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Software AG bookings up as clients hurry digital transformation

BERLIN, July 22 (Reuters) - Software AG reported a 32% rise in second-quarter bookings on Wednesday as customers turned to the German business software group to enable home working and remote access to data in response to the coronavirus pandemic.

The acceleration comes as Darmstadt-based Software AG shifts under CEO Sanjay Brahmawar to a subscription-based model from licences, replacing lumpy up-front payments over time with more predictable revenue streams.

“In two or three months we have seen digital transformation of two to three years,” Brahmawar, a former IBM executive, told Reuters in an interview.

Software AG specialises in so-called middleware, the “glue” that makes it possible for different systems to talk to each other and allows its clients to run their systems at on-premise servers or on top of different cloud providers.

Brahmawar highlighted a client win with an Internet of Things (IoT) solution for U.S. medical technology company Hill-Rom, saying it would generate seven-figure euro revenues. The deal was done remotely within three months.

Second-quarter group bookings, management’s preferred growth metric, grew by 32% to 109.8 million euros ($126.5 million). Subscription and software-as-a-service (SaaS) contracts accounted for 88% of new business in Software AG’s digital segment that accounts for around four-fifths of revenue.

Group revenue declined by 3% to 204.6 million euros while operating profit was down by 26% to 41.4 million euros - generating a margin of 20.2%. That was in line with full-year guidance of 20%-22% which the company reiterated.

Software AG confirmed its goal of achieving 1 billion euros in annual revenues in 2023, with an operating margin of between 25% and 30%. The company’s shares are up 21% in the current year to date. ($1 = 0.8678 euros) (Reporting by Douglas Busvine Editing by Michelle Martin)