Materialise NV (NASDAQ: MTLS) Q4 2020 earnings call dated Mar. 09, 2021
Corporate Participants:
Harriet Fried — Senior Vice President of LHA
Peter Leys — Executive Chairman
Wilfried Vancraen — Chief Executive Officer
Johan Albrecht — Chief Financial Officer
Analysts:
Jason Celino — KeyBanc — Analyst
Arvind Ramnani — Piper Sandler — Analyst
Troy Jensen — Lake Street — Analyst
Presentation:
Operator
Thank you for standing by and welcome to the Q4 2020 Materialise Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Harriet Fried of LHA. Thank you. Please go ahead, ma’am.
Harriet Fried — Senior Vice President of LHA
Thank you for joining us today for Materialise’s quarterly conference call. With us on the call are Fried Vancraen, Founder and Chief Executive Officer of Materialise; Peter Leys, Executive Chairman; and Johan Albrecht, Chief Financial Officer.
Today’s call and webcast are being accompanied by a slide presentation that reviews Materialise’s financial and operational performance for the fourth quarter and full year 2020. To access the slides, if you have not already done so, please go to the Investor Relations section of the company’s website. The earnings release that was issued earlier today can also be found on that page.
Before we get started, I’d like to remind you that management may make forward-looking statements regarding the company’s plans, expectations and growth prospects, among other things. These forward-looking statements are subject to known and unknown uncertainties and risks that could cause actual results to differ materially from the expectations expressed, including competitive dynamics and industry change. Any forward-looking statements, including those related to the company’s future results and activities, represent management’s estimates as of today and should not be relied upon as representing their estimates as of any subsequent day. Management disclaims any duty to update or revise any forward-looking statements to reflect future events or changes in expectations. A more detailed description of the risks and uncertainties and other factors that could impact the company’s future business or financial results can be found in the company’s Annual Report on Form 20-F filed with the SEC.
Finally, management will discuss certain non-IFRS measures on today’s conference call. A reconciliation table is contained in the earnings release and at the end of the slide presentation.
With that, I’d like to turn the call over to Peter Leys. Go ahead, please, Peter.
Peter Leys — Executive Chairman
Thank you, Harriet, and thank you, everyone, for joining us today. As always, you can find the agenda for our call on Slide number 3. As the first item on our agenda, I will summarize the highlights of our financial results for the fourth quarter of 2020; then I will pass the floor to Fried, who will provide us his key takeaways with respect to our performance last year; after that, Johan will walk you through our fourth quarter numbers in more detail; and finally, I will come back to give you some qualitative insights in what we currently believe the near-term future will bring. When we’ve completed our prepared remarks, we will be happy to respond to any questions that you may have.
So let’s turn to Slide 4, which summarizes the highlights of our financial results.
Just like the second and third quarters of 2020, the results of our fourth quarter were impacted by the COVID-19 pandemic. While we expect the impact of the prices on our performance to continue throughout the first quarter of 2021, we do see a number of encouraging signs of recovery.
First, while our revenue is still roughly 10% lower than the fourth quarter of 2019, our revenues in the reported period do represent a 10% increase on a sequential basis compared to our revenue in the third quarter of last year. Second, we are further encouraged by the fact that, in Q4, our deferred revenues from software license and maintenance fees grew by EUR3.4 million compared to the end of the third quarter of 2020. Third, in spite of the revenue decline, our adjusted EBITDA margin remained healthy at 16.3%, actually 10 basis points higher than the 15.3% margin that we reported in the same periods of 2019. Importantly, this performance did not come at the expense of our R&D efforts. On a comparable basis, R&D expenses increased by 10.8% in the fourth quarter of 2020 compared to the last quarter of the previous year, and they represented 14.5% of total revenue compared to roughly 12% of total revenue last year.
Finally, we closed 2020 with cash and cash equivalents of EUR111.5 million on our balance sheet and with total gross debt of roughly EUR150 million, of which only about EUR17 million is due within the next one year.
And with that, I would now like to ask Fried, to give some further color to these numbers. Fried?
Wilfried Vancraen — Chief Executive Officer
Good morning or good afternoon, everyone. I would indeed like to focus a moment on the last numbers Peter mentioned, because they show the impressive resilience Materialise demonstrated during the crisis year 2020. Our gross debt decreased by EUR13 million from EUR128 million in 2019 to EUR115 million. Our cash position decreased by EUR17.5 million from EUR129 million to 111.5 million at the end of last year.
I consider this an exceptionally strong performance as it actually means that except for EUR4.5 million, the hard work of our team members in 2020 financed, in addition to the normal capex, a year-on-year increase of R&D efforts by 7.1%.
On top of that, the first phase of our new IT infrastructure program for a total amount of EUR3.3 million was rolled out. And then the acquisition of RS Scan and RS Print, for which we paid roughly EUR8 million in 2020 was financed. And finally, for the strategic partnership with Ditto, we drew, in 2020, EUR2.8 million from our $9 million facility.
All of this was financed in a roller coaster year, where several of our production and sales activities came to a near complete standstill in the second quarter.
The very strong recovery of our Medical segment in the second half of 2020 required many of our people to move abruptly from standstill to an overtime situation. The slower recovery of our software and manufacturing activities required skillful management of a wide variety of temporary employment measures in the different countries where we operate.
We did not implement any redundancy programs, earning Top Employer awards in both early 2020 and 2021, and we retained our key talents, the core knowledge assets of our company. We will need those talents to tackle the big changes and opportunities that we are expecting in the next decade of 3D printing that starts now. Let me demonstrate this with our segment strategies in more detail.
Our Medical segment has demonstrated its flexibility and innovation by the superfast development of several products in the early days of the pandemic, when supply change were at the big of the problems. Simultaneously, our team released several new software products that expanded our legacy Mimics Innovation Suite and hospital-based point-of-care 3D printing solutions. This proved to be a major tool for some hospitals deprived of normal supply. These new releases also position Materialise well for growth in the cardiovascular market.
We showed our passion for personalized medical products when hospitals could reopen their elective care activities with accelerated deliveries and did not let down the surgeons and our medical device company partners when their planning of interventions was extremely difficult.
All in all, this resulted in a year-over-year growth for our Medical segment, despite the severe economic difficulties for hospitals and related companies in fields that could not be directly linked to the pandemic.
As we all expect that the medical sector will quickly return to serving all kinds of medical needs as soon as COVID-19 is under control, we believe that the experience of 2020 will spur elective cases to be the first time right as much as possible and well planned, of course, for each person or patient. This is exactly where Materialise Medical excels.
Now moving to our Manufacturing segment. It has been the one most severely hit during 2020, especially due to its exposure to the aerospace and automotive sectors. The COVID-19 crisis in those sectors cannot be seen independent of the long-term climate crisis, which is driving an unprecedented change in both sectors. This is a threat and opportunity at the same time.
The strategic actions that we started already before, and as we even accelerated during 2020 are twofold. First, people at Materialise believe in empowering sustainability, and we hate waste. That is why we believe we are well placed to serve the needs of the future in aerospace and automotive. We can provide services in which energy and materials consumption are minimized, and we can enable our customers to do the same.
For instance, lightweight RapidFit fixtures that are reusable, cater the needs of an electric car manufacturing. RapidFit saw historically high order intake at the end of 2020.
Second, the footwear and eyewear activities in our Manufacturing segment have demonstrated much more resilience in 2020, and this is where we made the most important strategic investment in Q3 and Q4, as we explained in our investor call in November.
Both for eyewear and intels, there are millions of consumers that need the right personalized solutions and additive manufacturing as the functionality and economics to deliver this.
Materialise’s passion for personalization, made to develop not only the products and processes for the 3D printing of those products, but also the entire software backbone that allows us to create and harvest value from the moment of data capturing at the point-of-sale with an optician or a podologist, up to delivery of the final product in the house of the customer.
We believe we can grow our own products in those sizable markets during the next decade substantially.
Last but not least, 2020 has also been a year in which a transformation within our Software segment accelerated. One can see the Software segment as the one through which the accumulated know-how of 30 years of Materialise additive manufacturing knowledge is shared with the additive manufacturing users worldwide.
It is obvious that the COVID-19 crisis has accelerated the digitization in general and cloud-based services, in particular. Companies prefered in-house solutions such as those offered by the standard Magics 3-matic, or Streamics suite, and they still rely on them today. This is demonstrated by the growth of our recurring revenue on annual basis that our CFO will explain later in this call.
There is, however, a growing interest in cloud-based solutions, often as a service rather than a product for scalability reasons. For instance, all our medical OEM partners are taking advantage of the cloud-based services Materialise provides. That is why, previously, we have started already a complete redesign on the legacy Materialise Software Kernel into APIs and take full advantage of the best scalability and security options that cloud technology has to offer.
During 2020, we came close to a full transformation of our software technology base in cloud compatible APIs that are ideal building box for the future, not only to run the old functionalities in the cloud, but also as a base for reliable workflow automation which many additive manufacturing applications are waiting for. As a result of the transformation during the launch of the Materialise Think-In Series in mid-November, we could announce several new products for this year 2021.
Magics Storefront is a full eCommerce and CRM solution in one platform. The new Process Tuner is an intuitive online platform that helps speed up the optimization of process parameters that is required for mass manufacturing of 3D printed parts.
Both are examples of a new generation of cloud-based services that are fundamentally based on a comprehensive Magics cloud platform we are rolling out.
Through these steps, we have ensured that existing and new Materialise’s customers have access to the most comprehensive body of additive manufacturing intelligence available through software algorithms and data. In the new normal that we expect soon after the vaccines have beaten COVID-19, we are strongly convinced those will be very successful.
Johan, up to you.
Johan Albrecht — Chief Financial Officer
Thank you, Fried. I begin with a brief review of our consolidated revenue on Slide 5. As a reminder, when we refer to sales in our presentation, we mean revenues plus deferred revenues. Also, please note that unless otherwise stated, all comparisons in this call are against our results for the fourth quarter of 2019.
In this year’s fourth quarter, our income statements include two months of the RS Print activities as a result of the 50% step-up acquisition of RS Print and RS Scan on November 9 of last year.
Revenue decreased 10.7% to EUR45.3 million for the period. COVID-19 continued impacting our Software and even more so our Manufacturing segment. However, compared to the third quarter of 2020, we recorded 11% growth, boosted by manufacturing that grew 26%, plus 21% if we exclude the RS Print impact.
The EUR3.4 million increase of deferred revenues from software license and maintenance fees underscores the strong sales performance of our Software and Medical segment in this fourth quarter. For the quarter, Materialise Software accounted for 23% of our total revenue, Materialise Medical for 38% and Materialise Manufacturing for 39%. Cross-segment revenue from software products increased to 34% of our total revenue.
Moving to Slide 6, you will see our consolidated adjusted EBITDA numbers for the fourth quarter. Consolidated adjusted EBITDA amounted to EUR7.4 million, a modest increase of almost EUR400,000 compared to Q4 last year. This decrease should be seen in the light of our quarterly revenue decline of EUR5.4 million. Besides the effect of reducing variable cost of sales, the many cost-saving initiatives we implemented had a substantial impact on keeping our EBITDA margin at 16.3%, 1 percentage point above last year. All this, while we increased our R&D efforts this fourth quarter on a comparable basis by 10.8%.
Slide 7 summarizes the results of our Materialise Software segment. Here, revenue was 15.7% below last year’s quarter. Recurrent revenue grew 3.5% from last year, benefiting from a strong increase of renewed license sales. Nonrecurrent revenue decreased 31%. On a sequential basis, however, compared to the third quarter of 2020, our Materialise Software revenue increased 7.8% and the sales even increased 40%, including the effect of deferred revenue of EUR2.3 million. The significant sequential growth of our software sales of 40% was boosted by an increase of direct sales of 48%, while OEM sales rose 9%.
EBITDA amounted to EUR3.9 million compared to EUR5 million. The EBITDA margin remained strong at 37.9% compared to 41.5%. In fact, while revenue decreased EUR1.9 million, cost containment measures in SG&A amounted to EUR0.9 million, while R&D efforts increased. For the full year, the EBITDA margin increased 1.1 percent point to 34%, and this in the light of a decreased revenue of 6% over the full year.
Moving now to Slide 8, you will see that total revenue in our Materialise Medical segment was EUR17.2 million, matching both the quarterly record revenues of Q4 2019 and also the solid performance of Q3 2020. We are particularly proud of the Materialise Medical full year results that in the midst of the pandemic still represented an increase of 1.5% compared to an already very strong 2019.
Revenue from our Medical Device Solutions remained strong. At December 1, 2020, Materialise acquired the remaining 25% shares of Engimplan from the founding family in exchange for Engimplan’s final implant business line, which was nonstrategic for Materialise. Since that date, Engimplan is a 100% Materialise company with a very targeted focus on our CMF business
Because the pandemic in Brazil delays the rollout of our business plan in that region, including the introduction of 3D printed devices, we impaired EUR2.5 million of goodwill and intangibles related to the Engimplan acquisition of 2019.
Revenue from Medical Software sales accounted for 30% of the segment revenue. In the last quarter of 2020, our Medical Software sales matched the quarterly records of both fourth quarter of 2019 and of the third quarter of 2020. Moreover, Medical Software sales, excluding the impact of deferred revenues, increased by an impressive 40% compared to Q3 2020.
While revenue was flat, adjusted EBITDA increased 28% to EUR4.8 million from EUR3.5 million. We succeeded in reducing operating expenses by EUR2.4 million, while the segment increased its R&D program efforts by 11% on a comparable basis, in line with our strategy.
This quarter, we impaired the capitalized expenditures on our balance sheet of EUR2.1 million related to our tracheal splint development program. A couple of setbacks were affecting our expectations related to the timing of start of commercialization, creating a longer period of uncertainty and leading to this impairment. We currently still believe in the successful outcome of the program and of the associated business case, so we plan to continue this R&D program in full.
As of Q4 2020, our R&D expenses related to the program are reported now in our income statement.
Now let’s turn to Slide 9 for an overview of the Q4 performance of our Materialise Manufacturing segment. This quarter, Manufacturing revenue included two months of activities from a newly acquired RS Print and RS Scan Footwear business line. The revenue represented EUR762,000 in the fourth quarter. This revenue, yes.
Total revenue decreased by 16%, mainly due to our ACTech business. Our traditional 3D printing-related manufacturing business lines recovered well and came close to the revenue of Q4 2019. Compared to Q3 2020, total manufacturing increased 26% or 21% if you exclude RS Print footwear. But including already a double-digit growth in ACTech as well.
Despite the mitigating effects of lower variable expenditures and labor cost reduction efforts, gross profit of Materialise Manufacturing was still negatively affected because of the fixed cost of underused capacity. Savings measures resulted in a decrease of operating expenses of 13% or almost EUR800,000. As a combined result, adjusted EBITDA decreased EUR0.7 million to EUR1.1 million while the EBITDA margin was 6.1%, which is, all-in-all, not that far from last year’s 8.3%.
Slide 10 provides the highlights of our income statement for the fourth quarter. Revenue decreased EUR5.4 million or 10.7% and gross profit decreased EUR2.4 million or 8.4%. Gross profit was negatively affected by the cost of capacity in our manufacturing business lines, but positively impacted by efficiency gains and the growing software and services portion in our revenue sales mix. As a result, gross profit margin increased to 57.8% compared to 56.4%.
While revenue fell 11%, our sales and marketing spending decreased 23%. G&A expenditures increased 12%, an increase entirely due to the rollout of the ongoing internal digital transformation project that we discussed in our last earnings call. Excluding the impairment cost of our tracheal splint program, research and development expenses increased 11% this quarter, in line with our stated strategy.
This quarter’s net operating expenses were EUR0.3 million, and included the EUR2.5 million impairment cost of goodwill and intangibles and a positive revaluation of EUR0.8 million on our initial 50% interest in RS Print. Last year, net other operating income was EUR1.4 million.
As a result of these elements, the group’s operating result was negative EUR2 million compared to a profit of EUR2.5 million in last year’s period. Net financial cost was EUR600,000 at the same level as last year. Income tax expense amounted to an income of EUR0.5 million, mainly due a new German tax law enabling tax carryback on 2019 taxes.
Net loss for the fourth quarter was EUR2.118 million compared to a net profit of EUR1.2 million through the 2019 period.
Now please turn to Slide 11 for a recap of balance sheet and cash flow highlights. In this fourth quarter, our balance sheet remained strong, as both Peter and Fried pointed out earlier. Cash amounted to EUR111.5 million compared to EUR128.9 million at December 31, 2019. But over the same period, our borrowings decreased by EUR13 million to EUR115 million, only EUR17.2 million of our debt is short-term at December 31.
Equity decreased almost EUR10 million to EUR133 million as a combined effect of the year-to-date net loss of EUR7 million, negative conversion differences of EUR6 million and income from the exercise of stock options for EUR4 million. Of the negative EUR6 million conversion differences, EUR4.6 million reflects the effect of the weakened Brazilian real on Engimplan’s equity position.
Total deferred revenue amounted to EUR34.9 million as compared to EUR32.7 million as of end 2019. Of the EUR34.9 million, EUR13.2 million were related to annual software sales and maintenance contracts versus EUR27.7 million as of December 31, 2019.
Cash flow from operating activities for the fourth quarter of 2020 increased EUR9.5 million to EUR15.2 million from EUR5.7 million for the 2019 period. Main contributors to the strong operating cash flow with the EBITDA performance, a further improvement of our working capital of EUR3.8 million and deferred revenue of EUR3.5 million.
Full year operating cash flow amounted to EUR30 million compared to EUR28.4 million last year. Our days of sales outstanding position even improved from the past quarters, and our customers have not shown any material payment difficulties.
During the quarter, we paid EUR8 million for the acquisition of RS Print, including the acquisition of the assets of RS Scan. Capital expenditures for the quarter amounted to EUR3.7 million and were not financed. This quarter’s capex included a EUR0.3 million investment related to our ambitious internal digital transformation project, and that besides the EUR900,000 expenditures reported under G&A in our income statement. Peter?
Peter Leys — Executive Chairman
Thank you, Johan. Before opening the floor to questions, we would like to try and give some qualitative insights about what 2021 may bring in the short term.
As we explained in today’s press release, our fourth quarter 2020 results and the customer feedback we have been receiving to-date in 2021 are encouraging. The COVID-19 crisis continues to impact our business, however, and does this in a fairly diverse way across our various segments and the various regions where we do business.
As a result, our outlook is currently not sufficiently mature for us to provide meaningful quantitative guidance for our consolidated full year 2021 performance.
Today, we do have more visibility on what the first quarter of 2021 may bring. We currently expect that both our Software and Medical segments, which continue to recover steadily, have the potential of posting revenues that were close to the revenue levels that they posted in the pre-pandemic first quarter of 2020. We do not expect our Manufacturing segment to recover to the same extent at the same pace in the first quarter of this year. As a result, we estimate that our consolidated revenues in the first quarter of this year will be 5% to 10% lower than what they were in the same period of the previous year.
The backlog of orders and the pipelines of our Manufacturing business, in general, and of our ACTech and RapidFit activities, in particular, are becoming stronger by the day. Because of the nature of these businesses, that recovery will only be reflected in our Q2 numbers at the earliest. But based on that information, we believe that in the second, the third and the fourth quarters of this year, as the pandemic crisis subsides, the entire group, including our Manufacturing segment, will perform well and will grow sequentially quarter-over-quarter.
In line with our strategy just like last year, we will continue to invest in our R&D programs and internal infrastructure. And this will weigh on our overall results in 2021.This concludes our prepared remarks. So operator, we are now ready to open the call to questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Jason Celino from KeyBanc. Your line is open. Please ask the question.
Jason Celino — KeyBanc — Analyst
Hello. Can you hear me okay?
Peter Leys — Executive Chairman
Hey, Jason. We can hear you fine.
Jason Celino — KeyBanc — Analyst
Okay. Looks like a little bit of echo on my end. It looks like you had pretty solid renewal activity in the first quarter. Was it potentially [Technical Issues] or is it a requirement of more and more renewal activities? And this is for the Software segment.
Wilfried Vancraen — Chief Executive Officer
For the Software segment, I think we can state that it’s a combination of both. Some people had really such economic difficulties last year that they postponed some renewals of maintenance, for instance, or annual licenses. Despite the fact that we did very well on the recurring income side, we could have done better, if not some of our customers had experienced some financial difficulties.
At the same time, you will have noticed that the OEM-related activity of our software was very low. And that we believe that the entire climate in the 3D printing sector will pick up, so that we also have more possibilities to sell in relation — in combination with new machine sales, for instance, and new projects that are going to be started this year.
Jason Celino — KeyBanc — Analyst
Okay. Great. And then one more for me. The commentary on the sequential growth from second quarter to fourth quarter, but more specifically for Manufacturing. Your level of confidence here, if I heard this correctly, is being driven from [Technical Issues]. Maybe can you talk about more, like r what exactly is driving the confidence?
Wilfried Vancraen — Chief Executive Officer
Yes. Jason, we’re getting feedback. There’s quite a bit of echo on the line when people ask questions. So we get the suggestion that we briefly repeat the questions, so everybody can follow. So I will try to recap your question. Your question relates to the sequential growth that we are currently expecting for the second, third and fourth quarter of this year. And what, in particular, with respect to Manufacturing, you were asking where we draw that confidence from?
Jason Celino — KeyBanc — Analyst
Correct. Yes, correct.
Wilfried Vancraen — Chief Executive Officer
Yes. Yes, you’re right. I mean, we referred in our prepared remarks, we referred to the activities of ACTech and RapidFit, two activities that really are, to a very large extent, active in the automotive sector. So if we look at the orders that we’re getting in and at the backlog that we — those two activities are currently having, then we do see that the automotive sector, in particular, is picking up, is gaining confidence and is finding its way to our salespeople, again, with good and strong orders that supports the confidence that we have expressed with respect to the sequential growth for the following quarters of this year.
Johan Albrecht — Chief Financial Officer
If I can add something to that, Peter. We also have the new line associated with the foot care that we also expect that will start ramping up, especially as from Q2. And simultaneously, also, we see a good progress to come up in our eyewear business line, on top of the elements that Peter has already explained.
Peter Leys — Executive Chairman
Thank you, Johan. We had echo from Jason’s line before. Now we hear nothing. Maybe we should move to the next question.
Operator
Your next question comes from the line of Arvind Ramnani from Piper Sandler. Your line is open. Please ask your question.
Peter Leys — Executive Chairman
Hi, Arvind. How are you doing?
Arvind Ramnani — Piper Sandler — Analyst
Good. So one of the items you talked about were — as the year progresses, how much of growth are you expecting from pent-up demand or, in other words, growth that was not done in 2020, that’s been delayed, the pent-up demand [Technical Issues] should likely [Technical Issues] any color on that would be helpful.
Peter Leys — Executive Chairman
Yes. Arvind, I will also first repeat the question. You are asking us how much increase of demand we estimate we will be seeing because of the delays in orders last year.
Arvind Ramnani — Piper Sandler — Analyst
Yes.
Peter Leys — Executive Chairman
Actually, we have a strong belief and good indications that this is going to happen this year. However, the quantitative amount we cannot express at this moment. That is why we give a qualitative, yes, forecast because it’s very hard to estimate at which rate this is going to happen through the entire year. What we can currently state is that in the automotive sector, for instance, we have seen, let’s say, in the last months return to the normal situation of before the crisis. And if that — that’s what we can currently state, but that’s where we are.
Arvind Ramnani — Piper Sandler — Analyst
Terrific. And is there anything [Technical Issues] Medical field, in the prepared remarks, you talked about kind of demand from medical field. So any further color you can provide of that would be helpful.
Wilfried Vancraen — Chief Executive Officer
So again, Arvind, I’ll try to repeat your question. So your question was, if we could also expand on the same topic of pent-up orders with respect to the Medical sector.
Arvind Ramnani — Piper Sandler — Analyst
Yes.
Wilfried Vancraen — Chief Executive Officer
That will, to some extent, be the case, but I think this — we expect lots of actually genuine growth within our Medical sector. So genuine growth, not only coming from delayed orders of last year, for a very simple mathematic reason that last year was actually a very good year, where we showed albeit moderate growth compared to 2019. But secondly, there’s also the practical reality that surgeons can only do so many interventions on the day. So they cannot just — so there is current business that is gradually picked up, that 2021 cannot basically lean heavily on many pent-up orders that would date from a year ago.
So the growth that Medical has shown and that we expect that Medical will continue to show in 2021 is just genuine growth that has much more to do with the quality of the products and the disruption of the solutions that we bring than with delayed orders from the past.
Arvind Ramnani — Piper Sandler — Analyst
All right. Thank you.
Wilfried Vancraen — Chief Executive Officer
Sure. Thank you.
Operator
Excuse me, presenters. I can see there’s a static on the line of Mr. Peter Leys. Are you on a speaker phone, sir?
Peter Leys — Executive Chairman
Yes, we are.
Operator
Can you kindly use your handset or mute your line while not speaking to prevent background noise?
Peter Leys — Executive Chairman
Yes, we will mute the line when we are not speaking.
Operator
Okay, sir. Let’s move on, on the next question. Your next question comes from the line of Troy Jensen from Lake Street. Your line is open. Please ask your question.
Troy Jensen — Lake Street — Analyst
Hello, gentlemen. Congrats on the improved results.
Peter Leys — Executive Chairman
Thank you, Troy. Welcome back.
Troy Jensen — Lake Street — Analyst
Yeah, thank you. Glad to be back. Hey, so quick, I guess I was most interested in Fried’s comments about the cloud offering here. Could you talk at all about like the timing of these launches? Has it started to contribute to revenue? Or this is going to be a 2021 story? And then I’ll probably throw a few questions out here just because the meet you guys got to do, but is it going to be Mimics and Magics and Streamics? And I’m guessing this is going to be an opex expense now for customers versus the capex. So do you see this accelerating revenue growth for you guys given the typically too easy to get opex approval for that corporations?
Wilfried Vancraen — Chief Executive Officer
Troy, this is about new products. We announced at the end of last year, and that we are taking in better tests with customers during the first half of this year, but that only will be going on sales in the second half of the year. So the overall impact on results, well, this year still be limited. I hope this answers your question.
Troy Jensen — Lake Street — Analyst
Yes, understood. That’s fine. [Technical Issues] I’ll let you guys mute.
Johan Albrecht — Chief Financial Officer
Troy, related to your question about capex, we reported in 2020, capex of something more than EUR17 million over the full year. What it will bring next year, we will continue to invest. That’s for sure. We already mentioned there are two elements. On the first place, we have R&D investment that entered in our P&L. And second, we have our capital expenditures. We estimate that it will not be that far from what we have invested in 2020 in the same range, but the focus may differ a little. In 2020, for example, we still invested in manufacturing, also in our building. But now we are — we count also on investing in our focus in our strategic new business lines where Peter has — all that Peter has talked about.
We also count on investing much more money in our digital transformation program, and that will be partly reflected in capital expenditure, but also in our P&L. We have to follow the IFRS standards. And not all of the — in IT investments that we make are to be recognized as capital expenditure, but some also have to be expensed in P&L. Again, it will be more or less in the same range.
Troy Jensen — Lake Street — Analyst
Yes. I was actually referring to your customers when they buy software. Typically, it’s a capex purchase, as it relates to the service. I think it’s more of an opex purchase, and I believe it can get better or quicker approval on it.
I’m going to move to the next question here. Software revenues were up 7.8% sequentially, but sales were up 40%, and I get that that’s deferred revenues. Can you talk about what’s driving that? Is that going to be additive applications or is that the Medical stuff?
Peter Leys — Executive Chairman
Yes. The 40% applies really to our technical software. So the additive manufacturing software. And again, I think there, we definitely had some catch-up operations of people that postponed some purchases during Q2 and Q3.
Troy Jensen — Lake Street — Analyst
I guess one more question I’m going to see the floor. So some of the system companies are talking about an upcoming inflection in end part production. And I always view that as good for your Software business. So does this tie into this 40% growth in deferred revs? Do you agree with the comment, Fried, that we’re starting to see an uptick in in-product applications?
Wilfried Vancraen — Chief Executive Officer
Yes. Troy, we are — and we have always been very positive about the future of 3Dprinting. However, you will — we can only talk as we have been talking to before about what we call the slower evolution. So the inflection point that is often mentioned is never a sharp inflection. It’s a steady — that steady growth that sometimes accelerates a bit, and I do think we can believe some acceleration will happen, of course, when the economy recovers. But don’t let — don’t believe it’s going to double at once, because the 3D printing is embedded in such a complex manufacturing and, yeah, ecological systems that this is always moving much slower than many people think.
Troy Jensen — Lake Street — Analyst
Yeah, completely understood you guys. Thank you and good luck in ’21 here.
Peter Leys — Executive Chairman
Thank you, Troy.
Operator
There are no further question at this time, you may continue.
Wilfried Vancraen — Chief Executive Officer
Thank you, operator, and thank you all once again for joining us on this call. We look forward to continuing our dialog with you through virtual investor conferences or one on one meetings and calls. Obviously, we very much more look forward to meeting you again in-person, hopefully somewhere in the second half of this year. But in the meantime, please feel free to reach out to us if you have any questions.
Thank you again and goodbye for now. Bye.
Peter Leys — Executive Chairman
Bye-bye.
Operator
[Operator Closing Remarks]