Snakk Media KOM Variance & Business Update Q4 FY2018

Page 1 of 5
SNK – MARKET UPDATE
24 April 2018

Variance to Key Operating Milestone (KOM)
Following a preliminary review of its unaudited trading results for the year ended 31 March
2018 (FY18), the Company notes the Compensation to Revenue ratio was less than the target
for FY18 of 42% by more than 10% and Staff Turnover exceeded its target for FY18 by more
than 10%. Further information is below.
Snakk Media – Business Update for the Period 1 January 2018 to 31 March 2018
General Commentary and Review:
The Board and Management of Snakk Media present the Quarter 4 Business Update for the
2018 Financial Year.
The Gross Margin for Q4 is 60% which is above the target of 58%. The Gross Margin was
higher in Q4 due to product mix. There was a higher proportion of managed service revenue
than self-service revenue compared to earlier quarters, and managed services have a higher
gross margin. The Gross Margin of 58% achieved for FY18 equals the Key Operating
Milestone.
The Compensation to Revenue ratio for Q4 is 34% and 36% for FY18, compared to the target
of 42%. This represents a positive variance of 14% for FY18. Throughout the year Snakk has
closely managed staffing levels and associated compensation (and all other operating
expenses) resulting in a better than forecast Compensation to Revenue ratio for FY18. The
ratio of other operating expenses to revenue has also improved in FY18. Revenues for Q4
and for the year were within a reasonable variation of the forecast which, when combined with
lower compensation costs, resulted in the positive 14% variation for FY18.
Staff Turnover for Q4 and FY18 was 10% and 53% respectively. The turnover in Q4 was the
lowest of any quarter in the year and replacements commenced in late March and April 2018.
As part of the restructuring in FY18 the number of FTE positions have been reduced which
means even small variations in estimated staff turnover have a mathematically high impact on
the ratio. The potential for a turnover of 50% or more was noted in the previous Business
Update and the result of 53% is within expectation. Although the turnover for the year of 53%
exceeded the target of 33%, capable replacements have been hired in a timely manner and
results have not been impacted.
The Click-Through rate remains consistent and within expectations.
The preliminary unaudited results for FY18 show revenue from media sales of $10.3m (FY17,
$10.6m) with a net loss after tax of $0.3m (FY17, $3.2m loss). The FY18 result includes
achieving a profit in the second half. That is the only profitable half year in the last four years.
Performance against Key Operating Milestones:
Key Operating Milestone (KOM)
Q1
FY18
Q2
FY18
Q3
FY18
Q4
FY18
FY18
FY18
Target
FY18
Target
Variance
Gross Margin % 57% 59% 56% 60% 58% 58% 0%
Compensation to Revenue
Ratio %
44% 37% 29% 34% 36% 42% + 14%
Staff Turnover % 12% 11% 34% 10% 53% 33% - 62%
Click-Through Rate % 0.97% 0.98% 0.98% 0.98% 0.98% 0.97% 1%

Page 2 of 5




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: 24 April 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 24 April 2018

Future Events and Business Update Timetable
FY2018 Full Year Preliminary Results Due Date 31/05/2018
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

Page 3 of 5
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

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;

Page 4 of 5

• 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

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
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