Belden Inc

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Incorporated conference call. Just a reminder, this call is being recorded. At this time, you are in the listen-only mode. Later, we will conduct a question-and-answer session. If you would like to ask a question, please press star 1 on your touch-tone phone. If you are in the question queue and would like to withdraw your question, simply press star 2. I would now like to turn the call over to Kevin Maska. Please go ahead, sir.

Thank you, Sergei. Good morning, everyone, and thank you for joining us today for Belden's fourth quarter 2020 earnings conference call. My name is Kevin Masca. I'm Belden's Vice President of Investor Relations and Treasurer. With me this morning are Belden's President and CEO, Roel Bestjens, and CFO, Hank Dirksen. Roel will provide a strategic overview of our business, and then Hank will provide a detailed review of our financial and operating results, followed by Q&A. We issued our earnings release earlier this morning, and we have prepared a slide presentation that we will reference on this call. The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belvin.com. Turning to slide two in the presentation, during this call, management will make certain forward-looking statements. For more information, please review today's press release and our annual report on Form 10-K. Additionally, during today's call, management will reference adjusted or non-GAAP financial information. In accordance with Regulation G, the appendix to our presentation and the investor relations section of our website contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate. I will now turn the call over to our President and CEO, Roel Vestjens.

Roel? Thank you, Kevin, and good morning, everyone. As a reminder, I'll be referring to adjusted results today. Please turn to slide three in our presentation for a review of our fourth quarter highlights. Demand trends improved in the fourth quarter, and I'm pleased to report that revenues, earnings, and cash flow exceeded our initial expectations. Fourth quarter revenues increased 5% sequentially to $498.5 million, compared to our initial guidance range of $460 million to $485 million, and our revised guidance range of $494 to $499 million. The upside relative to our expectations was broad-based, with contributions from both the industrial solutions and enterprise solutions segments. During the fourth quarter, our channel partners further reduced the inventory levels by approximately $22 million as expected, resulting in a reduction of approximately $70 million for the full year 2020. Importantly, this is not expected to recur in 2021. Incoming order rates were solid during the quarter, increasing 13% sequentially. This resulted in a book to bill ratio of 1.10 times, including a robust 1.16 times in the industrial solutions segment. EPS increased 25% sequentially to $0.90, compared to our initial guidance range of $0.63 to $0.78 and our revised guidance range of $0.85 to $0.90. Free cash flow generation was $101 million in the quarter, which exceeded our expectations by approximately $11 million. As a result, we exited the fourth quarter with cash on hand of $502 million, which provides ample flexibility as we pursue our strategic initiatives. Please turn to slide four for a brief discussion of our full year 2020 results. 2020 was a truly unprecedented year, with each of us facing significant challenges related to the global pandemic, both personally and professionally. I'm extremely proud of the way our global workforce responded to these challenges and maintained a sharp focus on supporting our customers, and executing our strategic plans while maintaining the safest possible working conditions. For the full year 2020, we delivered revenues of $1.863 billion and EPS of $2.75. Free cash flow generation was $86 million compared to our expectation of approximately $75 million. Beyond the initial response to the pandemic, The year was highlighted by the bold steps we took to position the company for substantially improved organic growth and margins. This includes streamlining our cost structure, funding our compelling growth initiatives, and significantly improving our portfolio of businesses. On the cost side, we delivered on our commitments by successfully reducing SG&A costs by $40 million for the full year 2020. We exited the year with a quarterly run rate savings of $15 million in the fourth quarter, so we are prepared to deliver the full $60 million in savings in 2021 as planned. This represents approximately 300 basis points of incremental EBITDA margin expansion on an annual basis. These are permanent cost reductions that will not return as conditions normalize. As we executed these cost reduction plans, we continued to make strategic investments to accelerate growth and capitalize on the opportunities in our key markets. To that end, R&D spending increased 14% to $107 million in 2020, with approximately 65% of this investment dedicated to software development. This includes standalone software and embedded software within various hardware products. We are making targeted investments to support growth and innovation in industrial automation and enhance our best-in-class cybersecurity cloud platform. These innovations are important to our customers and our shareholders as they will further strengthen our product offering and enhance our competitive advantage. We also maintained capex spending of approximately $70 million for the year to ensure that we have the capabilities and capacity to fully participate in the anticipated growth in our key markets. We made significant portfolio moves during the year, including the sale of Grass Valley in July. Divesting this business simplified and improved our portfolio. It also removed a considerable drag on consolidated organic growth, as declines in Grass Valley's business in prior years represented a substantial headwind. In addition, we initiated a process to divest approximately $200 million in revenues associated with certain undifferentiated copper cable product lines. These are primarily stand-alone product lines that are low growth and low margin, and we do not believe that they can meet our growth or margin goals in the future. Much like Grass Valley, we believe that exiting these product lines will improve our end market exposure. In this case, we are exiting the oil and gas markets and reducing our exposure to certain smart buildings markets. We expect to complete multiple transactions associated with these product line exits. We are encouraged by the overall progress to date and we remain on track to complete these divestitures in the first half of 2021, as previously communicated. Finally, Subsequent to the end of the fourth quarter, we announced the bolt-on acquisition of OTN Systems for $71 million. The transaction closed on January 29th. Please turn to slide five for additional details on OTN Systems. This is our first industrial automation acquisition in years, and we are very excited to add this talented team and its innovative networking products and technologies to our portfolio. OTN Systems is a leading provider of easy-to-use and highly reliable network solutions tailored for specific applications in harsh, mission-critical environments. Its value-added technology allows customers to easily build, maintain, and monitor complex networks in growing industrial markets such as power transmission, mass transit, and process. Belden and OTM Systems have a commercial partnership dating back to 2017, so we have a thorough understanding of the business and the value it will add to our product offering and our customers. The company's primary brand and product line, known as Xtrand, consists of proven switching devices and network management software that is complementary to Belden's leading industrial network offering. We expect the acquisition to contribute incremental revenue and EPS of approximately $36 million and 11 cents, respectively, during the 11 months of ownership in 2021. Consistent with our M&A strategy, this acquisition supports one of Belden's key strategic priorities related to the growing demand for industrial automation by adding proprietary technology and mission-critical hardware and software products for more complete end-to-end solutions. It also accelerates Belden's initiatives related to customer innovation centers or CICs with advanced solution selling and customer consulting capabilities. This will allow us to bid on a wider array of projects. It offers meaningful business synergies in the product technology, and commercial areas, and we see significant opportunities to leverage our global customer base to accelerate growth and further improve profitability. We remain an inquisitive company, and we continue to pursue other strategic and organic opportunities in industrial automation and fiber connectivity that would further enhance our product offering and growth potential. However, We are prioritizing de-levering in the near term, and as a result, we expect our M&A activity to be modest in 2021. I will now ask Henk to provide additional insight into our fourth quarter financial performance. But before I do so, I wanted to discuss the other matter referred to in our press release this morning. After 20 years with Belden, the last nine as our CFO, Hank has announced his departure next month, following a transition of duties to Jeremy Parks. Hank, your contributions to Belden are difficult to put into words. You are a meaningful part of the history of this company, and we thank you for everything.

Thank you. For the kind words, before I begin my prepared remarks, I want to express my gratitude to my team, the leadership team, and the board of directors, the entire finance and IT organization, and so many Belden colleagues around the globe who have shaped my time at the company. I'm proud of my role in leading Belden through a substantial transformation from a regional cable company in the early 2000s to the global network solutions company it is today. I leave the company with a strong balance sheet and capital structure and much improved portfolio, and I'm confident that Belden remains well positioned for future success. Please turn to slide six for a detailed consolidated review. I will start my comments with results for the quarter, followed by a review of our segment results and a discussion of the balance sheet and cash flow performance. As a reminder, I will be referencing adjusted results today. Revenues were $498.5 million in the quarter, compared to $549.7 million in the fourth quarter of 2019. Revenues decreased 9.3% on a year-over-year basis and increased 4.8% sequentially. After adjusting for a $5.5 million favorable impact on acquisitions, and a 14 million favorable impact on currency translation and higher copper prices, revenues declined 12.8% organically on a year-over-year basis. After further adjusting for changes in channel inventory levels, revenues decreased 6.1% organically on the prior year. On a sequential basis, revenues increased 2.9% organically. after adjusting for a $9.1 million fatal impact from currency translation and higher copper prices. After further adjusting for changes in general inventory, revenues increased 9.6% organically on a sequential basis. Incoming orders were solid during the quarter, increasing 13% sequentially. This resulted in a book-to-bill ratio of 1.1 ten times, including a robust 1.16 in the industrial solution segment and a 1.04 in the enterprise solution segment. Gross profit margins in the quarter were 35.4%, consistent with the third quarter. EBITDA was $74 million compared to $65.3 million in the prior quarter and $92.9 million in the prior year period. EBITDA margins were 14.8% compared to 13.7% in the prior quarter and 16.9% in the prior period. As Ru mentioned, we successfully executed our SG&A cost reduction program by delivering savings of 15 million in the fourth quarter and 40 million for the full year. We expect to deliver the full 60 million in savings in 2021. As we streamlined the cost structure, we remain committed to our important growth initiatives. We increased R&D investments by approximately 15% in the fourth quarter and the full year 2020. We expect further increases in 2021 as we make additional targeted investments to drive innovation and growth in industrial automation and cybersecurity. Net income expense was approximately flat sequentially in the quarter, At current foreign exchange rates, we expect interest expense to be approximately $61 million in 2021. Our effective tax rate was 13.5% in the fourth quarter and 16.4% for the full year, as we benefited from incremental discrete tax planning initiatives. For financial planning and modeling purposes, we recommend using an effective tax rate of 20% throughout 2021. Now the income in the quarter was $40.5 million compared to $32.2 million in the prior quarter and $54.9 million in the prior period. Earnings per share was $0.90 in the fourth quarter compared to $1.20 in the year-go period. Earnings per share increased 25% sequentially from $0.72 in the third quarter. Turning now to slide seven in the presentation for a review of our business segment results. I will begin with our industrial solution segment. As a reminder, our industrial solutions allow customers to transmit and secure audio, video, and data in harsh industrial environments. Our key markets include discrete manufacturing, process facilities, energies, and mass transit. The industrial solution segment generated revenues of $270.8 million in the quarter. Currency translation and copper prices had a favorable impact of $9.2 million year-over-year and $5.8 million sequentially. After adjusting for these factors, revenues decreased 14% organically on a year-over-year basis and increased 7% sequentially. After further adjusting for change in general inventory levels, revenues declined 8% year-over-year and increased 10% sequentially on an organic basis. Within this segment, industrial automation revenues declined 8% year-over-year and increased 9% sequentially on an organic basis after adjusting for changes in general inventory levels. Not surprisingly, the trends were relatively consistent across our market verticals in the quarter. Cyber security revenues declined 14% in the fourth quarter on a year-over-year basis and increased 16% sequentially. We continue to secure large strategic orders with new customers and significantly expand our engagements with existing customers. As a result, non-renewable bookings in the fourth quarter matched the highest quarterly level in five years. Notable bookings in a quarter included a Fortune 500 insurance company migrating from on-premise to cloud-based solutions and a multinational financial services corporation expanding its coverage in preparation for expected future growth from acquisitions. We remain very bullish on industrial cybersecurity Non-renewable bookings in this vertical increased 13% sequentially in the quarter and 31% for the full year. Further, we continue to gain significant traction with our software as a service offerings. SAS offerings represented approximately 25% of non-renewable bookings in the quarter compared to 10% a year ago. Industrial solutions segment EBITDA margins were 17.5% in the quarter compared to 15.6% in the prior quarter and 20.1% in the year-go period. The year-over-year decline primarily reflects lower volumes and increased R&D investments in industrial automation and cybersecurity. Turning now to our enterprise segment. As a reminder, our enterprise solutions allow customers to transmit and secure audio, video, and data across complex enterprise networks. Our key markets include broadband, 5G, and smart buildings. Our enterprise solution segment generated revenues of $227.7 million during the quarter. After adjusting for a 5.5 million favorable impact from acquisitions and a 4.8 million favorable impact from currency translation and higher copper prices, revenues declined 12% organically on a year-over-year basis. Revenues declined 2% sequentially after adjusting for a 3.3 million favorable impact from currency translation and higher copper prices. After further adjusting for changes in channel and customer inventory levels, revenues declined 3% year-over-year and increased 9% sequentially on an organic basis. Revenues in broadband and 5G increased 8% year-over-year and 5% sequentially after adjusting for changes in customer inventory levels. We are encouraged by the solid share capture during the quarter. The ever-increasing demand for more bandwidth and faster speeds is driving increased investments in network infrastructure by our customers. This supports continued robust growth in our fiber optics products, which increased 28% organically in 2020. Revenues, smart buildings market declined 12% year-over-year and increased 13% sequentially on an organic basis after adjusting for change in general inventory. Enterprise solution EBITDA margins were 11.5% in the quarter, consistent with the prior quarter, and compared to 13.7% in the prior year period. The year-over-year decline primarily reflects lower volumes. If you will please turn to slide eight, I will begin with our balance sheet highlights. Our cash and cash equivalence balance at the end of the fourth quarter was $502 million, compared to $391 million in the prior quarter and $426 million in the prior period. We're very comfortable with our current liquidity position. Our capital turns were 10.3 turns compared to 6.6 turns in the prior quarter and 8.9 turns in the prior period. We are extremely pleased with the DSL performance in the quarter. Days sales outstanding declined eight days sequentially from 58 days in the prior quarter to 50 days. Inventory turns were 5.2 turns compared to 5.0 turns in the prior quarter and 6.0 turns the prior year. Our total debt principal at the end of the fourth quarter was 1.59 billion compared to 1.52 billion in the third quarter. Disappointing increase reflects current foreign exchange rates. Net leverage was 4.0 times net debt to EBITDA at the end of the quarter. This is temporarily above our targeted range of two to three times, and we expect to turn back to the targeted range as conditions normalize. Turning now to slide nine, I will discuss our debt maturities and components. As a reminder, our debt is entirely fixed at an attractive average interest rate of 3.5%, with no maturities until 2025 to 2028. We have no maintenance confidence on this debt, so we're not at risk of a default in the unlikely event of significantly worsening economic conditions. As I mentioned previously, we're comfortable with a liquidity position and the quality of our balance sheet. Please turn to slide 10 for a few cash flow highlights. Cash flow from operations in the fourth quarter was $134.7 million compared to $187.4 million in the prior period. Net capital expenditures were $33.3 million for the quarter compared to $35.9 million in the prior period. For the full year 2020, we generated cash flow from operations of $173.4 million compared to $276.9 million in 2019. The decline primarily reflects lower EBITDA during the year that resulted from the global pandemic. For the full year, net capital expenditures were $87.1 million compared to $110 million in 2019. The difference is primarily related to the timing of the Grass Valley divestiture, which we completed in July of 2020. As a result, we generated free cash flow of $86.3 million in 2020, compared to $166.9 million in 2019. That concludes my prepared remarks. I would now like to turn this call back to our President and CEO, Roel Westjens, for the outlook. Roel?

Thank you, Henk. Please turn to slide 11 for our outlook. 2021 will be a year of recovery in most of our key markets. During the year, we expect to complete our transformative portfolio actions and turn the focus to accelerating organic growth. Our recent order rates are encouraging, and I'm confident in our ability to achieve our financial goals and drive superior returns for our shareholders. we anticipate first quarter 2021 revenues to be between $490 million and $505 million, an EPS of 60 cents to 70 cents. For the full year 2021, we expect revenues to be between $1.99 billion and $2.050 billion, an EPS of $2.90 to $3.30. For financial modeling purposes, we recommend using interest expense of approximately $61 million for 2021 and an effective tax rate of 20% for each quarter and the full year. This guidance includes the expected accretion from the OTN systems acquisition. It continues to include the contribution of our copper cable product lines that we are in the process of divesting, which contributed approximately $200 million in revenue and 20 cents in EPS in 2020. We will update our guidance accordingly as we complete these divestitures. Please turn to slide 12 for a bridge that walks from our 2020 results to the high end of our 2021 guidance. We expect current copper prices and foreign exchange rates to have a favorable impact on revenues of approximately $80 million in 2021, with a negligible impact on earnings. We expect consolidated organic growth in the range of 1% to 4%, or up to $70 million, with solid growth in our industrial solution segment, partially offset by declines in the smart buildings markets within our enterprise solution segment. we anticipate an incremental $36 million in revenue and 11 cents in EPS from the OTN systems acquisition. Consistent with our commitment, we expect to realize the incremental $20 million in savings under our SCNA cost reduction program. These savings represent 36 cents in EPS. R&D investments are an important strategic initiative designed to drive growth in future periods, but these investments will temporary pressure margins and EPS in 2021. Finally, a normalized effective tax rate of 20%, along with modestly higher interest expense and share count, represent an EPS headwind of approximately 20 cents for the year. For the full year 2021, The high end of our guidance implies total revenue and EPS growth of 10% and 20% respectively. Please turn to slide 13. Before we conclude, I would like to reiterate our investment thesis. We view Belden as a fairly compelling investment opportunity as we are taking bold steps to drive substantially improved business performance. We are significantly improving our portfolio and aligning among the favorable secular trends in our key strategic markets, including industrial automation, cybersecurity, broadband and 5G, and smart buildings. We continue to invest in our business to position the company for accelerating organic growth and robust margin expansion. As we successfully execute our strategic plans and deliver on our goals, We would expect this to drive superior returns for our shareholders. That includes our prepared remarks. Sergey, please open the call to questions.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. Please make sure the function on your phone is switched off to signal to each other equipment. We kindly ask you to limit yourself to one question and one follow-up. Again, it is star one to ask a question. Our first question comes from Ruben Garner from Benchmark. Please go ahead.

Thank you. Good morning, everybody. Good morning. Hank, it's been a pleasure. Good luck moving forward, and hopefully we stay in touch. And, Jeremy, congrats on the new role. Maybe if we could start off, you know, the way the fourth quarter ended and your first quarter guidance is pretty strong, can you just talk about maybe the older trends last year? What gives you the confidence that – Q1 will already be returning to growth and running that same kind of thought process. The outlook for the rest of the year, I think, would seem a bit conservative just given what you're already seeing in terms of recovery. Can you just talk about how you're thinking about 2021 top line?

Okay. Thank you for the question. So there's a couple of factors to consider. So first of all, We did end the year very strong, as we mentioned in our prepared remarks, with a book-to-bill of 1.1, most notably a very strong book-to-bill in our industrial solution segment. I think we referenced it in our remarks 1.16 times. Secondly, we are encouraged by the orders so far in January. They are in line and trending towards the high end of our guidance. And thirdly, the way that the calendar works out, Ruben, we actually have three more shipping days in Q1 than we did in Q1 last year, which means we have three less shipping days in Q4 of this year. So that's why we feel confident that we'll be able to hit our Q1 guidance.

Perfect. That's very helpful. Thanks, Will. And back at the analyst day, it sounded like you know 2021 growth in each uh or growth in three out of your four business with smart buildings um still expected to kind of lag the the recovery are you still thinking about it the same way maybe just talk about what you're seeing kind of in the sub markets uh within your total 2021 outlook yeah absolutely so we see um our industrial solutions segment

grow approximately 6 to 8%. That's implied in the guidance. Our enterprise solutions segment, we expect to be down 1 to 5%, which is basically a tale of two cities. So our broadband and 5G business, we expect to continue to grow. low single digits, but we do expect our smart buildings business to be further down, and it could be down as much as 5% to 10%. That's kind of how our guidance was constructed.

Thank you. We'll now move to our next question from William Stein from Trust Securities. Please go ahead.

Great. Thanks for taking my questions. I want to offer my congrats to everyone on the good results and outlook and especially to Hank and Jeremy. I'd like to first ask about shortages in the related semiconductor market. We're seeing shortages pervade that industry. And when we look at your book to bill, we have to consider maybe some of the strong backlog is related to customers expressing some concern about availability, and maybe there's some pull ahead. Is that dynamic, you think, a realistic way to perceive what's going on with your business? Or are inventories low enough? Or is there some other dynamic that makes you push back on that idea that this really is sort of real-time demand?

Yeah, we tried to anticipate some of these shortages. And as a result, you could see that our inventory levels in Q4 were only at 5.2 turns, right? And they were six turns a year ago. That's not what you're used to at Belden. We made it up in other parts of the working capital. So therefore, total working capital turns showed a nice improvement compared to a year ago. But that's the main reason for the higher inventory levels. So we wanted to make sure that we can indeed ship in Q1 and deliver on our backlog. Whether or not all the orders received are truly for the demand currently at place, that's obviously a little bit hard to tell. We don't have a lot of blanket orders, so virtually all of our orders come with requested ship dates that are not too far in the future. So hopefully that answers your questions. Those are the two dynamics that we see and how we try to anticipate.

Yeah, I recall now about the very short view times. Okay, great. And relatively short duration of backlog. So I think I get it. Another question. You, at the very end of your prepared remarks, you talk about Belden as a compelling investment opportunity. We haven't seen buybacks in at least a quarter, maybe longer, and you did some M&A. I'm wondering how you think about the balance between these two activities in the coming year. Which should we expect more of? Is M&A on hold? Pardon me, are buybacks on hold? Or... How should we think about it and model it?

Yeah, our capital allocation priorities have not changed from how we laid them out during Investor Day. So our priority was and will remain de-levering. I think Hank explained that we have no covenant issues, but we do feel that that is the most prudent thing to do in terms of the uncertainties of the world that we live in. As we've seen with OTM systems, we obviously will continue to cultivate our long list of potential M&A targets, most profoundly within the industrial automation space and fiber connectivity space for broadband and 5G offerings. So if there is an opportunity, as you know, you cannot always control the timing of these companies, then we will act. But as we highlighted, we expect it to be modest in 2021. So the first and foremost priority will continue to be delivering.

Thank you. And our next question comes from Noel Diltz from Stiftel. Please go ahead.

Hi, everyone. And Hank, thanks for all you've done over the past 20 years. And Jeremy, congrats on the new rule. So, well, I was hoping you could just comment a little bit on the R&D investments. You've talked about this again at Investor Day. But, you know, you discussed how this is they're expected to pressure margins and APS in 2021. But how should we think about, you know, when you expect to start to see a return on those investments and you know, as you look out to that kind of longer term 20 to 22% EBITDA margin target, you know, do you still feel like that's achievable within the next few years, three years with this step up in R&D? Thanks.

Yeah, absolutely. Absolutely. As a matter of fact, the investments that we're making now, we are confident will increase our growth rates in 2022 and 2023. So the thesis that we outlined during our investor day is still very, very valid. The guidance implies that at that to get us there in the first year of the three years that we've outlined. So we're very confident that, indeed, the investments that we're making now will yield higher growth rates in 2022 and 2023.

Okay, great. Thank you. And then just in terms of, you know, you're seeing this nice strength in industrial solutions. Could you comment a little bit on, you know, what you're seeing in terms of discrete, you know, oil and gas, kind of some of the submarkets within the segment?

Yeah, our Q4 results were pretty even amongst the verticals. We feel good about discrete. If we look at our current order rates, then we feel very good about discrete. Our leading indicator, as we see it, is our business in Germany. Our business in Germany in Q4 was very strong, was actually up approximately 20%. So we feel good about the screen. And we see a nice optic in mass transit. And this is where OTM systems will help us out.

Thank you. We will now take our next question from Steven Fox from Fox Advisors. Please go ahead.

Hi. Good morning. Hank, congratulations. And thanks for all your help over the years. I assume you're going to manage AACS next. But please let us know what you're going to be doing. Anyway, in terms of just the numbers, I guess I'm a little curious about where you see your customer inventories in the channel. You mentioned some of that was a drag on growth last quarter. Could you sort of give us an update on how inventories look down the supply chain to you? And then I have a follow-up.

So, first of all, let me comment, indeed, to make sure there's no ambiguity. Let me comment on the customer inventory levels. So, we had outlined the plan at the beginning of the year to get $70 million out of the system, if you will, so further reduce our channel inventory partners' levels with $70 million, and that's exactly what matured. A lot of it in the fourth quarter, as you saw, but that was exactly as we had forecasted it to be. So that sets us up well for 2021. We don't expect any of this to recur. And the turns at our channel partners we now believe are unhealthy levels. So we're very, very pleased to have that behind us. As far as our supply chain is concerned, As I mentioned earlier, you saw that the inventory levels that we carry on our balance sheet in Q4 were actually a little bit higher than you probably would have assumed, meaning that our turns did not improve compared to a year ago period. As a matter of fact, they degraded 0.8 turns. That's because we carry more inventory anticipating some of these shortages that you read about to make sure that we can satisfy our customers and maintain our high on-time delivery standards.

That's very helpful. And then just as a follow-up, can you talk a little bit more about the broadband business, especially, one, how you're gaining market shares, and then secondly, sort of the growth outlook, either split between the MSOs versus telecom and networking?

Yeah, so a few comments that might be helpful. We see the trend. of our mix moving more toward outside the home versus inside the home continue. So for a full year 2020, we had 50% of our revenue outside the home, and hence 42% inside, with actually an exit rate of 64%. Before we had 64% of our revenue outside the home. We saw the trend of fiber versus copper further improve. So for the year, 27% of our revenue within broadband and 5G is now fiber, and actually we had an exit rate of 32% in Q4. So more than $100 million we're doing in fiber and fiber-related connectivity products in that segment. So that's one. Two is we continue to expand fiber. our offerings for the telcos as they get ready for their 5G offerings. It's still a relatively small part of the business, but we continue to invest in terms of adjusting our products, making our products suitable for the 5G market, as well as increasing some of our commercial coverage within that segment. Our MSOs are obviously still the bread and butter, right, for that business. So we remain very strongly tied to our MSO customers. And while we continue to expand our product portfolio, continue to increase share through offering more solutions for these MSO customers.

Thank you. We'll now take our next question from David Williams from Lube Capital. Please go ahead.

Hey, good morning and thanks for letting me ask a question. First, I wanted to ask a little bit on the smart building side and kind of how you envision that playing out for the rest of the year, obviously pressured with the COVID situation. But as that improves, do you see a big rebound there or just kind of how you're thinking maybe about the smart building side of the business?

We continue to expect that business to decline in 2021. And I think during the Investor Day, we highlighted that over the three-year period, we outlined a base case and an upside case. In the base case, I think we shot low single digits over the last three years. And on the upside case, positive low single digits growth rates. So that's our outlook. We continue to monitor the starts, right, of commercial buildings. And we'll continue to allocate more resources within the smart building segment to verticals that are actually growing, such as data centers.

Okay. And then for our follow-up, just any comments on the ordering patterns in terms of being rational, and are you seeing much anxiety in terms of trying to pull in orders just ahead of any shortages, I guess, down the food chain?

You know, not at this point. I think I indicated that we feel good about the early trends that we're seeing within the quarter, but we don't see anything out of the ordinary.

Thank you. And our next question comes from Jed Dorsheimer from Concord Unity. Please go ahead.

Hi, thanks. And first, let me just comment. And Hank, it's been great working with you for the short time that we have. And congrats on your next endeavor. I guess the question that I have is, because many of mine have been asked, I'm just curious how your upstream supply chain has been shifting. Is the market that you serve are changing in terms of the technology. So, for example, if I look at broadband infrastructure, for example, as those frequencies increase, how is that having an effect on your upstream supply chain?

So, I think we touched on this earlier. You know, we feel good about... our suppliers' ability to deliver our components and the products that we require. We carry, I think I've highlighted earlier, that we carry a little bit more inventory than we typically do for this specific reason to ensure that we don't run into shortages and that we're able to deliver our orders in Q1, we're able to book and turn in Q1, and able to maintain our high standards for delivery. our on-time delivery performance that our customers have expected from us at this point in time. So we don't see any issues at all.

Got it. I guess what I was trying to ask is not whether or not there are issues, but the process that I'm assuming that your supplier base is shifting, though, is the technology shifts. My question was more about the process of evaluation, testing, and qualification of your upstream suppliers. As the market demands continue to shift at a rather rapid pace, I'm just curious how you're managing that.

I understand. I appreciate the question. First and foremost, An increasing part of our offerings is software. So that obviously reduces the dependency on supplier lead times and supplier component availability. And secondly, because we are such a diverse enterprise, since we have so many different types of products and different types of suppliers, we're not very dependent on a few. So, and thirdly, you know, because we've been doing this for a while and we have such a broad supplier base globally, there's very little components, if none, as a matter of fact, I don't know of a single component that we're sole sourced, that we only have one option in. So as you may or may not recall, we had an issue years ago where we kind of got stuck with the supplier not being able to supply certain components for industrial switching equipment. And ever since that, we've increased the exposure of our processes and optimized the processes to ensure that we minimize the chances of that ever happening again. So that's kind of how I would answer the question. Does that make sense?

Yes, sorry, I was trying to come off mute. That's helpful. Thank you.

You're welcome. Thank you. We will now take our next question from Mark Jelani from Goldman Sachs. Please go ahead.

Yeah, good morning. Thanks for taking the questions. And, Hank, please let me thank you as well for all of your help over the last several years and wish you the best going forward.

Thank you.

Yeah, two questions from me, if I could. Maybe first on the cybersecurity business, you know, there's been a lot of news around increased number of hacks, especially with solar winds. And I'm curious, is Belding seeing a material increase in customer dialogue or your order funnel for the tripwire business, given the increasingly challenging threat environment?

Yeah. You know, our funnel currently supports our forecast for the first quarter and for the full year 2021. We continue to focus on our number one strategic priority within cybersecurity, the industrial space, and we're pleased with the results that we've achieved. within that vertical. So in 2021, in the second half, as you know, our leading indicator is non-renewal bookings. For the second half, they were up 11% cybersecurity bookings in the second half, and for the full year, they were actually up 31%. So we feel good about the industrial priority within cybersecurity, and we continue to increase our funnel supporting the increased activity that we see.

Understood. And for my follow-up question, copper pricing, shipping costs, and semiconductor prices have all been rising. Can you speak to how much of a margin headwind you may be expecting in your 2021 outlook from some of these factors?

You know, we don't. We have the ability to pass it on to our customers, oftentimes through contractual agreements or oftentimes through price increases. And since we're very used to fluctuations in copper prices as well as other metals, we're confident in our ability, as we have proven over the last years, to be able to pass those increases on to our customers.

Thank you.

Thank you. Kevin Muska, there are no further questions at this time. Please continue.

Okay. Thank you, Sergey, and thank you, everyone, for joining today's call. If you have any questions, please reach out to the IR team here at Belden. Our email address is investor.relations at Belden.com. Thank you.

This concludes today's conference call. Thank you for your participation.