MNTN, Inc. Class A

Hello and welcome to the Mountain second quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Brinley Johnson. You may begin.

Good afternoon. Thank you for joining us for Mountain's second quarter 2025 earnings call. With me today is Mark Douglas, CEO, Patrick Pollin, CFO, and Chris Innes, COO. Just to remind everyone, today's call includes forward-looking statements that are subject to risks and uncertainties, and actual results can materially differ from those anticipated in these forward-looking statements. For the risks and uncertainties that may affect our future results, please see the risk factor section of our IPO perspectives filed with the SEC on May 22, 2025, which is also available on our website. We will also discuss non-GAAP financial measures on today's call. Reconciliations of these measures are available in our earnings material on our IR website. With that, I'll turn the call over to Mark. Please, go ahead.

Good evening. So, thanks. Thank you for joining us on Mountain's very first earnings call as a public company. Sam marks a major milestone, not just for Mountain, but for the thousands of brands we serve and for the future of TV advertising. We build Mountain around a bold mission to democratize TV. Our goal is simple, to make connected TV the most effective performance marketing channel and to give every brand from startups to household names the tools to succeed on television. On behalf of the entire team, I want to thank our investors, partners and shareholders for your belief in our mission. We are not only helping brands advertise better, we are helping them grow smarter. Let's get to the headline. We've delivered a strong Q2. Second quarter performance TV revenue grew over 35% to 67.8 million with total revenue of 68.5 million. Driven by our unique value proposition as well as our ability to efficiently attract New customers to the platform and increased usage for existing customers. Gross margin improved to 77% and adjusted EBITDA grew 92% year-over-year and hit a record $14.5 million. We ended the quarter with $175 million in cash and cash equivalents, but our quarterly results are only part of the story. Our strength lies in how well our strategy is aligned with the state of the market and the needs of modern marketers. Marketers today are navigating a rapidly shifting landscape fueled by automation, rising customer acquisition costs, AI generated content, and the increasing pressure to do more with less. That's why performance TV is resonating. It's not just an evolution of connected TV, it's a new category altogether. One that combines the reach and storytelling power of television, with the precision, speed, and accountability of digital. And Mountain is leading the way. Our platform is purpose-built to close the gap between where audiences are spending their time and where ad dollars are still catching up. Nearly half of all TV time in the US is now streamed, yet only a third of TV ad budgets have followed. In the past 12 months, thousands of brands have run campaigns on Mountain, many of them seeing TV drive revenue for the first time. In fact, the number of live customers on our platform has increased 85% year over year, a majority of which are small and mid-sized businesses. These aren't legacy advertising titans. They're growing challenger brands looking for the next engine of acceleration and finding it with Mountain. Since 2019, ads run through Mountain have generated over $27 billion in revenue for our customers, and notably 97% of our customers that launched in 2025 had never advertised on TV before using Mountain. Malin is turning television to a growth engine for the small to mid-sized businesses that were once priced out or left out. While others chase the top 1% of advertisers, we've gone the other way, making performance TV accessible, measurable, and effective for brands that never thought they could afford it, let alone scale with it. This is where mountain shines. Our performance TV platform is the most advanced software and connected TV. We build performance TV on a simple belief that TV advertising should be effective, measurable, and as easy to buy as search and social. This is TV advertising engineered for outcomes. Our platform combines the creative power television with the intelligence of performance marketing. Brands handle the rest, but our platform handles the rest. Targeting, optimization, attribution are all built in. This is what sets Mound apart. Every campaign is optimized for performance. Three key proprietary technologies make this possible. Mound Match is our proprietary AR targeting engine. It matches brands with the viewers most likely to convert based on real behavior, intense signals, and household data. Verify Visits is our cross-device attribution system. It connects a TV commercial to downstream action like a purchase or a site visit across more than 400 million devices in the U.S. with household-level accuracy. Mount's programmatic bidders are AR-powered proprietary bidding engines. It automates media buying, optimizes spend in real time, and processes hundreds of thousands of streaming TV ad requests per second, maximizing performance across trusted, professionally-created premium streaming inventory. This is what transforms TV from a top of funnel awareness play into a direct response growth engine for challenger brands. Our competitive mode isn't just technology, it's also a years long lead in understanding how to make TV work like digital for everyone. As for the road ahead, we remain confident in our momentum, in our mission, and in our market opportunity. We're raising the bar in performance and making a TV a viable growth channel for brands of all sizes. Thank you again to our investors, our shareholders, and our partners. Your belief in Mountain is helping us lead a major shift in one of advertising's most powerful mediums, and we're just getting started. Now handed over to Patrick to walk you through our financial results in more detail and share our guidance for Q3.

Thank you, Mark. As Mark mentioned, we had a very strong second quarter. Our first quarter is a public company. We delivered strong second quarter results with performance TV revenue growth of 35% to $67.8 million. This performance reflects continued customer adoption of Performance TV, particularly among small and medium-sized businesses. For a bit of clarity on revenues, on April 1 of 2025, the company closed a transaction that transferred its interest in Maxim Effort to an affiliate of its original owner. Maxim Effort continues to play a key role in our brand and creative strategy, just as a separate company. Max effort continues to be a big part of Mountain. Adjusted for this transaction, our total revenue grew 34% year-over-year to $68.5 million in Q2. Without adjusting for this transaction, that is, including maximum effort in Q2 of 24 and not in Q2 of 25, total revenue grew 25% year-over-year. Turning to gross profit, Our gross margin for Q2 was 77% compared to 70% in Q2 of 2024, an increase of 700 basis points. Looking ahead to the second half, we are taking further steps to drive additional gross margin improvements, specifically reductions in hosting costs. On the OpEx side, Total operating expenses for the quarter were $48.8 million, up 21% from Q2 of last year. This increase was primarily driven by two things. One, investment in technology and development, and two, marketing to support customer growth as we move down the long tail. Sales and marketing spend was $24.3 million. We continue to invest in customer acquisition and brand visibility while maintaining efficient unit economics. Technology and development spend was 10.7 million. We remain committed to driving differentiated results for our customers through product innovation and improvements, like Mountain Matched. GA totaled 13.1 million for the quarter. On a GAAP basis, our net loss was $26.2 million. We concluded our initial public offering in the quarter And as part of our public offering, convertible notes were converted into cash and equity, which added 23 million on a one-time charge to net loss. A $26.4 million expense was incurred on the extinguishment of the convertible notes, which were paid off in the IPO. This was partially offset by a 3.4 million net gain related to fair value adjustments on warrants and convertible notes. Adjusted EBITDA for the quarter was $14.5 million, up from $7.6 million in Q2 of 2024, an increase of 92%. The company's adjusted EBITDA margin was 21% compared to 14% in Q2 of 2024. This improvement was driven by increased operating leverage throughout the business. We have a very strong balance sheet ending the quarter with $175 million in cash, and cash equivalents, and no debt outstanding. We ended the quarter with 72.6 million shares outstanding, and looking ahead, we're confident in our momentum and the underlying health of our business. For Q3, we expect revenue in the range of 69.5 million to 70.5 million, representing a 22.5 year-over-year growth at the midpoint. We expect adjusted EBITDA to be between $13.5 million and $14.5 million, reflecting continued leverage as we scale the business while remaining disciplined in our investments. As a reminder, we will continue investing strategically in R&D and go-to-market capabilities to support our future growth. We remain focused, though, on delivering operating leverage over time. To wrap up, we're pleased with the results for this quarter, our first as a public company, and we believe we're uniquely positioned in a massive and rapidly evolving market. PerformanceTD is unlocking new growth for advertisers, and we're proud to be leading the way. Our financial performance is strong, our market opportunity is expansive, and we have the team, technology, platform, and capital to execute. With that, we'll open the lineup for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure your phone is not on mute when called upon. Thank you. Your first question comes from Shyam Patil of Susquehanna. Your line is open.

Hey, guys. Congrats on your first earnings call and the strong results. I had a couple of questions. Mark, clearly you guys are seeing very strong trends. Can you just talk about the momentum you're seeing right now? And then kind of as you look out, maybe the two to three things that you're most excited about. And then second question for Patrick, you guys have solid margins in Picasso Dynamics already, but as you kind of look out from here, can you just talk about how you see margins trending and what the key levers are? Thank you.

I'll also thanks for the question. I'll start with the first part of that. So I think the key thing we've started to see and I can't completely give you a metric on this is that marketers for our in our target segment, which is small and mid sized businesses, the SMB market, they've gone from being surprised that they can use television to now they're really assuming they can. So it's just kind of, I think a lot of that is due to our marketing, to our company's marketing. And you're seeing like more content about how to do performance marketing on TV and where as the, you know, essentially the creators of the, the first mover advantage creator, creators of segment and market were really benefiting from that. And you can see it reflected in some of our stats. 77% of Mountain's revenue now comes from inbound leads. And that percentage has gone up even since we did the IPO, the metric we had for the IPO only two months ago. So we're just seeing all this forward momentum. In terms of what we're most excited about, I think it's the efficiency. So all of these customers, 97% of our customers have never advertised on TV before. So we're obviously investing heavily in AI. So we're doing AI targeting to help those companies find their next customers, AI creative to help, and some things that we're working on there to help lower the cost of building television commercials. 97% of our customers don't have a TV ad when we meet them, although they have a lot of videos. So we can help them through tools and through a network of creators in Quick Frame, a part of Mountain, have TV commercials at very efficient cost. And there are other areas we're applying AI to. I think if you look at our sales headcount, we haven't added headcount in sales in over three years, and that's all due to gaining efficiencies, and a lot of efficiencies are increasingly coming from our use of AI and the AI technology we're building. And I'll pass it to Patrick for the rest of the questions.

Yeah, so Sean, first of all, thanks for your kind words. So, gross margin, our long-term target is 75 to 80. And we have, in advance of the maximum effort spin out, we had been doing some things, but the real value in the increase in gross margin starts with the maximum effort transaction. And we have a couple things planned during the course, and so we're sitting at 77% for the quarter, and that's a quarter in which we didn't have max effort and the creative costs, so that's a significant reduction. Data, as you may recall, is a fixed COG, so we're now looking at the other two. One is hosting costs, which we are underway to reduce our hosting costs in a relatively significant manner, and that should occur during Q3 and part of Q4. Then we'll turn our attention to media costs, and we expect to generate additional gross margin improvements around media. So we're sort of sitting right now at the bottom end of the range, and so we expect with those hosting and media to drive us up higher in that range. In terms of adjusted EBITDA, we're also on a journey there. That is a more balanced journey. That is, we want to be profitable, but not at the sake of driving revenue growth. And so right now, we ended the quarter, I think, at 21% gross margin. And that leads to about 18% for the first half of the year, which is a pretty significant improvement, 92%. You know, so 92% increase in adjusted EBITDA for Q2. And we'll end the year sort of in the, I'm guessing, approximately around the 20% gross margin, I'm sorry, adjusted EBITDA with a long-term target of 35 to 40. In terms of components of OPEX, we've continued to drive sales and marketing down a long-term range of 20 to 25. That's directionally where the trajectory is. Gross DNA, 10 to 15, same thing, moving into that range. And then technology and development, where we're going to spend additional money on engineers to improve, maintain the product, develop new products. We're sitting in that range already. Great. Thank you, Guy.

Next question. Thank you.

The next question comes from Mark Mahaney with Evercore ISI. Your line is open.

Hey, I want to ask two questions, please, and congrats on the first quarter out of the gate. One of the things that you've been doing is kind of lowering the minimum spend in order to bring on, you know, kind of reach out to more small, medium-sized biz advertisers. Could you talk about the impact that's had on the business and where you are now in terms of that kind of minimum spend? And then secondly, Patrick, thanks for the disclosure on the reported versus the organic growth rate. Would that same sort of delta apply to your guidance for the September quarter, roughly a 10-point faster organic than a reported growth rate? Thank you.

Yeah, I'll start off that question just talking about the product minimum. So if we go back a couple years ago, our minimums per campaign per month were $25,000. Those now sit at 500 and essentially our improved targeting through Mountain Matched has allowed us to open the platform and product to more customers. Right now we're not seeing big adjustments in our average budget. We do anticipate that those will go down as we begin to scale with the 1.5 million advertisers in this market. And the other thing I'll say on the budgets, remember, it's a bit of a choice for Mountain. We are go-to-market. We decide what customers we want to target, what size, and so that does give us a lot of control.

To the second part of your question, Mark, so at the midpoint of our guidance for revenue, we're at 23%. I think we'd expect high single-digit increases both in the core business PTV revenue, and then if you just adjusted the comparison to remove maximum effort revenue from Q3, also in the single high digits.

The next question comes from Andrew Boone with Citizens. Your line is open.

Hi, guys. Thanks so much for taking the question. Congrats on the first public company quarter. Two please from me. One is I would love to touch on net revenue retention rates and understood you guys may not want to quantify this this quarter, but can you please speak to kind of what you guys are seeing with existing customers and the trend there? And then secondly, VO3 is certainly changing the game in terms of text to video creation. Can you guys just speak to where you guys are with quick frame AI and what is going on in terms of content creation with generative AI? Thanks so much.

Yeah, I'll cover the first question just around net retention. So net retention is not something we're revealing now, but it's very, very strong. And to piggyback onto the last question, we're seeing very, very strong performance from existing customers and especially small businesses. Among our small businesses, really the F in small and medium-sized business, we see the strongest net retention number of any of our segments. And so while we're moving down market, we're seeing very, very strong net retention and customer performance.

And I'll take the AI, the Quick Frame AI. So Mountain, we have been working on generative AI tools for more than two years now. I made a comment about them on CNBC recently. We generated over 1,000 customer-facing, fully AI-generated ads on the beta version of that platform in June, more than 18,000 in total in test, and we'll have some announcements coming up about those tools and how they're being used and how they're helping our customers.

The next question comes from Andrew Merak with Raymond James. Your line is open.

Thanks for taking my questions. First, wanted to talk about the Zoom info deal that was announced recently. Just trying to get a sense of how big you think the scale of the unlock can be from that deal. and the timing and just trying to get a sense of, from a customer perspective, is B2B overrepresented or underrepresented as a percentage of the SMB market versus large enterprises? And then I have a housekeeping follow-up.

Yeah, so on the Zoom Info, that's a partnership where Zoom Info is essentially driving advertisers and customers to Mountain to use our software to grow their business. It's one of several types of those partnerships we have. I can't speak to what the numbers are going to turn out, but it's a good customer base who has a good understanding of our features and product, and we're going to continue to expand those type of relationships.

All right, great, thank you. Maybe one for Patrick, just on the housekeeping side really quickly. Just want to make sure, it sounded like from a previous answer that the gross margin is kind of, this is what to assume the trajectory going forward, but just want to make sure that, you know, in the context of your EBITDA guide for 3Q, it does assume these kind of higher gross margins than we'd seen in the previous few quarters.

Thanks. No, it assumes, Andrew, You know, there's going to be variability in the gross margin quarter over quarter, but it assumes a gross margin that is at the bottom of the long-term range in that general vicinity.

The next question. I'm going to add just a little to what Patrick said. There's an interesting subtlety to our gross margin, which is as our revenue increases in quarters like Q4, the sum of our costs, like the cost to bid. Like, people don't watch more television. So if we're getting 300,000 bid requests in the slowest quarter, Q1, and then you get 300,000 bid requests in your biggest quarter because people are watching the same amount of television. There's 140 million also in America. So just growth alone expands your gross margin, although we've been investing in other ways, like reducing our hosting costs and others. But it's an interesting part of our business. And you can see it reflected in last year's numbers, where Q4 has the largest gross margin and Q1 has the smallest. I don't know off the top of my head, but I believe this quarter is bigger than the largest quarter, or close to.

No, it is.

It is. So Q2 of this year, which you would consider smaller,

has a higher gross margin than our biggest quarter last year so it's you know that's something you can put in the spreadsheet and trend out yeah yeah so so we have a fixed component which is data so that's fixed and so higher revenue all by itself drives increasing gross margin and then the slope line and the variables are all less than the revenue growth line great thank you

The next question comes from Rob Sanderson with Loop Capital Markets. Your line is open.

Hello. Good afternoon, everybody. Also, I'll offer my congratulations on turning public. I've got a question for one of each of you. For Mark, maybe, you know, could we talk a little more about the GenAI tools for creative, you know, feedback from beta? And generally, like, how much cost does creative add to PTV campaigns? And any thoughts on how much more productive your community can get with these tools? Maybe it's too early to talk about this stuff, as you maybe alluded to earlier, but to get any thoughts you could add. For Chris, how has your go-to-market strategy been evolving? Any commentary on near-term funnel dynamics and maybe impact of the IPO? And then is there a large opportunity for other partnerships like ZoomInfo? Do you think partner channels can become a meaningful part of your customer acquisition over the next, say, two or three years? And then for Patrick, just curious the impact of MaxApp on gross margin and operating margin. Obviously, we assume the PTV platform business is meaningfully higher, but is there a way to dimensionalize the apples to apple exclusive of the transaction, just how you're trending on a year-over-year basis. If you could add any color to that, that'd be great.

Cool. So I'll get started on the first question. And we're trying not to pre-announce the software, to be honest. But with 97% of our customers never having advertised on TV before, we feel compelled to to help solve that problem. So our initial solution is we acquired Quick Frame in December 21. Quick Frame is a network of thousands of independent creators who can build television creative. They also build creative for Instagram, TikTok, YouTube, so ads for any of the platforms, including Mountain, and we've kept it that way. And that was the initial solution. Now with AI tools, We think that that is an important component, but we think the independent creator can still play a big role. Even if you lower the cost of creative, you can lower it to a point where like someone's choosing between spending their night using AI tools to build an ad or they can pay someone, you know, hundreds of dollars to do it for them. And so we intend to keep both generative AI tools that we haven't launched yet, but we just spoke about, we've been testing, as well as our independent creator network and kind of combine them together. And by the way, we're totally open to partnerships also. At the end of the day, we're investing in that. There are other companies investing in generative AI tools also, and we decided to invest because we didn't feel we could like delegate 97% of our customers needing TV ads when we meet them to other companies, but if they are using other companies, we are fully embrace that. And by, and we also are fully embracing the partnership around the tools we're building. So we're not, it was mentioned via, we are working with Google 11 labs and others on the best use of their generous, um, technologies and putting them into an environment purpose built for television ads and social.

Yeah. And to jump into go-to-market, and I'll piggyback Mark's comment, you know, what are some changes or challenges we've seen in our go-to-market? It's become a lot faster since we went public. And so a part of that is the IPO. Another part of that is the creative tools we have, those AI tools that allow the customers to go live much, much faster. Remember, our go-to-market is we take the email addresses of our future customers. we upload that to our platform, which matches to their household, and we start serving TV commercials directly in their living room. If we want to expand into a new vertical or a new part of the market, we just need those email addresses and we can grow from there.

And Rob, on the question for me, so we kind of answered it when we talked to Andrew, and that is, And I haven't sliced it exactly the way you're asking, which is what if max effort had stayed, what would the gross margin be? But it would have ticked up for the reasons that Mark and I discussed, which is there's a fixed component. So our revenue grew 25% year over year, and the gross margin in the prior period was 70%. So we certainly, and the 25%, slope line is still much higher than the variable slope line, so gross margin would have gone up. I just can't tell you precisely where it went up. I have in the back of my head what I think maximum effort contributed, but I don't want to go out. I had a target for that reduction in COGS and increase in gross margin, but I think it would have been a couple points.

I want to add one more one thing, so I just wanted to be very clear. Maximum effort and, in particular, Ryan Reynolds and George Dewey are massive contributors to the building the mountain brand and ultimately the growth and although. Um, we, we all agreed to spin out maximum effort because it doesn't really make sense to have like the world's most creative people in agency be dealing, you know, like, like dealing with quarters and lawyers and accountants and things like that. Um, the, the form of the partnership changed, but the function of meaning, like how tightly we work together. um has not and if anything we've been we've been working even harder together and we're excited to still have them as um to be I I can't even say still have them we're excited that they let us in their door to work to have such an incredible partnership because we're always amazed at the what they do and they I think are always amazed at the technology we build and the sales organization and marketing organization that NS has built for the company. So I just wanted to be very clear on how tight that partnership continues to be and how well we all work together.

Yeah. I mean, just anecdotally, I have worked more with the Maxim Effort people since we've gone public than I did before. Awesome. Next question.

The next question comes from Laura Martin with Needham. Your line is open.

Hi, there. Great results. I'll ask you, too. So revenue, you said you had 85% growth in active customers, and you had 25% revenue growth, 600 basis points above our estimate. I would have guessed that came from Meta, Google Search, and maybe YouTube. Meta grew 600 basis points faster in revenue at 22%, and both search and YouTube grew 13% well above consensus estimates. So my first question is, where are you getting your new customers from and your new spending if they are growing as fast as you, practically? My second question is on this. So you guys have brought performance to connected television, hugely differentiated, lots of pricing power. But Amazon is sitting in the area of performance called purchases. When you look at how your customers define performance, what percent of your advertisers define performance as an actual sale versus something else, a site visit, a website, a query, an email address? Could you talk about your mix of how your customers define performance on your platform? Thank you.

Yeah, and so remember, it's 35%. year-over-year performance TV growth. And where are we getting those customers? It's just part of our normal go-to market. And so we have a process to gather brands and email addresses of the brands we want to work with. We upload those to our platform. That matches to their household, and we start serving them TV commercials. The sales team will come in essentially on top over that. In terms of the customer base and how they think about performance, Most of our customers, more than 80% are using return on ad spend as their key metric. So they have a tracking pixel live. They're essentially handing us that conversion data. We see each sale and we're attributing it. Uh, we have B2B customers. Um, we have B2B customers that make up a smaller fraction of that. You know, they're, they're still measuring to some type of conversion. It's normally a cost per action. And then some of our smaller brands, B2B and other brands may use a cost per visit to optimize toward. And on the meta question, I may have misunderstood that. So I think about it in terms of share of wallet. What percentage of a brand's budget do we have versus meta? Mountain is in about the 15% range. And so we have 15% of a brand's overall marketing budget. Meta is the highest in the industry, sitting at about 22%, where Google is at 18, and they've been quickly declining.

And remember, Laura, it's not a zero-sum game. Our customers don't choose to use Mountain or Meta. All of our customers are using paid search, paid social, email for retention marketing, Mountain for performance CV, but definitely So all of our customers, I'm not sure we can find a customer that is like, no, I don't advertise on Instagram. And that just grows over time. Obviously, our goal is that eventually that's, you know, I, of course, advertise on performance television with Mountain. And then we get the second part of the question. Amazon. Who's about Amazon? In terms of, can you repeat your second part of your question, Laura? I'm sorry.

I was just interested in how much competitive exposure you have to Amazon, because Amazon actually drives the purchase. And I'm wondering if you guys have a broader mix that doesn't always drive the purchase and therefore is more protected from big tech competition.

Yeah, so the majority of our customers are direct to consumer brands. We talked earlier about how we're expanding into B2B brands. But the vast majority of our businesses direct the consumer brands, and their goal is to drive outcomes, to drive purchases, or to drive some other consumer action. And so they're looking, and again, they're going to use Mountain. They're doing search advertising on Amazon. They're doing streaming TV advertising on Mountain. They're doing the social on Instagram. So we think Amazon's advertising business is obviously really important. It has grown tremendously, but it's not competing with Mountain's business. Their TV business is, at this stage, still entirely focused on their own brand advertisers and focused on their inventory. So to the large extent, largely excluding the 199 other streaming networks in America.

But the highest, our customers' highest outcome as a percentage is sales, like far and away, sales.

Yeah, the revenue the platform's driving, and they're able to compare mountains to these other platforms directly through the data we provide them as well as other third-party tools that pretty much all performance advertisers use. Cool. Next question.

The next question comes from Ivan Feinseth with Tigris Financial Partners. Your line is open.

Hi. Congratulations on the great Q2 results and your first quarter as an IPO as well. Where are you seeing the biggest growth in new customers, like what types of businesses or industries or products?

We in Q4 of last year, we began to open the top of the funnel to move to smaller brands. And so we picked up a lot of small franchises like Orange Theory, their 600 stores, along with a lot of smaller local businesses. We launched the ability to do radius targeting late last year, which has helped fuel that. But these are mom and pop businesses all across the United States.

And then are you seeing a lot of new customers go through the self-service portal, or are they using your Salesforce? And if they use the self-service portal, does that help contribute to the margin expansion?

Absolutely. So we call that self-signup. We started expanding our self-signup efforts in Q2 of this year. We're still using humans on a portion of that, just as we perfect our process and all of our metrics.

The other thing, Ivan, that's been interesting, because we thought we needed to do the self-signup for smaller budgeted customers, but it turns out the midsize customers love self-signup too. So it's been an improvement across all customer types.

The next question, thank you, comes from Ron Josie of Citi. Your line is open.

Great, thanks for taking the question, guys, and great to see the results. I wanted to ask maybe a bigger picture, Mark. In the past, you've just talked about, you know, TV has greater engagement and scale than other platforms online like search and social, and yet it's still under-monetized. Talk to us about what unlocks the bigger picture of this greater engagement and scale online. So talk to us about the opportunity around PTV and CTV overall. And then Patrick, on the sales and marketing side, would love to hear your thoughts on brand building and awareness and the investments that the team is making in the advertising front, given I think I heard headcount for sales is about flat. Thanks for the time.

Sure. So the first part of the question, It primarily has to do with data. There are two things that help to monetize TV better. One is bringing small mid-sized businesses. This is a medium that has been dominated by large brand advertisers focused on reach and frequency. The ultimate ad is the Super Bowl ad or the ad during the Olympics or those kinds of moments. and but for so small mid-sized businesses were largely excluded i think that when mountain the first campaign was launched on mountain it was the first it was the first time certainly at scale we'll say first time at scale that you could advertise on tv without having to you know have months of meetings and like find people to help you just like go to mountain.com create an account and You are live on every streaming now live on every pretty much every streaming TV in America. So then the question is, well, the growth of this medium is going to come from small, mid sized businesses. I like to say, just like the job market, all the growth in jobs comes to small, mid sized businesses in the advertising market. All the growth in TV advertising is also going to come from small and mid-sized businesses. Remember, 97 cents of every dollar spent through Mountain is net new revenue into this industry. because these customers have not advertised on TV before. So then it just comes down to, well, what makes this cost effective? What makes this measurable? What makes this fun for a small business? Not, you know, a T-Mobile, every person in America can become a customer. I'm talking a business looking for the next 500 customers. What makes this work? It's data applied with, you know, machine learning algorithms. and at this stage now, AI technology. So that's the heaviest investment in our engineering effort is in finding that right target consumer. When you find the consumer, you put that brand on 65-inch television on the wall versus a 6-inch screen in your hand, it's going to perform 30 seconds of time uninterrupted. So it's all about the data. Patrick Corbett- That the the machine learning Ai algorithms and then applying that to the SMB market that's it.

Patrick Corbett- yep so on sales and marketing in his continues to hold the line on headcount increases. Patrick Corbett- But you know, there was a condition precedent to going down to the small, the long tail and that was mountain matched The other thing we did. Patrick Corbett- Just for a bad pun is the match that we use to get to the small businesses. was additional ads ran to those targeted customers. And we did that in Q1 and we continued it in Q2. So it's driving more brand recognition in the small, medium-sized businesses and more leads into the company from that cohort of customers. So the increase is not headcount, it's actually marketing.

The next question comes from Matthew Cost with Morgan Stanley. Your line is open.

Hi, everybody. Thanks for taking the questions. Just on the 85% customer growth, if you could just break down how much of that is coming from kind of your core midsize customer base that's made up, obviously most of your customers historically, versus kind of cracking into these smaller customers, you know, how much of that growth is coming from them? And then I just want to maybe close the loop on a couple of comments you've made over the course of the Q&A. Is it fair to assume that you're actually getting more efficient even as you move downscale from a customer perspective just because of the adoption of self-serve and the efficiency with which you're acquiring them? So is your cost to acquire and serve customers improving even as you capture these smaller ones? Thank you.

Yeah, absolutely. And the, you know, as we begin to acquire smaller advertisers, as you look at that, that 85%, it's the small advertiser, it makes up more of the count than the revenue. Our majority of our revenue still comes from midsize brands. Over time, as we continue to open the top of the funnel towards smaller brands, I'm sure that will change. And what was the second part of the question? Cost to acquire and service. Oh, cost to acquire. We've become very, very efficient and effective with that. And Allie leads our marketing teams, doing a great job there. We're using a lot of AI to improve our content, our messaging, our strategy, and more. And as our own product gets more efficient with Mountain Matched, that makes our customer acquisition costs even better.

Yeah, so I think the answer to your question is we have gotten much more efficient We did it primarily for the small customer, but it runs now through the whole business. So we are getting great operating leverage in sales and marketing across all customer types.

Yeah. Every, like a number of businesses, they increase headcount just as kind of like a function of the way the business, if we're going to increase our revenue goal, we're going to increase sales headcount, at this point in Mountain, literally every new hire is a strategic hire. Like you can name what they're gonna contribute strategically to the business and there's no increased headcount that's just kind of a function of the revenue plan. And one thing that's happening also You can't really tell in our numbers, but a third of the company's headcount, we started a third of our headcount is in engineering. We're at now over 40%. That's headed over 50%. So one out of every two people working at Mount is in engineering, and again, strategic hires. And then throughout the sales organization, the marketing organization, everything, every single person that joins the company has a specific specific reason to be here they are not part of like just a spreadsheet that you know if sales revenue increases then this headcount will have to increase also so I and and that again gives us operating leverage um as part of continuing increase our EBITDA margins yeah but both both OPEX um increases uh Matthew are targeted to drive revenue yeah so the engineering headcount

is to maintain the product, improve the product, add functionality, add features, and develop new products. All that drives revenue, and the same is true of the marketing expense. So the OpEx things we're doing are headcount related as it relates to engineering to drive revenue, and then marketing focused on the sales and marketing side.

This concludes the question and answer session. I will turn the call to CEO Mark Douglas for closing remarks.

So this is my first set of closing remarks, and it's actually surprisingly hard to decide what to say. So I'll just speak from the heart. So one of the things I think a few of you know is I grew up in New York City. I went to aviation high school here in the city, like in the city, not just in New York, in New York City. And I actually, AVH, I wanted to be a pilot. I wound up going to tech industry. I love what I do in tech. I love learning the code and then coding throughout my career. But I also love flying, and so I'm a jet pilot also. And one of the things about flying that you really love is tailwinds. Like, yeah, it's free speed. And so I said all that to say, I think I think mountain, we have a lot of tailwinds in the business right now. So we have customers that increase or prospects that increasingly recognize their ability to leverage streaming TV as a performance advertising medium. and are coming to us to help them do that. We have, in terms of all the efficiencies that we mentioned, sales and marketing, we have products that we continue to improve and continue to work on and release. So I just honestly feel, and it's my mission to have the company just fire on all cylinders. I spend a majority of my time on engineering and focus on that. And so we just see it and to finish up the remarks is that performance marketers increasingly are learning about connected TV mountain is the conduit for that we created that story we told that story and we continue that we plan to continue to lead and, most importantly, when. In making that happen for ourselves for our customers and obviously our team and our partners so. I'll leave it there. I thank you for all the time and all the questions. And for those listening, listening and running this call, I sincerely thank you for your time.

This concludes today's conference call. Thank you for joining. You may now disconnect.