Travelzoo 2002 Annual Report Download - page 25

Fluctuations in our operating results may negatively impact our stock price.
Our quarterly operating results may Öuctuate signiÑcantly in the future due to a variety of factors that
could aÅect our revenues or our expenses in any particular quarter. You should not rely on quarter-to-quarter
comparisons of our results of operations as an indication of future performance. Factors that may aÅect our
quarterly results include:
‚ mismatches between resource allocation and client demand due to diÇculties in predicting client
demand in a new market;
‚ changes in general economic conditions that could aÅect marketing eÅorts generally and online
marketing eÅorts in particular;
‚ the magnitude and timing of marketing initiatives;
‚ the maintenance and development of our strategic relationships;
‚ the introduction, development, timing, competitive pricing and market acceptance of our products and
services and those of our competitors;
‚ our ability to attract and retain key personnel;
‚ our ability to manage our anticipated growth and expansion;
‚ our ability to attract traÇc to our website; and
‚ technical diÇculties or system downtime aÅecting the Internet generally or the operation of our
products and services speciÑcally.
In addition, we plan to signiÑcantly increase our operating expenses to expand our sales and marketing,
and production department. If revenues fall below our expectations in any quarter and we are unable to quickly
reduce our spending in response, our operating results would be lower than expected and our stock price may
fall.
In addition, we are required under generally accepted accounting principles to review our intangible assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
We may be required to record a signiÑcant expense or charge to earnings in our Ñnancial statements in the
period any impairment of intangible assets is determined.
We depend on two clients for a substantial part of our revenues.
In the Ñscal year ended December 31, 2002, two clients accounted for 27% of our revenues. The loss of
one client or both clients may result in a signiÑcant decrease in our revenues and results of operations, which
could have a material adverse eÅect on our business.
Our business model is unproven and may not be adaptable to a changing market.
Our current revenue model depends on advertising fees from travel companies using our products. If
current clients decide not to continue listing their sales and specials with us and we are unable to replace them
with new clients, our business may be adversely aÅected. To be successful, we must provide online marketing
solutions that achieve broad market acceptance by travel companies. In addition, we must attract suÇcient
Internet users with attractive demographic characteristics to our products. It is possible that we will be
required to further adapt our business model in response to changes in the online advertising market or if our
current business model is not successful. If we are not able to anticipate changes in the online advertising
market or if our business model is not successful, our business could be materially adversely aÅected.
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