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

c. Changes in the range of business activities

of these maintenance agreements is currently less than 10%. Accordingly, the Group’s exposure to the risk of non-renewal of these maintenance agreements is low. However, maintenance fees account for a significant part of the Group’s revenue. Consequently, the non-renewal of maintenance agreements by a significant number of customers, or by customers accounting for a significant percentage of the Group’s revenue, could have a negative impact on its net financial income, its financial position and its outlook. In addition to the risks detailed in this SectionǾ1.13.1 (items a to d inclusive), it should be noted that the Group’s net financial income and outlook could be affected by other factors including, in particular, exchange rate fluctuations (ChapterǾ1, SectionǾ1.13.2.b), the global economic situation (SectionǾ1.13.1), and corrections to Group software (SectionǾ1.13.1). a. Interest rate risk The Company is exposed to an interest rate risk in connection with a medium-term credit facility (with a contractual maturity of five years as of the date of the initial listing) granted in the amount of €125Ǿmillion under a “Club Deal”. In addition to this loan, bank overdrafts in the amount of €20Ǿmillion are also available. Moreover, the Group’s exposure to interest rate risks and hedging instruments is detailed in NoteǾ30.3 a) of ChapterǾ4 “Consolidated financial statements.” b. Foreign exchange risk The wide geographic distribution of the Group’s operations entails the use of several different currencies. A significant portion of the Group’s assets, liabilities, revenue and expenses is denominated in currencies other than the euro, mainly the US dollar, while the consolidated financial statements are denominated in euros. Consequently, fluctuations in these currencies, and especially the US dollar, against the euro, have had a material impact on the Group’s financial position and business results, and might also have such an impact in the future (see NoteǾ32.3 of ChapterǾ4). For Axway, the dollar zone is a region where the Company has commercial activities which generate revenue, as well as development and support activities which carry expenses, including personnel costs. For this reason, fluctuations in exchange rates for the US dollar against the euro affect Axway’s revenues and costs to a nearly equivalent extent and thus have only a limited overall impact, especially with respect to margin levels.

The Group’s revenue is generated by software package licensing together with contracts for maintenance and professional services. In any given period, the results of the Group’s operations would be very different should there be a marked shift in favor of one or another of these revenue sources. d. Risks associated with the non-renewal ofbmaintenance agreements The Group’s maintenance agreements are concluded for periods ranging from one to three years, subject to automatic renewal for successive one-year periods, and the rate of non-renewal

1.13.2 Risks associated with the Group’s assets Risk related to intangible assets Market risks

Intangible assets mainly comprise goodwill. At 31ǾDecember 2017, goodwill amounted to €334Ǿmillion (see ChapterǾ4) arising from the acquisition of companies in recent years and certain allocated intangible assets. Every year, the Group’s executive management team tests its intangible assets for impairment. Acquisitions or disposals, revisions in standards, fluctuations in exchange rates or interest rates, changes in the Group’s profitability, whether resulting from internal or external factors, might have a material adverse impact on the Group’s business results or financial position. Intellectual property risks The Group’s business is built upon the software packages it has developed over a number of years, either in their entirety or on the basis of acquired software packages or licenses. Continuing to use and develop these software packages is primordial to ensure the Group’s future success. The protection of intellectual property rights is crucial to the Group’s business. This protection is provided in particular by copyright, patent rights, trademark rights, and professional secrecy. The Group may be the subject of infringement actions brought by third parties, as described in SectionǾ5.1.2 and resulting in its recognition of the violation of their intellectual property rights. It is thus exposed to the risks associated with the protection of its intellectual property rights as described in SectionǾ5.5.2.

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AXWAY - 2017 REGISTRATION DOCUMENT

www.axway.com