Travelzoo 2009 Annual Report Download - page 36

Risks Related to Our Financial Condition and Business Model
We cannot assure you that we will be profitable.
In the year ended December 31, 2009, we generated net income of $5.2 million. Although we had been
profitable in the past, we incurred a net loss in 2008, and there is no assurance that we will continue to be profitable
in the future. We forecast our future expense levels based on our operating plans and our estimates of future
revenues. We may find it necessary to significantly accelerate expenditures relating to our sales and marketing
efforts or otherwise increase our financial commitment to creating and maintaining brand awareness among Internet
users and travel companies. If our revenues grow at a slower rate than we anticipate, or if our spending levels exceed
our expectations or cannot be adjusted to reflect slower revenue growth, we may not generate sufficient revenues to
be profitable. We expect our operations in Europe to incur losses in the next 12 months. We expect that this will have
a material negative impact on our operating margins, net income and cash flows. Any of these developments could
result in a significant decrease in the trading price of our common stock.
Fluctuations in our operating results may negatively impact our stock price.
Our quarterly and annual operating results may fluctuate significantly in the future due to a variety of factors
that could affect our revenues or our expenses in any particular period. You should not rely on quarter-to-quarter
comparisons of our results of operations as an indication of future performance. Factors that may affect our results
include:
• mismatches between resource allocation and client demand due to difficulties in predicting client demand in
a new market;
• changes in general economic conditions that could affect marketing efforts generally and online marketing
efforts in particular;
• the magnitude and timing of marketing initiatives, including our acquisition of new subscribers and our
expansion efforts in other regions;
• 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 traffic to our Web sites;
• technical difficulties or system downtime affecting the Internet generally or the operation of our products
and services specifically;
• payments which we may make to previous stockholders of Travelzoo.com Corporation who failed to submit
requests for shares in Travelzoo Inc. within the required time period; and
• volatility of our operating results in new markets.
We may significantly increase our operating expenses related to advertising campaigns for Travelzoo for a
certain period if we see a unique opportunity for a brand marketing campaign, if we find it necessary to respond to
increased brand marketing by a competitor, or if we decide to accelerate our acquisition of new subscribers.
If revenues fall below our expectations in any quarter and we are unable to quickly reduce our operating
expenses in response, our operating results would be lower than expected and our stock price may fall.
Our business model may not be adaptable to a changing market.
Our current revenue model depends on advertising fees paid primarily by travel and entertainment companies.
If current clients decide not to continue advertising their offers with us and we are unable to replace them with new
clients, our business may be adversely affected. To be successful, we must provide online marketing solutions that
achieve broad market acceptance by travel and entertainment companies. In addition, we must attract sufficient
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