Prepared remarks
Hello, and welcome to the MNTN Third Quarter 2025 Results Conference Call. I would now like to turn the call over to Brinlea Johnson. Please go ahead.
Good afternoon. Thank you for joining us for MNTN's Third Quarter 2025 Earnings Call. With me today is Mark Douglas, CEO; and Patrick Pohlen, CFO. Just to remind everyone, today's call includes forward-looking statements that are subject to risks and uncertainties, and actual results could materially differ from those anticipated in these forward-looking statements. For the risks and uncertainties that may affect future results, please see our most recently filed periodic report, which is also available on our website. We will discuss non-GAAP financial measures on today's call. Reconciliations of these measures are available in our earnings materials on our website. With that, I'll turn the call over to Mark. Please go ahead.
Thank you for joining us today. We had another strong quarter with revenue and adjusted EBITDA growth, as well as positive net income. But before we get into the numbers, I want to take a step back and talk about what makes MNTN different, why this moment in time is so exciting and where our next stage of growth is coming from because understanding MNTN is key to understanding our results, and this quarter's success is a direct reflection of our strategy and technology. I founded MNTN with the mission to democratize television advertising. For decades, the industry has been dominated by the 200 biggest advertisers, big brands with big budgets and big agencies to support them. We built MNTN for everyone else. MNTN is focused on the millions of other small and medium-sized businesses that never thought they could afford to advertise on television. One thing I've said before, but you'll hear me say it over and over, 97% of MNTN customers have never run a TV ad before coming on to MNTN.
This means we're bringing new people to TV advertising and creating our own category. For years, these small to medium-sized businesses have served as the real growth engine of digital advertising because they are focused on one thing, performance marketing. They expect their advertising investments and platforms to be measurable, targetable and as ROI-driven as search and social. TV could never be bought and measured the way digital could, and that kept a lot of businesses shut out of one of the biggest opportunities in marketing. That changed when we built MNTN Performance TV, a self-serve platform that makes connected TV measurable, accessible and performance-driven. Today, MNTN advertisers can launch campaigns across more than 200 premium streaming networks like CNN, Paramount+, Bravo, ESPN and more. They can target audiences using real intent data powered by AI and measure actual business outcomes like site visits, conversions and return on ad spend.
That's a monumental shift for television advertising, transforming TV from a branding medium to a true performance channel. Let's not forget, television is still the most powerful medium in the world. Every day, more than 5.5 billion people watch TV for an average of 3.5 hours, more than the nearly 4 billion who use social media and more than any other form of entertainment. It's what people talk about at dinner, not the video they scroll past on social media, but the season premiere of Landman, the finale of White Lotus or that last game of the World Series. And the way we watch TV has fundamentally changed. Connected TV is now the fastest-growing segment in all of advertising, and it's not slowing down. Yet despite that growth, connected TV remains undermonetized because most of the spend still comes from a small number of large brands. TV had never traditionally been considered a performance channel, only a brand.
We're changing that. MNTN is bringing the small business revolution to television just as Meta did for social and Google did for search. More than 80% of digital ad spend on these platforms still comes from small and midsized businesses. But TV has historically been out of reach for them. We're opening that door and unlocking the next wave of growth for connected TV. Streaming TV captures the attention of consumers with professionally produced content that costs millions to make. And now with MNTN, every business can reach their next customer alongside that same premium content. It resonates in a way that other media just can't. That's the magic of television. And now with MNTN, every brand can be part of it. Our Performance TV platform is the most advanced software in connected TV, and it makes getting an ad on TV simple. Advertisers can launch, manage and optimize campaigns entirely on their own in a self-serve environment that delivers real-time results.
Everything is automated from targeting to optimization, bringing the precision and accountability of digital performance marketing to television. Performance TV gives advertisers of every size the ability to run measurable performance-driven campaigns across the best and biggest streaming networks in the world. And we didn't stop there. We've also removed one of the biggest barriers to TV advertising, creative. While creative might seem like a commodity, for our customers, it's an on-ramp, a critical enabler that helps them get started quickly and stay engaged within our ecosystem. So we've built a complete suite of creative tools to meet every brand where they are. It started with our acquisition of QuickFrame, which connects brands with a marketplace of over 5,000 vetted video professionals quickly and affordably. It expanded through our continued partnership with Ryan Reynolds, George Dewey and the Maximum Effort team.
Then last week, we took that even further by launching the public beta of QuickFrame AI, a new platform powered by the best generative AI models out there that lets advertisers create complete TV spots in minutes. We've lowered the barrier to creating an ad, a huge enabler that accelerates how quickly businesses can launch on MNTN and bring their stories to TV. It's simply helping more customers say yes to television. As we scale, our buying power and optimization technology drives lower cost per view and therefore, stronger returns for our clients. The more advertisers that join MNTN, the more efficient the platform becomes. Our buying power drives down costs. Our optimization technology improves performance. And as our customers see stronger returns on ad spend, they invest more. That creates a virtuous cycle. Scale drives efficiency and efficiency drives growth. And because our model scales with efficiency, not headcount, every new advertiser strengthens our unit economics and improves performance across the entire network, the true definition of a flywheel effect.
And as a result, our Performance TV business has averaged 39% year-over-year growth for the past 6 quarters, and our customers are seeing great results. Take Fazzo, a fast-growing e-commerce brand that sells personalized apparel and home goods. They started testing MNTN last summer. What began as a small trial quickly became a core performance channel with spend more than doubling year-over-year, verified visits up over 120% and a return on ad spend consistently above 20 times. Zazzle is a great example of how performance-driven marketers can start small, see measurable results and quickly scale to meaningful levels of investments. Then there's Guesty, a hospitality software brand that never thought TV could reach their niche target audience of property managers and vacation owners. With MNTN, they found it could. They started small, tripled their investment and now drive tens of thousands of site visits each quarter with strong efficiency.
Both brands also rely on QuickFrame for their creative, showing how our ecosystem gives small teams the speed and scale to compete and win like big advertisers. There are 3 key pillars that define our business and form our competitive moat. First, MNTN is purpose-built for small and medium-sized businesses. Ad tech can be incredibly complex. Just look at those Lumascape charts, full of logos. Our customers never see that complexity. Everything they need, targeting, measurement and campaign setup, is built right into one simple platform. And when a company sees themselves on TV for the first time and sees the incremental revenue it can generate, it's a magical moment made by MNTN Performance TV. Second, we've built direct connections to more than 200 premium streaming networks. Because 97% of our advertisers are new to TV, we're bringing incremental revenue to the largest media companies and delivering the best premium content to our customers.
And then have I mentioned 97% of MNTN customers are new to TV, nearly every customer who joins MNTN needs their first TV commercial. We built the resources to make professional creative accessible to everyone. Together, these 3 pillars make MNTN unique, built to drive real performance for SMBs, connected to the most premium content and powered by best-in-class creative solutions. Because of these, we're leading the category, transforming television into the next great performance marketing channel. Every new MNTN advertiser, every new TV campaign, and every new creative made through QuickFrame AI reinforces the same belief we started with that great ideas and measurable performance shouldn't be reserved for the biggest brands. We're executing against a massive opportunity, transforming the largest and most influential medium into a measurable performance-driven channel. With strong customer growth, expanding margins and continued innovation across our platform, MNTN is well positioned for sustained profitable growth. We're successfully building the next generation of performance marketing on TV, and I'm very proud to do it. Now, I'll turn it over to Patrick to discuss our third quarter results in more detail.
Thank you, Mark. We reported strong third quarter results, delivering on our prior revenue guidance and exceeding our previous adjusted EBITDA guidance. Our solid performance reflects continued customer adoption of Performance TV, particularly by small and midsized companies that had not previously advertised on television. Our third quarter revenue increased to $70 million, up 31% year-over-year after adjusting for the divestiture of Maximum Effort on April 1, 2025. Please note, we included a table in our press release and in our investor presentation that breaks out our growth over the past several quarters, both including and excluding the prior year's contribution from Maximum Effort. On a GAAP basis, which includes the prior year's contribution from Maximum Effort, total third quarter revenue grew 23% year-over-year. Gross margin for Q3 increased to 79% compared to 72% in Q3 of 2024, an increase of 720 basis points.
We continue to drive additional gross margin improvements across our core business and believe we have a number of levers that we can use to maintain and grow our gross margin on a year-over-year basis. The table we included in the press release and in our investor presentation also breaks out the gross margin contribution from Maximum Effort. You can see that of the 720 basis point year-over-year improvement in our reported gross margins, our core PTV business improved over 400 basis points with the balance coming from the impact of the Maximum Effort divestiture. As you can see from the table in our earnings release, at the end of Q3, we had 3,316 active PTV customers when measured over the trailing 12 months. On a year-over-year basis, this represents growth of 67%. Recently, we have made inroads moving down market into the SMB market opportunity, which we believe is a testament to the strength of our platform and its applicability across companies of all sizes with performance marketing budgets.
This initiative has helped support the strong growth of our customer base. Accordingly, our calculated Q3 ARPU, which reflects this increased mix of smaller customers on our base, was $20,904, in line with our expectations. Our expansion rate, which measures the spend of our current customers as compared to those same customers' spend a year ago, is quite healthy and remains well north of 115%, demonstrating that when our customers achieve their desired returns on advertising spend, they continue to increase their budgets with us. Total operating expenses for the third quarter were $47.7 million. We achieved positive net income of $6.4 million for a GAAP EPS of $0.09 a share. Of note, this was the company's first quarter of GAAP profitability in the last 4 years. Adjusted EBITDA was $16 million, up from $10.5 million in Q3 of '24, an increase of 52.9%. The company's adjusted EBITDA margin grew to 22.8% compared to 18.3% in Q3 of 2024.
This improvement was driven by increased revenue and gross margin expansion and demonstrates the leverage inherent in our model. We will continue to invest strategically in sales and marketing and R&D to support future revenue growth while remaining focused on delivering operating leverage. Our balance sheet remains strong, and we ended the quarter with $179 million in cash and cash equivalents with no debt outstanding. We ended the quarter with 73.2 million shares outstanding. Looking ahead, we remain confident in our momentum and the underlying health of our business. For Q4, which is typically a seasonally strong quarter for us, we expect revenue in the range of $85.5 million and $86.5 million, representing a 34% year-over-year growth rate at the midpoint of $86 million when normalizing for the effect of the divestiture of Maximum Effort. This translates into a reported GAAP growth rate, which includes Maximum Effort in the year ago comparison of 23.2% at the midpoint.
We expect adjusted EBITDA to be between $25 million and $26 million, reflecting continued leverage as we scale the business while continuing to remain disciplined in our investments. Our Q4 guidance implies full year 2025 revenue between $288.5 million and $289.5 million, representing 35.5% year-over-year growth at the midpoint when normalizing for the effect of the Maximum Effort divestiture and 28.1% year-over-year growth on a GAAP basis. 2025 adjusted EBITDA would be between $64.9 million and $65.9 million for an EBITDA margin of 22.6% at the midpoint. To wrap up, we delivered another solid quarter and believe MNTN will continue to gain market share in the massive Performance TV market. We are confident that our future growth initiatives and the strength of our operating model will position MNTN to drive continued growth and profitability.
Questions and answers
Your first question comes from the line of Shyam Patil with Susquehanna.
Mark, you mentioned that you guys are averaging almost 40% year-over-year growth over the past 6 quarters, which when you look at the overall market that you're in, it's by far the highest growth rate in CTV. Can you just talk about what's driving that? And then, how you think about the runway ahead of you from here?
Sure. Thanks for the question, Shyam. So there are a number of growth drivers in place for the business. And so, I'll start with the business ones first. You're seeing accelerating new customer growth. So that's as a result of our continued investment in marketing and sales, as well as our expansion in the small business. Our expansion rate is well north of 115%, meaning new customers are spending more over time. And we have a really efficient go-to-market motion. So approximately 3 years ago, 2% of our leads were inbound. Now, that percentage is north of 75%. That's a direct result of our marketing investment. But there's also technology, so improved targeting, the MNTN Matched, which is our AR targeting system. We have partnerships with over 200 premium streaming networks. So we have the right content. And now, I think QuickFrame AI is really critical. You can get true 30-second professional-quality videos using AI technology, and we have a number of partnerships for that. So all of that combined is driving the growth, and it's going to continue to drive the growth. And we're really early, by the way. I mean, this market is huge, and we're really just at the early stages of monetizing this market to the levels of search and social. So we're pretty excited about that.
Your next question comes from the line of Robert Coolbrith with Evercore ISI.
Congratulations on the solid results. I wanted to ask about your expectations for the QuickFrame AI launch. How do you think that could impact your close rate, your time to get customers up and running, and then, also maybe the rate of creative refresh for your existing customers as well? And then, secondly, I just wanted to ask about the sales and marketing expense in Q3. It looked like that ticked down a little bit sequentially. Just curious if that was increased efficiency or maybe a timing difference around the QuickFrame AI launch. Anything else you could tell us about that?
Thanks for the question. To understand QuickFrame AI, consider that 97% of MNTN's customers have never advertised on TV before and don’t have TV commercials when we first connect with them. We've always aimed to address this issue and want to enhance our efforts. QuickFrame AI serves as an accelerant, enabling our customers in several ways. Firstly, it reduces the time needed to launch campaigns, allowing customers to get creative material faster and go live sooner. It significantly decreases the cost of production, potentially by a large margin. Instead of saving this money, we believe customers will use these savings to generate more creative content. Increased creative output leads to better returns on ad spend, as customers can efficiently A/B test to find the most effective messaging. This is a crucial aspect of our business, particularly in terms of creativity. We're genuinely excited about QuickFrame AI, which we launched just last week. I encourage everyone to visit quickframe.com to see this impressive tool.
In response to your second question, Rob, the sales and marketing expense has decreased slightly, now at 30.5% of revenue. Our long-term target is between 25% and 30%, so we're just outside that range. However, we plan to strategically invest in sales and marketing and likely increase our headcount for the first time in three years. Additionally, we might take on our own marketing efforts. As Mark noted, over 75% of our leads come from using our own product to generate inbound traffic, so we will approach this strategically and wisely.
Your next question comes from the line of Andrew Boone with Citizens.
I would love to talk about just the 4Q revenue guide and the acceleration that's built in there. Patrick, is there anything to call out as we think about the drivers of that? And then, Mark, you talked about just the efficiency of go-to-market. And Patrick, it sounds like there may be a slight increase in terms of sales and marketing as we think about kind of 4Q. Can you just talk about the efficiency of go-to-market and how we think about that net add number going forward?
Sure. So the guide is $85.5 million to $86.5 million. So we're keeping a pretty narrow range. The midpoint is 86%, Andrew. That would be 34%, giving effect to the Maximum Effort divestiture. We're also guiding $25.5 million at the midpoint for adjusted EBITDA. That's a 29.7% adjusted EBITDA margin. It is our strong quarter seasonally. And we just see a lot of opportunity in the quarter and frankly, in the business as a whole.
Yes. And I'll add to that also. So because of how strong the marketing is on our go-to-market motion, we look at our marketing expenses there on essentially a monthly basis and make small adjustments either for new product or because we want to bring in maybe additional small business. So it's something that generally is trending the way we want, but we will adjust up and make small adjustments up and down quarter-to-quarter while still hitting the adjusted EBITDA targets that we're setting for the business.
Can you confirm if we addressed your second question, Andrew?
Just anything in terms of the onboarding of customers, anything around self-service or any other kind of change in terms of how you guys are kind of growing the net add number? And then how do we think about that going forward?
So Andrew, I'm going to correct you again, not self-service. The platform has always been self-service, self-sign-up.
Yes, the platform has always included self-service from the beginning. As we target smaller businesses, the process has become entirely self-sign-up, meaning new customers do not engage with our sales team. Similar to how they would create a Google AdWords account, they simply go to MNTN and set up a MNTN Performance TV account. Consequently, all of this revenue, along with a growing portion of our mid-market revenue, is a result of our marketing efforts, with over 75% of revenue generated from inbound leads.
We still are getting great efficiency from our sales team, even with the heads we're planning to add.
Your next question comes from the line of Andrew Marok with Raymond James.
Two, if I could. So maybe building on that last point a little bit. So, on the PTV customer growth, obviously, we have the emphasis on the S in SMB. Have there been any surprises relative to expectations in terms of the ability to onboard customers or their behavior once they've gotten on to the platform? And then, separately, can you expand a little bit on your success in the agency business that you called out in the press release? Is there anything you've done there that specifically made agencies take note? Or is it more just like a general scaling of awareness in MNTN and the maturity of the offering?
I'll start with the small business segment. Small business accounted for about 6% of our revenue in Q4 of last year, and now it's at 15% just three quarters later and continues to grow. The midsized market is also experiencing growth. Traditionally, our focus has been on the midsized market, but we are integrating more small businesses at an even quicker pace. As mentioned earlier, our efficiency in this regard keeps improving. We're also measuring that mid-market customers are now opting for self-sign-up, and this group's spending is strong. We anticipated that once a small business customer went live, their spending would increase at a slower pace compared to those who engaged with our sales team, but that's not what we're observing. Instead, they are onboarding and spending well. This indicates to us that the Performance TV market, which is still relatively new, is transitioning from an early stage to a point we call escape velocity, where businesses recognize the need to be involved with Performance TV. We are very encouraged by this development and pleased with the results in that area. Additionally, we have a dedicated team focused on the success of self-sign-up among these customers. Can you repeat your second question, Andrew? I apologize for that.
Yes. No worries. Thank you for the answer on the first one. It was on the agency business. Anything there that you've specifically done to appeal to agencies? Or is that kind of building on that theme of just greater awareness and escape velocity?
We formed a dedicated team to engage with agencies, which developed organically for us. Historically, we operated almost entirely as a direct-to-brand model, a rarity in television, where agencies were typically involved. Some of our clients were already working with agencies, and we fostered those relationships, recognizing a promising opportunity, which led us to establish a specialized team. The positive outcomes we reported earlier in the quarter stem from this initiative. We have upcoming products that we believe will resonate well with this group of customers, particularly independent agencies that excel in performance marketing. These agencies have built their business on paid search and paid social, and they are now entering into agreements with MNTN to utilize our dedicated platform for Performance TV. We anticipate continued growth in this area and plan to announce new products that we believe will generate significant interest, which is directly influenced by our discussions with these agency clients.
Your next question comes from the line of Rob Sanderson with Loop Capital.
I have a question about agencies. You recently revealed that agency-led accounts have increased by four times. Is this part of an effort to target larger brands? Mark, you mentioned that this growth has occurred organically due to available opportunities, but you didn’t specifically address agencies when discussing demand drivers earlier. I would like to understand what investors can anticipate from these new agency initiatives as a source of additional demand in 2026, 2027, and beyond.
Certainly. Traditionally, many people associate the term agency with large advertising firms or holding companies like WPP or Omnicom, which mainly cater to major global brands and their substantial budgets. However, the agencies we're discussing are independent ones, numbering in the thousands, with about 500 of them accounting for over half the market. These agencies focus on the specific needs of performance marketers, primarily mid-market businesses that aim to succeed in search, social media, and now also Performance TV, which they view as a growth opportunity. We have committed to supporting these agencies in their efforts by enhancing their marketing capabilities, helping them explain Performance TV to their clients, and providing them with creative credits to assist customers in launching their campaigns. While this represents a new channel for outreach, our customer base remains the same—mid-market performance brands and, in some cases, small business brands. Our approach does not alter the underlying model but does offer a new avenue for engaging with these customers, potentially accelerating the growth of their budgets.
That makes sense. If I could have a follow-up. Just a few weeks ago, you announced a partnership with PubMatic. I wanted to ask how partnering with SSPs fits into your strategy. You already have direct relationships with 200 publishers, providing a comprehensive supply. Do SSPs help fill in gaps or enhance these supply relationships? What other advantages do these partnerships offer to MNTN?
Yes, we have always collaborated with various SSPs. Recently, we announced a partnership with PubMatic, which you mentioned, and we also partnered with Magnite at the beginning of the quarter. Magnite issued a press release regarding certain premium content, including Pause Ads, which they've introduced. It's important to understand how these SSP relationships function. Every streaming network operates an auction when we establish a direct relationship with them, and the SSP acts as the auctioneer. For instance, when we say we have a direct relationship with Paramount, they still utilize one of these SSPs to connect their inventory with MNTN, despite having negotiated terms and pricing directly with them. SSPs have consistently been part of the process. Our focus with PubMatic is on premium and super premium content, which performs exceptionally well and is highly valued by our clients since it includes the most elite television content, often costing millions of dollars to produce per episode.
We aim to secure more of that supply, especially with the introduction of live sports and Pause Ads. We're enhancing our relationships across the board, not only with all our premium content but also by exploring specific opportunities to obtain even more premium content. We initiated this with PubMatic, and I believe you will continue to see us pursue this with both streaming networks and the SSPs, which facilitate the transfer of ad impressions between, for example, Paramount and MNTN.
Your next question comes from the line of Matthew Cost with Morgan Stanley.
Two, if I could. Just one on the pace of customer adds. Is there any seasonality that we should be aware of in terms of the just gross number or net number of new customers coming on to the platform? Because the guide would imply, I think, very strong customer growth in the fourth quarter. So I guess, how should we think about contribution of user growth? And should we expect a seasonal pickup there in the fourth quarter or customer growth, I should say? And then, the second question is just on the gross margin front. It seems like around 79% gross margins, give or take, this quarter, you're really kind of getting towards the upper end of the 75% to 80% range that you've talked about historically. I guess, Patrick, you talked about in the prepared remarks the potential for further gross margin improvement. So I guess, where are we in that journey?
I’ll address the first part of your question. We are actively continuing to invest in sales and marketing to boost the pace of customer additions. There’s a noticeable trend in the market where companies are increasingly recognizing the value of Performance TV. When we initially introduced the concept, a significant portion of our efforts was focused on convincing businesses that television advertising was accessible and not just for those with deep pockets. Many viewed it as an expensive and lengthy process that required vast resources. However, this perception is changing as more small and mid-sized companies realize that television advertising is within their reach. Our sales cycles have become shorter, which indicates that we are successfully bringing on new customers at an accelerated rate. This is influenced by our investment and the improving efficiency of our sales process. Moreover, with QuickFrame AI, the time to launch has significantly decreased; for instance, a customer was able to create compelling content in just two hours, thanks to our partnerships and generative models. We are optimistic about these developments and believe this momentum will continue. Now, I’ll turn it over to Patrick to discuss gross margins.
We experienced a significant gross margin expansion in Q3, with an increase of 720 basis points. Over 400 basis points of this was due to MNTN's increased revenue, and more than 300 basis points were a result of the Maximum Effort divestiture, which represents a permanent structural change. As we move into Q4, which is projected to be our highest quarter in terms of revenue, we anticipate further improvements in gross margin. Additionally, as previously mentioned, we have transitioned our hosting services to GCP. Assuming the hosting environment remains stable, which is unlikely, this change will also lead to a notable reduction in our cost of goods sold. In summary, we foresee opportunities for further enhancements moving forward and are currently operating within a long-term gross margin range of 75% to 80%.
There are no further questions at this time. I will now hand it back to Mark Douglas for closing remarks.
I just want to say thanks, everyone, for attending the call. We're very excited about the results for the quarter and, honestly, even more excited for Q4 and beyond. So we'll see you on future earnings calls. Thank you.
This concludes today's call. Thank you for attending. You may now disconnect.