AXWAY_REGISTRATION_DOCUMENT_2017

AXWAY GROUP AND ITS BUSINESS ACTIVITIES Risk factors

CORPORATE RESPONSIBILITY

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

1.13 Risk factors Apart from the information contained in this Registration Document, investors are invited to take into consideration the risks described below. The Company carried out a review of the risks which could have a material adverse impact on its business, its financial position or its earnings (or its capacity to achieve its objectives) and believes

that there are no further significant risks other than those presented. Investors should nevertheless be aware that the list of risks presented in this chapter is not exhaustive and that the Group may be exposed to other risks, either currently unknown or not considered, at the date of this Registration Document, as likely to have an adverse impact on the Group, its operations, its financial position, its business results or its prospects.

1.13.1 Risks associated with the Group’s operations Uncertainties related to the global economic environment

business segments. Moreover, the structure and internal customer risk management procedures minimize the risk of insolvency and lead to a delinquency rate of less than 0.01% of consolidated revenue. However, a number of industry sectors, such as banking, financial services, logistics, government agencies and health, account for a large part of the Group’s revenue and may prove more susceptible than others to the economic uncertainties of the current context. This might lead existing or prospective customers in these segments to limit, postpone or cancel all or part of their information technology purchases or investments, or to reduce or terminate maintenance contracts as well as contracts for ancillary services related to their installed base of systems, which might have an adverse impact on licensing and/or the Group’s revenue. Sales cycles for licenses to use the Group’s software packages might also tend to lengthen in the face of current economic uncertainties. In addition, the Group’s ability to recover receivables might be affected by the financial difficulties of its customers, especially in the industry segments mentioned above. Finally, the fact that customers increasingly seek to obtain the most competitively priced offerings might have a material adverse impact on the Group’s business results, financial position and revenue. Infringement of intellectual property rights of third parties In the past, claims were made against the Group, alleging that its software packages infringed on patents, particularly in the United States and/or violated other intellectual property rights held by third parties. Such claims could continue to be made in the future, following Axway software developments or the inclusion of third-party software in Axway software packages (including open source software used by Axway in its software packages). Irrespective of their merit, such claims could: ● be time-consuming, costly and result in legal disputes; ● take up management’s time and divert its attention from the Group’s business;

The Group’s revenue, net income and cash flow are significantly affected by the global economy and the financial markets. By its nature, the IT industry is especially susceptible to economic cycles. Moreover, the infrastructure software package market in which the Group is active has often shown greater sensitivity to worldwide economic upturns and downturns than the application software market. The roll-out of a large-scale infrastructure network may represent an important portion of a customer’s technology budget. Consequently, decisions relating to this type of investment greatly depend on global economic conditions. As seen in the past, the challenging global economic conditions could continue to negatively affect the Group’s revenue, net income and cash flow, or result in lower-than-expected growth, in particular because of the uncertainties looming over the global economic environment and the lack of reliable economic forecasts. In addition, although signs of economic recovery have been perceptible in certain countries, the sustainability of a global economic upturn is not yet proven. If economic conditions remain uncertain, the Group might see lower levels of growth than in the past, which might have an adverse impact on the Group’s operations and business results. The Group is present mainly in Europe and in the United States, and is currently developing operations in Asia’s emerging markets. Apart from risks related to foreign exchange rates described later in this chapter, due to its established presence in these geographical areas, the Group is particularly exposed to the risk of unfavorable developments in the economic context and/or regulatory regimes in the countries where it maintains operations. The Group has severalǾthousand customers, thus reducing the risk of dependency on a single customer or group of customers. InǾ2017, no single customer accounted for more than 2.3% of consolidated revenue. This risk is further reduced by the composition of the portfolio, which is made up of public sector entities and private sector companies operating in diverse

42

AXWAY - 2017 REGISTRATION DOCUMENT

www.axway.com