PRSS 2017 Annual Report

9 • The development of, or changes to, new technologies and platforms for Internet use, such as mobile, and evolving marketing methods such as social media, flash promotions and any changes in website traffic acquisition algorithms, policies or practices supporting such development; • Conversion rates of website traffic, including the impact on conversion rates from increased traffic from mobile devices as compared to desktops or tablets; • Our ability to provide accurate search results and recommendations and to deliver long-tail content to our e- commerce partners; • Litigation and associated risks and expenses, including extraordinary expenses related to litigation and settlement costs; • Concerns about the data security of consumer personal information run through our e-commerce services and their vulnerability to attack and intrusions; • Any production issues which may in turn result in delayed orders or increased costs; and • Fluctuations in the cost of raw materials and inventory. As a result of these and other factors, the results of any prior quarterly or annual periods should not be relied upon as indications of our future revenue or operating performance. In particular, due to the seasonality of our business, our revenue in the first three quarters of each year are generally substantially lower than our revenue in the fourth quarter of the preceding year, and we expect this trend to continue for the foreseeable future. We may not achieve or sustain profitability or avoid net losses in the future. Our growth rates in the future, if any, may fluctuate or not be sustainable or may decrease. In addition, in order to be profitable in the foreseeable future, we must control our costs and operating expenses and achieve adequate pricing or scale in a highly competitive environment. We have incurred in the past, and expect to continue to incur in future periods, stock-based compensation expense, which will reduce our net income and may result in future losses. If we fail to increase revenue at the rate we anticipate or if our costs and operating expenses increase without a commensurate increase in our revenue, our business, financial condition and results of operations will be negatively affected. If we are not profitable in the future, we may be unable to continue our operations. Although we recorded net income for the year ended December 31, 2015, we have otherwise incurred operating losses each year since we went public in 2012. If and when we achieve profitability depends upon a number of factors, including our ability to execute on our strategy and grow our business. We cannot assure our investors that we will ever achieve profitability. If we are not profitable in the future, we may be unable to continue our operations. If our recently announced internal cost reduction initiatives do not have the intended effects, we could experience increased volatility in our stock price and our results of operations could suffer. As part of a cost reduction initiative that will be implemented during 2018, we reduced our workforce by 5%. We expect this cost reduction will allow us to gain financial efficiencies, however we may not be able to realize the full amount of the estimated savings from the cost reduction program, in a timely manner, or at all. This cost reduction will make it more difficult to predict our financial performance, which could cause increased volatility in our stock price. In addition, we could face challenges in retaining personnel, business disruption or decreased productivity as a result of this cost reduction, and our results of operations could suffer. We depend heavily on the continued success of our core business of selling user-designed products on CafePress.com, and any event that adversely affects our sales of user-designed products could harm our business and results of operations. A significant proportion of our revenue is derived from the online sale of user-designed products through CafePress.com and through distribution channels derived therefrom. As a result, the continued performance of CafePress.comis dependent on continued flow of user-generated content into the creation of products. We expect that the sales of user-generated design products will continue to comprise a majority of the revenue of our business. Our users rarely exclusively use our e-commerce platform to sell their designs. Users who design products may choose not to use our e-commerce platform to create and sell their designs, and choose other platforms, thereby reducing the number of designs available through our websites and thus affecting future growth of our revenue generated fromCafePress.com. Customers who purchase user-designed products on our websites may also purchase other fulfillment and partner products through our e-commerce services as well, which aid the growth of our services. Our tools and platform offerings may not remain competitive with those of our competitors. If competitive services increase and/or we cannot successfully attract or retain users to design and sell products through our e-commerce platform or if we are unable to attract and retain our customers for user-designed and other products, our operating results may suffer. If we are unable to grow