Published on the 15/06/2015 | Written by Donovan Jackson

The space of one year has delivered the worst of times and the best of times for New Zealand mobile advertising technology company Snakk Media…

Despite delivering a widened loss on improved revenues, an upbeat CEO Mark Ryan said the company’s fortunes are turning the corner with South East Asian investments beginning to perform after a torrid start to FY2015.

Ryan met with iStart to discuss the company’s recent announcement of unaudited results, in which Snakk more than doubled its annual loss to $4.26 million from the previous year’s $1.86 million. The five year old NZX Alternative Market-listed company (SNK) reported revenue of $9.9 million, up from $7.1 million, while gross margin improved from 32 to 51 percent.

Snakk delivers targeted advertising to mobile devices, a traditionally tricky area for marketers to capitalise upon. Despite the ubiquity of personal screens, even Facebook and Google have struggled to monetise mobile channels. Be that as it may, mobile advertising is a steep growth industry which eMarketer said is expected to grow from a 2015 estimate of US$69 billion to top more than US$100 billion a year later.

The opening half of FY2015 was something of a disaster for Snakk, admitted a forthright Ryan. “It was dismal. We kicked off in South East Asia and hired a number of new salespeople, with these initiatives failing to yield a tangible return until the second half. We burned through $2.5 million on low revenues and margins and got crunched from every angle.”

Ryan described this as ‘a pretty serious time’ for the business.

By the second half, however, he said the investments in people and premises began to bear fruit. “Our Represent Media division signed up a slew of titles as the sales staff kicked into gear and found their feet. The gross margin improved by almost 60 percent [to 51 percent]. At the same time, we started to manage overheads better, trimming things down, which contributed to the improved performance in the second half.”

On the back of that half, he said the business has turned the corner, while acknowledging that it has to sustain the positive momentum. “One swallow does not a summer make but there is a sense of relief that our model is validated by this strong performance. If the trajectory can be maintained and the cost base kept where it is, we would hope to be cash positive by the next financial year.”

In total, Snakk went through $3.8 million cash in the last year; it said it held cash and equivalents of $2.5 million as at March 31, and enjoys access to a $1.3 million rolling debt facility, which Ryan said is as yet untouched. He added that ongoing cost management may see Snakk move its ‘centre of gravity’ closer to the markets of Indonesia, Malaysia and Thailand to take advantage of lower labour and other prices.

Commenting on what he said are ‘better fundamentals’, Ryan said Snakk will look to offer superior advertising solutions where more substantial margins can be charged. “In digital media, things get commoditised quickly. You’re not the new kid on block for long and the challenge is be a step ahead – but not ten steps ahead. The digital media space is changing rapidly, so you do need to temper the enthusiasm which comes with ‘exciting stuff’ to focus on that which works, but which isn’t yet commoditised.”

Looking ahead, Ryan said Snakk is considering raising further capital, but said this would be ‘small and tactical’ and noted the business will proceed with caution. “There is money in the bank and fuel in the tank. Right now, I’d say the business is undervalued, so we wouldn’t want to, for example, sell off half the company for $5 million in a rights issue.”

Snakk Media traded most recently at 7cents per share.