Snakk Media Business Update Q3 FY2018

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SNK – MARKET UPDATE
30 January 2018

Snakk Media - Business Update for the period 1 October to 31 December 2017

General Commentary and Review:

The Board and Management of Snakk Media present the Quarter 3 Business Update for the
2018 Financial Year.
The Gross Margin for Q3 is 56%, which is slightly lower than in previous quarters and against
the target. The cost of inventory is typically higher in the peak November and December
period, lowering the margins in Q3. YTD the Gross Margin is in line with the FY18 target.
The Compensation to Revenue ratio for Q3 is 29%, which is lower than the FY18 target of
42%. Q3 revenue was in line with forecast. Staff Turnover was higher than anticipated in Q3.
Natural attrition, the timing of new hires, and limited re-structuring lowered the compensation
costs in Q3 and the overall Compensation to Revenue ratio. The Board and Management
believe the Compensation to Revenue for FY18 will be within or slightly better than a positive
10% variance to the FY18 target.
Staff Turnover for the Q3 and year to date was 34% and 51% respectively. Given the low
FTE, even small variations in staff turnover have a mathematically high impact on the ratio.
Capable replacements have been recruited, which includes one team member who left in Q3
only to return in January (Q4). As at the date of this Market Update all current FTE positions
are full. Although annual turnover is likely to be 50% or more the Board and Management
believe the staff turnover has not had a material impact on the business and it would not be
appropriate to review the annual target at this time.
The Click-Through rate remains consistent and within expectations.
The Key Operating Milestones and targets will be reviewed at the end of the 2018 Financial
Year.
Performance against Key Operating Milestones:

Key Operating Milestone (KOM)
Q1
FY18
Q2
FY18
Q3
FY18
Q3
YTD
FY18
FY18
Target
Q3 YTD
FY18
Target
Variance
Gross Margin % 57% 59% 56% 57% 58% -1%
Compensation to Revenue Ratio % 44% 37% 29% 36% 42% 13%
Staff Turnover % 12% 11% 34% 51% 33% -54%
Click-Through Rate % 0.97% 0.98% 0.98% 0.98% 0.97% 1%

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SNAKK MEDIA LIMITED [SNK]
In the directors’ opinion, Snakk Media Limited’s (the “Company”) key operating
milestones, taken together, address the most significant factors by which the
performance of the Company’s business should be assessed and monitored and will
result in understandable reporting for investors and therefore meet the NXT standard.
Dated: 30 January 2018
Peter James

Director
Signature

Martin Riegel

Director
Signature



AUTHORITY FOR THIS ANNOUNCEMENT
Name of senior manager or director
authorised to make this announcement
Joel Williams
Chief Executive Officer
Contact for enquiries Heidi Aldred
Group Company Secretary
Contact Phone Number +64 9889 2616
Contact email investors@snakkmedia.com
Date of release 30 January 2018

Future Events and Business Update Timetable
Q4 Business Update Due Date 30/04/2018
FY2018 Annual Report Due Date 30/06/2018



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

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KOM Calculation Methodologies:

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

• 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

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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

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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

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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