Snakk Media – Key Operating Milestone Update

Page 1 of 5
SNK – MARKET UPDATE
05 April 2017

Snakk Media – Key Operating Milestone Update

Commentary:

Snakk is in the process of finalising its 31 March 2017 financial results. Based on the
preliminary financial information available, Snakk believes its group operational performance
is likely to vary by more than 10% in relation to two of its Key Operating Milestones:
Compensation to Revenue Ratio %, and Staff Turnover %.
Compensation to Revenue Ratio %. Based on the preliminary information available it is likely
the operational result will vary by more than 10% from the FY17 target of 42%, however, it is
not possible to confirm the exact extent of this variance until the FY17 financial results are
finalised.
The reason for the variation relates to revenue falling short of budgeted revenue in Quarter 4.
Snakk is assessing the impact of this variation and is reviewing its compensation to revenue
ratio for FY18.
Staff Turnover %. The Staff Turnover % for the year ending 31 March 2017 was 33%
compared to the target of 24%. The total number of permanent full-time staff who left
voluntarily during the year was 15, compared to the total number of 45 permanent full-time
staff employed as at 31 March 2017. The variance to the FY17 target is not expected to have
a material impact on Snakk.

Snakk Media will release the full Q4 Business Update by 03/05/17.

Performance against Key Operating Milestones:

Key Operating
Milestone (KOM)
Q1
Actual
FY17
Q2
Actual
FY17
Q3
Actual
FY17
Q4
Estimate
FY17
FY17
Estimate
FY17
Target
FY17 Target
Variance
Compensation to
Revenue Ratio %
46% 65% 41%
Unknown* Unknown*
42%
Unknown*
Staff Turnover % 12% 9% 12% 5% 33% 24% 38%

* Based on the preliminary information available it is likely the operational result will vary by more than
10% from the FY17 target of 42%, however, it is not possible to confirm the exact extent of this
variance until the FY17 financial results are finalised

Page 2 of 5
KOM Calculation Methodologies:

CLICK-THROUGH RATE
Click-Through Rate is the number of clicks on a mobile page or app advertisement
divided by the number of times the advertisement is shown (impressions) as a
percentage.
CTR is the current industry-standard measure of how successful an ad has been in capturing
users' interest. The higher the CTR, the more successful the ad has been in generating
interest. A high CTR can help a mobile publisher support the site or app through advertising
revenues. It is also a strong indicator of the success of a mobile campaign, as more people
have interacted with the campaign by clicking on its advertisements.
When a company produces mobile campaigns that deliver CTRs that are constantly in excess
of its competitors or accepted benchmarks, the likelihood of securing future campaign
bookings is markedly increased. Research suggests that Internet users are increasingly
becoming "desensitized" to ads on mobile sites and apps. As a result it is imperative that
acceptable CTRs are maintained and grown to keep advertiser and publisher confidence in
the company's offerings.
Snakk’s strategy is to identify and then utilise innovative mobile consumer targeting
technologies to identify those whom are most likely to be receptive to the advertising message
being delivered. When this degree of mobile consumer targeting is combined with award-
winning mobile creative capabilities, the CTR is maintained or grown on a per campaign basis.
The industry average is 0.62% and Snakk has forecast that it will continue to consistently
achieve CTRs that exceed the industry average. Snakk measures its CTR through its internal
ad-serving platforms and then correlates that information with third party publisher data.

It is calculated as follows:
Click-Through Rate % = Clicks x 100
Impressions

GROSS MARGIN
Gross margin is the percentage of total revenue that Snakk retains after incurring the
direct costs associated with producing services sold (Direct Media Costs).
Maintaining and growing Gross Margin allows a higher percent of revenues to be spent on
other business operations, such as R&D, technology, marketing and expansion into new
markets / territories. As the company grows, a stable Gross Margin will drive the delivery of
positive EBITDA. Direct Media Costs are the costs of the advertising inventory that Snakk
onsells to its clients.
Snakk’s strategy to maintain and grow Gross Margin includes:
• utilising increasingly sophisticated and efficient technologies to purchase advertising
inventory cost-effectively without compromising quality; and

Page 3 of 5
• maintaining premium product pricing by delivering strong results for advertisers, combined
with product offerings that are underpinned by unique and innovative ad technologies.

It is calculated as follows:
Gross Margin % = Total revenue less Direct Media Costs
Total revenue

COMPENSATION TO REVENUE RATIO
Compensation to revenue ratio is the percentage of permanent full-time employee
salaries within Snakk's operating divisions compared to total revenue.


The company's main cost outside of Direct Media Costs (being the costs of the advertising
inventory that Snakk onsells to its clients) is staff salaries across its various divisions,
particularly sales, marketing and management. Measuring the relationship between revenue
and compensation figures within a period provides a method to monitor how well the business
is utilising its human resources to generate revenues.
The efficiency or scale of a labour force increases as the labour-to-revenue ratio decreases,
which is why a lower ratio is better for the company. Comparing the ratio against the
company’s historical records can show if the labour force efficiency is deteriorating, improving
or being maintained at the same level over a period of time.
Snakk’s strategy is to lower the Compensation to Revenue Ratio over time using a
combination of the following:
• automating current manual and people-driven processes;

• remunerating staff in innovative and progressive ways;

• utilising technologies to drive operational efficiencies;

• managing staff headcount closely if revenue growth is too slow or other market conditions
change in an adverse way; and

• increasing the proportion of staff located outside Australia.
It is calculated as follows:
Compensation to Revenue Ratio % =

Total permanent full-time employee salaries
Total revenue

Page 4 of 5
STAFF TURNOVER
Staff turnover is the percentage of permanent full-time employees that voluntarily leave
the company compared to the total permanent full-time employees.
While the general employment market in Australia experiences staff turnover of approximately
15% per annum, the Media Federation of Australia recently reported that in media agencies
the 2014 average was over 33% per annum. The battle for talent is particularly fierce in the
mobile sector, where an extremely limited supply of expertise is rapidly driving up agency
salaries, compounding the issues associated with staff turnover.
Recent media agency research out of the UK suggests that, as well as the disruption caused
when staff depart, the considerable length of time taken and cost to identify and hire a
replacement, it can also take up to 20 weeks for a replacement to fully get to grips with the
job. It is calculated that the cost of replacing a middle manager can be up to 150 percent of
their annual salary. For senior managers, the figure can be between 200 and 400 percent.
In a small fast-growing company, with highly specialised skills required, high levels of staff
turnover represent a significant threat to its ability to conduct business. Snakk’s strategy is to
maintain a lower than industry average turnover rate by fostering a strong workplace culture,
clearly defining roles and responsibilities, and remunerating staff in innovative and progressive
ways.
It is calculated as follows:

Staff Turnover % = Total permanent full-time employees departed voluntarily
Total permanent full-time employees

Page 5 of 5
Future events and Business Update timetable:

Full Year Preliminary Due Date 31/05/2017
Annual Report Due Date 30/06/2017
Quarter Business Update Due Date 03/05/2017


Announcement Authority:

Authorised By: Joel Williams, Chief Executive Officer
Contact phone number: +61 429 155 202
Contact Email Address: joel.williams@snakkmedia.com
Date of Release: 5 April 2017

Snakk Media Limited’s shares can be traded on the NXT Market (Ticker Code: SNK). Snakk
Media Limited is required to disclose information under the NXT Market Rules. Information
about the NXT Market and the NXT company is available at www.nxt.co.nz or from the
company’s website at www.snk.co.nz.