Travelzoo 2014 Annual Report Download - page 52

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Our business relies heavily on e-mail and other messaging services, and any restrictions on the sending of e-mails or
messages or a decrease in member willingness to receive messages could adversely affect our revenue and business.
Our business is highly dependent upon e-mail and other messaging services. Deals offered through e-mails and other
messages sent by us, or on our behalf by our affiliates, generate a substantial portion of our revenue. Because of the importance
of e-mail and other messaging services to our businesses, if we are unable to successfully deliver e-mails or messages to our
members or potential members, or if members decline to open our e-mails or messages, our revenue and profitability would be
adversely affected. New laws and regulations regulating the sending of commercial e-mails, including those enacted in foreign
jurisdictions (such as Canada), may affect our ability to deliver of e-mails or messages to our members or potential members
and may also result in increased compliance costs. Further, actions by third parties to block, impose restrictions on, or charge
for the delivery of, e-mails or other messages could also materially and adversely impact our business. From time to time,
Internet service providers block bulk e-mail transmissions or otherwise experience technical difficulties that result in our
inability to successfully deliver e-mails or other messages to third parties. In addition, our use of e-mail and other messaging
services to send communications about our website or other matters may result in legal claims against us, which if successful
might limit or prohibit our ability to send e-mails or other messages. Any disruption or restriction on the distribution of e-mails
or other messages or any increase in the associated costs would materially and adversely affect our revenue and profitability. In
addition, the shift in our website traffic originating from mobile devices accessing our services may decrease our members'
willingness to use our services if they are not satisfied with our mobile user experience and could decrease their willingness to
be an e-mail member, which could adversely affect our revenue and profitability.
Our reported total number of members may be higher than the number of our actual individual members and may not be
representative of the number of persons who are active potential customers.
The total number of members we report may be higher than the number of our actual individual members because some
members have multiple registrations, other members have died or become incapacitated and others may have registered under
fictitious names. Given the challenges inherent in identifying these members, we do not have a reliable system to accurately
identify the number of actual individual members, and thus we rely on the number of total members shown on our records as
our measure of the size of our member base. In addition, the number of members we report includes the total number of
individuals that have completed registration through a specific date, less individuals who have unsubscribed. Those numbers
may include individuals who do not receive our e-mails because our e-mails have been blocked or are otherwise undeliverable.
As a result, the reported number of members should not be considered as representative of the number of persons who continue
to actively consider our deals by reviewing our e-mail offers.
We may not be able to obtain sufficient funds to grow our business and any additional financing may be on terms adverse to
your interests.
For the year ended December 31, 2014, our cash and cash equivalents decreased by $11.4 million to $54.8 million, of
which $41.8 million was held outside the U.S. in certain of our foreign operations. We intend to continue to grow our business
and fund our current operations using cash on hand. However, this may not be sufficient to meet our needs, including the
payments required to settle escheat or tax claims, as described under Note 5 and 6 to the accompanying consolidated financial
statements. We may not be able to obtain financing on commercially reasonable terms, or at all.
If additional financing is not available when required or is not available on acceptable terms, we may be unable to fund
our expansion, successfully promote our brand name, develop or enhance our products and services, take advantage of business
opportunities, or respond to competitive pressures, any of which could have a material adverse effect on our business.
If we choose to raise additional funds through the issuance of equity securities, existing stockholders may experience
significant dilution of their ownership interest and holders of the additional equity securities may have rights senior to existing
stockholders of our common stock. If we obtain additional financing by issuing debt securities or bank borrowings, the terms of
these arrangements could restrict or prevent us from paying dividends and could limit our flexibility in making business
decisions.
Our business may be sensitive to recessions.
The demand for online advertising may be linked to the level of economic activity and employment in the U.S. and
abroad. Specifically, our business is primarily dependent on the demand for online advertising from travel and entertainment
companies. The recent recession decreased consumer travel and caused travel and entertainment companies to reduce or
postpone their marketing spending generally, and their online marketing spending in particular. Continued or future recessions
could have a material adverse effect on our business and financial condition. Moreover, declines or disruptions in the travel
industry could adversely affect our launch of our hotel booking platform and financial performance.