MNTN, Inc. (MNTN) Q2 FY2025 Earnings Call Transcript & Summary

Hello and welcome to the Mountain Second Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Brinlea 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 Pohlen, 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 could 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 Factors section of our IPO prospectus 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 materials 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. Today 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 of 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. The -- we are not only helping brands advertise better we are helping them grow smarter. Let's get to the headline. We 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 a record $14.5 million. We ended the quarter with $175 million in cash and cash equivalents. But our quarterly results only part of the story. Our strength lies in how well our strategy is aligned with the state of the market and the need to mine 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 powered 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 U.S. is now streamed, yet only 1/3 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 midsized 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 them. Mountain is turning television to a growth engine for the small to midsized 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 brands and 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 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 powered television with the intelligence of performance marketing. Brands handle the rest, but our platform hands the rest, targeting optimization, attribution all built in. This is what sets now in the part. Every campaign is optimized for forward performance. 3 key proprietary technologies make this possible. Mountain Matched 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. Verified Visits is our cross-device attribution system. It connects a TV commercial downstream action like a purchase or a site visit across more than 400 million devices in the U.S. with household level accuracy. Mountain's programmatic bidders or AI-powered proprietary bidding engine. 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 a challenger brand. Our competitive moat is in test technology. It's also a year's 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 on 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 medium and we're just getting started. Now I'll hand it 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 as 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, 2025, the company closed a transaction that transferred its interest in Maximum Effort to an affiliate of its original owner. Maximum 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 Maxim 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 2 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. DAA 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 onetime 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. Performance is unlocking new growth for advertisers, and we're proud to be leading the way. Our financial performance is strong. Our market opportunities expands it, and we have the team technology platform and capital to execute. With that, we'll open the line up for questions.

[Operator Instructions] Your first question comes from Shyam Patil of Susquehanna.

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 2 to 3 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?

I'll start -- 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 midsized 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 market -- our company's marketing. And you're seeing like more content about how to do performance marketing on TV and where as essentially the creators of the first mover advantage to create into the segment and market. We're really benefiting from that. And you can see it reflected in some of our facts 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 IP only 2 months ago. So we're just seeing all this for 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 customer, AI creative to help the 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 video. So we can help them through tools and through a network of creators in quick frame and part of Mountain built have TV commercials at a very efficient cost. And so -- and there are other areas we're applying AI to. I think if you look at our sales headcount, we haven't added head count in sales in over 3 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. Now I'll pass it to Patrick for the rest of the question.

Yes. So Shyam, 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 of 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 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, a 21% gross margin, and that leads to about 18% for the first half of the year, which is a pretty significant improvement, 92%. 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, where 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 G&A, [ 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 and develop new products, we're sitting in that range already.

The next question comes from Mark Mahaney with Evercore ISI.

I want to ask 2 questions, please. And congrats on the first quarter out of the gate. The -- one of the things that you've been doing is kind of lowering the minimum spend in order to bring on kind of reach out to more small, medium-sized 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 an endpoint faster organic than reported growth rate?

Yes. I'll start off that question. Just talking about the product minimum. So if we go back a couple of years ago, our minimums per campaign per month were 25,000. Those now sit at 500. And essentially, our improved targeting 3 Mountain Matched has allowed us to open the platform and product to more customers. But 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 -- our 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, TV 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.

Congrats on the first public quarter. Two please from me. One is I would like to touch on net revenue retention rates. And I understood you guys may not want to quantify this quarter. But can you please speak to kind of what you guys are seeing with existing customers and the trends there? And then secondly, VO3 has certainly changed in the game in terms of text to video creation. Can you guys just speak to where you guys are with Quickline AI and what is going on in terms of content creation generative AI?

Yes. I'll cover the first question just around net retention. So what network is not something we're revealing now, but it's very, very strong. And to piggyback on to the last question, we're seeing very, very strong performance from existing customers and especially small businesses. Among our small business is really the S and 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 2 years now. I made a comment about them on CMBC recently. So we generated over 1,000 customer facing fully AI-generated ads on a beta version of that platform in June, more than 18,000 in total in test, and we'll have some announcements in coming up about those tools and how they're being used and how they're helping our customers.

The next question comes from Andrew Marok with Raymond James.

First, I wanted to talk about the ZoomInfo 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. I'm 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.

Yes. So on the ZoomInfo, that's a partnership where ZoomInfo 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 -- they're -- 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.

Great. Maybe one for Patrick, just on the housekeeping side really quickly. I 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 in the context of your EBITDA guide for 3Q, it does assume these kind of higher gross margins than we've seen in the previous few quarters.

No. It assumes, Andrew, 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.

So this is -- I'm going to add just a little to what Patrick said. We -- there's an interesting subtlety to our gross margin, which is as our revenue increases in quarters like Q4, the some 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 in Q1, and then you get 300,000 bid requests in your biggest quarter because people are watching the same amount of tellers 140 million households in America. So Jeff's 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 is the smallest. So 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 that's something you can put in the spreadsheet and trends out.

Yes. Yes. So we have a fixed component, which is data. So that's fixed and so higher revenue all by itself drives increase in gross margin. And then the spline and the variables are all less than the revenue growth line.

The next question comes from Rob Sanderson with Loop Capital Markets.

Also from my congratulations on turning public. I've got a question for one of each of you. For Mark, maybe could we talk a little more about the AI tools for creative feedback from beta? And generally, like how much cost does creative add to PTV campaigns and -- 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 I'd like 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, 2 or 3 years? And then for Patrick, just curious the impact of Max Effort on gross margin and operating margin. Obviously, we assume the PTV platform business is meaningfully higher. But is there a way to like dimensionalize like the apples-to-apples expansion exclusive of the transaction, just how you're trending on a year-over-year basis? If you could add any color there, that would be great.

Cool. So I'll get started on the first question. And we're trying not to preannounce the software to be honest. But the -- with 97% of our customers never having advertised on TV before, we feel compelled to help solve that problem. So our initial solution as we acquired QuickFrame in December 21, QuickFrame 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 would be 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 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 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 we also are fully embracing the partnership around the tools we're building. So we're not -- it was mentioned we are working with Google 11 labs and others on the best use of their generate technologies and putting them into an environment purpose built for television ads and social app.

Yes. And to jump into go-to-market, and I'll piggyback Mark's comment, 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 customer is a lot much, much faster. Remember, our go-to-market is we take the e-mail addresses of our future covers. We upload that to our platform, which matches to their household, and we start serving TV commercials directly in their [indiscernible]. If we want to expand into a new vertical, or a new part of the market. We just need those e-mail addresses, and we can grow from there.

And Rob, on the question for me. So we kind of answered it when we talk 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 so line is still much higher than the variable softline. 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 -- I had a target for that reduction in COGS and increase in gross margin. But I think it would have been a couple of points.

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

Yes. I mean, just anecdotally, I have worked more with the Maxim effort people since we've gone public than I did before.

The next question comes from Laura Martin with Needham.

Great results. I'll ask you -- so revenue -- you showed you had 85% growth in active customers, and you had 25% revenue growth, 500 basis points above our estimate I would have guessed that come from Meta, Google Kirk and maybe YouTube. Meta grew 600 basis points faster in revenue at 22%, and both [indiscernible] and used to grow 13%, well above consensus estimates. So my first question is where are you getting your new customers from and your spending which they are growing as festival. My second question is on mix. So you guys have brought performance to connected television usually differentiated a lot of pricing power. But Amazon is sitting in the area of performance called purposes. When you look at how your customers find performance. What percent of your advertisers define performance of an actual sale versus something else, a site visit, a website, a query email address. Could you talk about your mix of how your customers define performance on your capital?

Yes. 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 e-mail addresses 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 metrics. So they have a traction pixel live, they're essentially handing us that conversion data. We see each sale, and we're attributing it. We have B2B customers we have B2B customers that make up a smaller fraction of that. 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, maybe a cost per visit to optimize. And on the media 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, take social e-mail for recent on marketing on for perform in TV. But definitely, so all of our customers, I'm not sure we could find a customer that is like, no, I don't advertise on Instagram. So the -- and that just grows over time. Obviously, our goal is that eventually that -- of course, advertise on performance evasion. And then we just the second part of the question?

Amazon. [indiscernible] Amazon -- in terms of can you repeat your second part of your question, Laura, I'm sorry.

I 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, it doesn't always drive the purchase and therefore, is more protected from big tech competition.

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

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

Yes. The revenue of the platform is driving and they're able to compare Mountain to these other platforms directly through the data we provide them as well as other third-party tools that pretty much all performance advertisers.

The next question comes from Ivan Feinseth with Tigress Financial Partners.

Congratulations on the great Q2 results in 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?

So 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 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 sales force? And if they use the self-service portal, does that help contribute to the margin expansion?

Absolutely. So we call it self sign up. We started expanding our self-sign-up efforts in Q2 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, Ian, it's been interesting because we thought we needed to do the self-sign-up or smaller budgeted customers. But it turns out the midsized customers will have self-sign up, too. So it's been an improvement across all type customer types.

The next question comes from Ron Josey of Citi.

Great to see the results. I wanted to ask maybe a bigger picture, Mark. In the past, you've just talked about TV is a greater engagement and scale and scale and other platforms online, like search and social and yet it's still undermonetized. Just talk to us about what unlocks the bigger picture of those 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, I 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 head count for sales is about flat.

Sure. So the first part of the question, it primarily has to do with data. So what makes -- what -- there are 2 things that help to monetize to be better. One is bring in small, midsized businesses. This is a medium that has been predominantly -- it's been dominated by large brand advertisers focused on reach and frequency. The ultimate ad is the Super Bowl ad or the ad earning Olympics or those kinds of moment. And -- but for -- so small mid-sized businesses will largely excluded. I think that when Mountain the first campaign was launched on Mountain. It was the first time certainly a scale. We'll say, first time at scale that you could advertise on TV without having to 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 it now lab 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 midsized businesses. I'd like to say, just like the job market, while the growth in jobs comes to small, midsize businesses in the advertising market, all the growth in TV advertising is also going to come small and midsized businesses. Remember, $0.97 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 us cost effective, what makes us measurable? What makes us for a small business, not a T-Mobile, every person in America can become a customer. I'm talking a business looking for the next 500 customers. What makes us work? It's data applied with machine learning algorithms and AI 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, it's got versus a 6-inch screen in your hand is going to perform. 30 seconds of time uninterrupted. So it's all about the data. the machine learning AI algorithms and then applying that to the SMB market, Patrick?

Yes. So on sales and marketing, it continues to hold the line on head count increases, but there was a condition precedent going down to the small, the long tail, and that was mountain matched. The other thing we did, just for a bad point 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 and 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.

Just on the 85% customer growth, if you could just break down how much of that is coming from kind of your core midsized customer base that's made up, obviously, most of your customers historically versus kind of cracking into these smaller customers? And 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 down scale 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 if you capture the smaller ones?

Yes, absolutely. And as we begin to acquire smaller advertisers, as you look at that 85%, it's the small advertiser makes up more of the count than the revenue. Our -- the majority of our revenue still comes from midsized 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? Off to acquire and serve the as to acquire. We've become very, very efficient and effective with that. And Ali leads our marketing team is 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.

Yes. 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.

Yes. Every -- like a number of businesses, they increased head count just as kind of like a function of the way the business -- 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 going to contribute strategically to the business. And there's no increased head count that's just kind of a function of the revenue plan. So -- and so -- and one thing that's happening also, you can't really tell in our numbers but 1/3 of the company's head count, we started a 1/3 of our head count as an Engineering report. We're now over 40% that's headed over 50%. So one out of every 2 people working in Mountain is in engineering where -- and again, strategic hires and then throughout the sales organization, the marketing organization, everything, every single person that joins the company has a specific reason to be here. They are not part of like just a spreadsheet that if sales revenue increases than this head count we'll have to increase also. So -- and that again gives us operating leverage as part of continuing to increase our EBITDA margin.

Yes. But both OpEx increases, Matthew, are targeted to drive revenue. So the engineering head count is to maintain the product, improve the product add functionality at features and develop new products. All that drives revenue, and the same is true of the marketing spend. So the OpEx things we're doing are head count 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. So it's actually surprising we are 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 grow 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 -- Aviation -- I wanted to be a pilot, wound up going into tech industry. I love what I do in fact, I'd love learning -- learning the code and then coding to my career, but also love flying and some in jet pilot also. And one of the things you -- about flying that you really love is tailwind, like it's free speed. You say good. And so all that to say, I think at 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 in 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 a conduit for that. We created that story. We told that story and we continue to -- we plan to continue to lead and most importantly, win 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 in on call with sincerely, thank you for your time.

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