi-Fi access points or cellular systems. So, I think this is why it's so exciting to us because it's all of these technologies converging. And when you have this type of competition, we'll be able to help service all of our customers as they compete against each other.

Samik Chatterjee -- JPMorgan -- Analyst

Great. Thank you.

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Thanks for the question.

Operator

That will be our last question. Presenters, please continue.

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

So, I think we're complete. If that's our last question. I really appreciate everybody taking time, and we look forward to following up. So, Kevin Powers will be available for questions. And obviously, Chuck, myself, Bud, will also make ourselves available if need be. So, thanks for your support, and I hope everybody stays safe out there.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Kevin J. Powers -- Vice President, Investor Relations

Charles L. Treadway -- President and Chief Executive Officer

Morgan C. S. Kurk -- Executive Vice President and Chief Technology Officer

Alexander W. Pease -- Executive Vice President and Chief Financial Officer

Claudius E. Watts -- Independent Chairman of the Board

Sami Badri -- a

Jeff Kvaal -- Wolfe Research -- Analyst

Victor Chiu -- Raymond James -- Analyst

Amit Daryanani -- Evercore -- Analyst

George Notter -- Jefferies -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Jim Suva -- Citigroup Investment -- Analyst

Samik Chatterjee -- JPMorgan -- Analyst

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