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

All right. Welcome, everybody. I'm just going to quickly start with the disclosures. For important research disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your MS sales representative. And with that out of the way, my name is Matt Cost from the Morgan Stanley U.S. Internet team. Very happy to be joined today by Mark Douglas, CEO of MNTN. Thanks for being here.

Thank you.

Awesome. So maybe we can jump right into it maybe as a high level. For people in the audience who may be newer to the MNTN story, talk to us a little bit about an overview of MNTN, where you fit into the advertising ecosystem and how the business has changed over the past couple of years?

Sure. So at MNTN, with the advent of streaming television, relatively early in that journey from linear TV to streaming, we recognized that, that was a digital marketing opportunity. And we created the world's first Performance TV platform, and the idea of using television as a direct response marketing vehicle similar to what companies do with paid search and paid social. And so -- and we did that specifically for the SMB market, small and midsized businesses who the majority of spend was on search and social and now for the first time, can really come on -- into the television ecosystem and drive measurable results from streaming TV.

Got it. And I guess talking about the ad market for a minute, you've talked about and alluded to it in your comments just now, 92% of your customers are SMBs. Obviously, it's a volatile ad market out there. Given your exposure to that SMB market, are there any macro trends that you'd call out that are impacting them right now? It's a question that we get all the time about your business.

Yes. So I think the opportunity we're pursuing with performance television, that's a TAM we've essentially created. And so it's not really, I think, subject to macro trends just because the scale of the opportunity is significant. And I think that, that arena tends to have emerging companies who are almost by definition, bucking the macro trends. So we don't really see macro as a strong -- as significant factors. It's just significantly, like we're creating our own TAM. We can grow into that, and we see -- we've had consistent growth, and we see that as a continuing opportunity.

Got it. And just following up on that, I guess, thinking back a little less than a year ago when all the tariffs hit, I guess, in light of your comments, did that impact your customers, their ability, willingness to spend?

No. I mean we definitely heard from our customers, some of them, but I think only a single one of them paused spend because, again, when you're an emerging brand, no matter what the factors you're facing, you're not really giving up your growth aspirations. You might give up some of the margin you're taking. You might -- you'll find a path. And so that was a really good example of that not occurring. I think I've seen charts in the past that showed to some extent, performance television being almost -- not performance television, performance marketing being almost like recession-proof and like -- because the number of e-commerce companies and travel brands and other brands that are active in the space. And so it's a reiteration of kind of macro not really being a key factor. It's more the scale of the opportunity that we're growing into is the key factor.

Let's stick with Performance TV kind of really what you were alluding to there. I mean the fact that you're bringing performance advertising to streaming TV is really the main differentiator of your platform. So talk to us about some of the technology that you're leveraging there to make that possible. MNTN Matched, just one example of something that comes to mind there. And how are you iterating on your offering to grow how much you can scale on Performance TV going forward?

Yes. So I think the comparison is there are really 2 ad markets. There's a brand ad market which is represented, I think, has represented past a lot of the television ecosystem. And there's a performance market, which is kind of the segment that we're growing into. They're very, very different. I'll give you a very simple example. In the -- look at 2 very different types of customers. Let's say you have a customer like a Verizon. Virtually everyone in America be a Verizon customer. So the technology needs there are very different. There's not -- you don't have the targeting needs. You don't have the measurement needs. It's more about them building the Verizon brand, that brand being top of mind if it's time for you to potentially want to switch carriers. Now look at an example, one of my favorite customers, Onewheel. They sell a single wheel skateboard, very extreme sports. You probably see people in San Francisco or New York. It looks fun, but it also looks very dangerous, right? So not everyone is a customer for that. They are not trying to get 100 million customers. They're trying to get their next 10,000. So we have to apply AI models to the targeting generative models to profile who their target consumer is, machine learning models to find them. Everything has to be much more precise. The budgets are smaller. Verizon probably spends -- I think they're third largest television advertising in the United States. So that means they're spending something like $35 million a month on TV advertising. Someone like Onewheel is going to be spending far lower than that. And so every ad has to hit the right consumer and it has to be measured and they have to A/B test the creative, which creatives -- everything is done with a deeper level of technology. MNTN services all those technology needs end to end. purpose-built for the SMB market and purpose-built so you can take those dollars and you can use them very, very efficiently. So each of our customers can find their next customer. And the purpose of that example was to show how different that is from like a big global or enterprise brand. And so the technology that they're targeting, the measurement, the campaign management, the creative tools because they don't have TV ads when we meet them. So that's why we have QuickFrame for creative, that's all like a part of the whole package we deliver into the market for Performance TV.

Got it. Let's stick with creative for a second. So obviously, it's not generating a significant amount of revenue, but you just alluded there to how important it is for the customer experience and for retention of your advertisers. So talk about the innovations you're making there, QuickFrame AI and a little bit about customer adoption and how important the creative tools are.

Yes. So we see it as a revenue enabler, not specifically the revenue from QuickFrame, but how it enables customers to get live on our platform faster and also have more creative, meaning if you lower the cost and lower the time to have it, then you can have more of it. And more -- the more you're thinking about how to communicate your value to consumers, the more likely -- and trying different ideas, the more likely you're finding kind of the messaging and the creatives that really hit home that consumer. So that's why we built QuickFrame, is we want to have a solution that was really specifically built for TV 30-second ads and which means it has to be generated in multiple scenes, consistent characters across the scenes. We've been very happy with the adoption. We've announced early on right out the gate. We had over 5,000 users. The number is greater now. We're doing -- it's still in beta. We're doing a series of product releases that we think just really nail the fit from our customers. We're actually getting a lot of feedback from our own use of it. With MNTN now, our own commercials are largely -- we're using our own tools to build our commercials, and we're getting a good response like marketing response to. So it's a really key component. And to net it out, is more than 95% of our customers have never advertised on TV before, which means more than 95% don't have a TV ad when we meet them. And they certainly don't have many TV ads. So that QuickFrame solves that problem. It allows them to get that creative at a lower cost faster and do -- and build creative more often.

Got it. So you gave that really helpful example just a minute ago about Verizon versus Onewheel and sort of the differences in the needs of those enterprise versus SME type customers. I guess, talk to us about the key differences in terms of approaching and onboarding those customers. So time to first campaign, retention. And how do you ensure that you're profitable when you're going after these smaller advertisers?

Yes. I mean I think the profitability, I'll start with there is just having discipline in terms of customer acquisition cost and so forth. And you can see that in our numbers. We've been able to do that pretty -- profitably pretty consistently for many, many quarters, the adjusted EBITDA -- on adjusted EBITDA basis and now EBITDA basis. The -- in terms of -- go back to the original question...

So just the difference between onboarding, time to first campaign, the process of...

Yes. So that relates very specifically to the previous question. The majority of the time it takes for a customer to go live is waiting on creative, especially in the mid-market, where not only do you have to build creative for TV, you also need approval like people -- it might be a bigger marketing team, and so there are people that need to approve and so forth. So one of the other reasons I mentioned QuickFrame and I keep mentioning FAST, it's not FAST for them, it's FAST for us. So if they get creative faster, that means they go live faster. And that's something that we want to see happen. And honestly, they want to see happen. When they're new to TV, they're excited about it. They want to get live. There's a lot of momentum there. And so that's the key thing. And the go-live times typical platforms literally -- it approaches 90% of the time just waiting for creative. So that's the number we've been attacking, and we're really happy with how that's progressing right now.

You talked in passing a moment ago about using your own platform as a means of acquiring users. So talk to us more about how that fits into your marketing and user acquisition strategy and your plan to use that going forward. Is that a growing part of your marketing mix? How important is it?

Yes. So we use a number of different channels in order to acquire customers. So our own platform is the leading source of new customers for MNTN, meaning we run MNTN TV commercials on streaming TV. And essentially, it's -- the ads are not like billboards or anything, but it's like you ever see a billboard that says you could advertise here. It's somewhat -- the ads don't say anything like that, but that's kind of the message, right? You -- SMB customer could be here on house wives, on Landman, on my favorite show last week, which is Traitors, the favorite reality show. And so that's the mix. But we also use social LinkedIn, Instagram and TikTok and other vehicles to acquire customers. And so that mix allows us to do that with a pretty stable customer acquisition cost, and that fits into the economics of the business.

And I guess thinking of it as a driver of your own marketing mix, I mean, what are the unique aspects of using your own platform to acquire users? How are you able to reach people differently?

Yes. Well, the nice thing is the thing about streaming TV, about television advertising, it's like against the literal best content in the world. Like when people go out to dinner, they don't talk -- I mean, they don't talk about like the YouTube video they were listening on the way to, on the way to dinner, they talk about the season finale of Traitors or when White Lotus -- like they're talking about the first episode of White Lotus, they're talking about the best content in the world. And the other thing on streaming TV, the ad space you get against content like that is 30 seconds uninterrupted. It's like a real opportunity to tell your story. And so -- and as a result of that, combined with all the tech, it performs really, really well. And I think for all our customers, they're doing the same mix. They're using social search. And so the opportunity to now make a big platform like television, the largest screen in the home. There's generally no larger screen in a home than the television. And they get 30 seconds of time uninterrupted against that -- against the best content in the world is a really, I think, important part of marketing mix and more and more SMB customers are recognizing.

Got it. I guess thinking about your expectations for 2026, I believe you guided to another year of 20-plus percent revenue growth. So what are some of the key growth levers that you're looking at that are kind of underpinning that expectation? And just broadly, what is driving that strength in the business?

Yes. Well, I think one is, honestly, is AI. The -- and I don't know, maybe that sounds like a coin response, it's not. The -- all the targeting I mentioned is enabled through AI models. Like we used to ask our customers who their consumer is. Now we tell them who their consumer is and then they agree or adjust the things like that. So we literally use machine learning model -- I'm sorry, we use generative AI to literally say, what does this company sell? What products do they have? What other things would this -- someone who bought this, what else would they be interested in? And with that really precise consumer profile, then we use that in order to essentially run machine learning models in order to find that consumer. The AI models we talked about in creative, the more creative you have, the better performance you're going to get. I mean it plays an important role also, data and the creative. We have AI media planning right now that we have in beta. What that does is it really, again, does the same thing that looks at -- predicts the context of the content that these products and this brand will perform against and tells that to the customer so they can see what the game plan is in terms of the execution of the campaign. So that's basically the #1 driver is technology in particular that -- those levels of technology and then also just our continued sales and marketing expansion is also with any growing business is an important component also.

Got it. Let's talk for a second about competition. So I think you mentioned right at the top that you're kind of building this market as you go. So you're changing advertiser behavior away from things -- maybe not away, but in addition to stalwart performance channels like search and social. So I guess, how do you see the performance TV competitive landscape changing over the next couple of years? And what aspects of your platform, your go-to-market and your customer experience do you think create a moat around MNTN?

Yes. Well, I think the TAM for the segment will keep growing. So that's an important component of what we're doing. In terms of the TAM, it's a whole set of facts -- excuse me. So do we have water in the room or something like that?

I think there's some...

Thank you. I appreciate it. So the -- I think, one, the TAM here can continue to expand. So that's really important. And the nice thing is, again, we're contributing to the creation of the TAM because we enable the idea that the SMB market could do performance marketing there. So that's the -- and remind me the question I got, I want to make sure I nailed it.

Talk about the competitive landscape.

Yes. And then in terms of competitive landscape, the -- as TAM grows, there's bound to be competition to show up the old thing is if you don't have competition, you don't have a market, right? And so I think competitively in terms of our defensible position, the performance tech I've mentioned, we have a big head start on that. It is really hard to catch up. The things that maybe a potential competitor wants to do that we've already done in built-in platform, we're already doing additional things that I'm not talking about because honestly, I don't want competitors to know about. So we're continuing to invest in that. Also our relationships with the networks, we are the #1 player in Performance TV. And so we are -- we have deep relationships with the networks right now around that, the pricing that reflects that, that also contributes to our performance. And then our go-to-market motion, I think, is another really important point. Like we've been going to market here for a bit and really learn like how to bring companies in, get them through a sales cycle, get them through a go-live cycle and have them be successful. And so all of those play a role. Like if they -- if you bring them in efficiently, but they don't see the performance and -- or they can't get the creative. And everything you've heard me talk about in terms of platform is kind of a direct response to having a competitive -- like a big moat that also works efficiently to bring on customers and grow the business.

I think something that's probably a really -- not really, but somewhat poorly understood differentiator of what you do is the relationships with the networks that you just mentioned. So I guess maybe spend a second on the supply side and what you're doing with them and sort of the win-win that you have with them that others would have a hard time maybe replicating.

Right. So I think the streaming networks view us as a growth channel because we're bringing a cohort of customers in the market that they previously didn't really have good access to. They might have had some smaller customers in the local market, but definitely not e-commerce, right, definitely not travel. Online kind of highly targeted, highly measured. That just -- I mean it was rare to see -- even -- it was literally rare to see like kind of a true emerging e-commerce brand leveraging TV. And the reasons were the targeting, the data, the measurement, the integration with Google Analytics and all the different measurement platforms and stuff like that. So as a nature of where growth channel, we have really collaborative relationships with all the streaming networks. And I think they see us in a different bucket. One thing we constantly -- every time we're having meetings with any of the networks is more than 95% of our customers have never advertised on TV before and weren't going to, if not enabled by a platform like MNTN. So it's created really, really key relationships. Also, our relations with the networks are one-to-one, meaning that we have direct partnerships, negotiated what's called private marketplace deals, which I think are really critical to having the relationship and the pricing that makes us work well for everyone.

Got it. So you mentioned travel and e-commerce is important vehicle -- excuse me, verticals. Do you have outsized exposure to any particular verticals? And how does seasonality and vertical-specific events impact the predictability of your business?

Not really. I mean the -- a really good example that this is going back to like 2020, a year that I think everyone wants to forget, but like 23% of our revenue came from travel that went to 0 in 1 week, and we had a great year. So the -- as long as we're continuing to grow and so forth, I don't think there's any revenue concentration or vertical exposure that we feel concerned about.

That's interesting. I mean, I guess 2020 is sort of an unusual example, but what did happen that year? Because you're talking about bringing in groups of advertisers who've never done this before. So some of them went dark because of the situation at that point in time, who replaced them?

Well, it honestly relates back to one of the earlier questions you asked, which is about macro is that in challenging times, emerging companies, SMB companies, growing -- they don't give up their aspirations for growth. And so when they -- so they find -- this happened earlier this year with tariffs or earlier last year with tariffs and things like that. So when one segment goes out of -- there's always winners and losers is maybe the way to say it. And so if one sector is facing some really big headwinds through factors out of their control, that generally means someone else is actually growing as a result of that. And so overall, I think the performance advertising space in general tends to be kind of relatively immune from like individual factors because it's just so broad, and there's so many different companies. And no player in this market is really highly dependent on one. That was particularly challenging, obviously. But yes, there were a lot of other companies that were like, I'm not giving up my growth aspirations. I'm doubling down, and they did.

And I guess your expectation would be that given the scale of performance advertising at this point, it is kind of this always-on spend for a lot of companies. But your expectation would be, it sounds like that even as things might get more turbulent in the future, if they were to, you'd expect there to be offsetting factors between different verticals.

Yes. I have yet to see in the performance space. I don't mean just MNTN. I mean across the entire space where there's something that like -- that really interferes with the market to grow. Remember, growth in the performance advertising space is somewhat indexed to growth of your customers because you're really -- I think there tends to be a focus on CPMs in the brand advertising arena because it's viewed more as a cost. But in the performance space, it's viewed more as a revenue enabler. So as companies grow, they tend to grow their marketing spend along with that. And then any company that's providing measurable benefits to that spend is going to tend to grow with them.

Got it. Let's talk for a second about agencies. I think you've called out on a couple of recent earnings calls that you've seen some growth with performance agencies, ones that were maybe more focused on search and social historically. So it seems like an important proof point, frankly, for getting mind share with advertisers. How important is that as a source of new growth? How does it interact with your traditional ways of reaching advertisers?

Well, in the overall performance marketing space, agencies are probably about 10% of the overall revenue. But they are early adopters, right? And they can -- and they also are force multiplier. One agency can bring many clients. What we're seeing is that the agencies start to recognize this as another growth opportunity for them. And so we're out meeting with a lot of them, signing them up as customers, giving them the support in order to grow Performance TV as a component of the business. So it's an opportunity like I'm particularly excited about. In terms of the overall business, it's not -- it's still likely to be less than 10% or 20% even over time. That's where it typically lands within -- because most performance advertisers prefer to run in-house. When your goal is measurable revenue, you don't have a strong tendency to outsource that unless you really feel the need to get assistance.

Got it. One thing that we get asked about all the time as it relates to online advertising is how consumer behavior might change going forward. And frankly, streaming TV is probably one of the least frequent areas that comes up as something that might be at risk. In fact, it's something that people highlight is like, well, this will be kind of like a safe port in the storm. We're going to still be watching Breaking Bad or whatever it is, The Traitors, the show of the day. But I guess when you think about how you expect attention to change, do you see opportunities? Do you see risks? And how do you think MNTN fits into that changing...

Yes. I mean -- and I think the underlying source of the change is AI and the agentic AI and other things. We see that -- we see AI as an enabler for the business. We don't think -- so I think one thing that's important to understand is -- even within performance advertising, there are things that you're going to buy where you know you need it and you tend to use search for those things, right? And then there are things you buy that you didn't know you need it, right? And you tend to discover those things on TV, on social, like -- I see many things like on TV ads or on Instagram, where I'm like, I didn't really -- I didn't know I needed this, but I need it, I want it. And so the behavior in them is very different. So on TV, people love to be entertained and shopping itself is a form of entertainment for many people. And so I think that's why you can logically think, oh, this thing is somewhat like this is where people are going to go for entertainment. I don't think we're going to see a mass abandonment of shopping. Now shopping for Bounty paper towels, you might like say, I'm not manually doing that anymore if like agentic AI can do that for me. And so that's really a competitor to search, the Amazon search or Google search. The other thing I'll say is I never in the history of performance advertising see a rising tide not lift all boats. Because if the companies who are benefiting from new ways of acquiring consumers, they tend to then -- they don't want to become dependent on any one source of revenue, right? So -- and again, some of their customers might come from discovery, some might come from the person word of mouth and they're just doing a search to find it or whatever it is. But I guess to finish trying to answer your question, the -- yes, I kind of agree. I think the introduction of AI marketing or things like that, I think overall, that's going to be beneficial to everyone. I think in particular on TV, the thing to leave behind is this is a channel where people discover new things. And that's an activity. I don't think that people want to outsource the AI.

And it sounds like from the -- just the way you went through that, it sounds like from a road map perspective, everything you're thinking about doing still is in the streaming TV world. There's not other services that are interesting or that you're focused on.

Yes. I mean we're definitely exploring some very closely related areas. But for the most part, it's video on large devices.

Yes. Yes. Fair enough. Maybe let's talk about kind of the headcount and OpEx footprint. So I think half of your headcount is engineers. You're continuously investing in a lot of AI development stuff that you've been talking about in this conversation. How do you think about the trade-off between investing in AI now versus profitability? And how do you measure the ROI on the bets that you're making?

Yes. I mean I think we're -- the market or the use of AI is already divided into those who build the models and those who leverage those models to create additional value. And that could be a lot of value or it depends on what it is. For us, it's largely around targeting and creative, although we're using AI, both in our business as well as in like media planning, and we're using AI models across all of those. The cost of that is actually very manageable. Like so we're not one of a company -- because that -- the cost of that is working with Google through GCP and Gemini are working with -- we're actually working with many models. So I don't see a conflict. The kind of benefit we're getting definitely exceeds the cost. And so we're not fighting this battle. Now if we were training our own models rather than leveraging the best models out there, that might be a difference there. And it's also smart because the best models out there feels like it changes every month, and we're pretty agnostic to it.

Yes. I guess how do you think about that dividing line between renting versus building technology because there's a lot of important proprietary tools that you have built at MNTN. I guess how do you locate that line and think about it?

It's sometimes hard. I mean you look at QuickFrame AI, we chose to build that. I mean we're using models for the actual generation, but we chose to build the entire environment because that the best models are rapidly changing. So we're not dependent on any one model. As a matter of fact, in a 30-second commercial, it generates into multiple scenes and each scene can be a different AI model. And the technology to do that to go across multiple models with consistent characters, that the orchestration of that is actually pretty complex. And so that's where we add value in order to pick the models if you're doing a product commercial, it tends to go this way. If you're doing talking characters, these models tend to be used. So we chose something that's that important to our business. That's something we want to directly invest in like the orchestration layer, the environment, everything. And something that's a little less important, we might make a different choice. In all cases, we are -- the area we are essentially generating our own models is on the targeting side because there are no models to do targeting, and we think we can really differentiate there. So there's specific choices and even there, the cost is manageable. We're not running LLM models across the entire Internet. We're running it against a large but very specific data set that's far smaller than the entire Internet. So I think the original part of your question was the cost. It's a very manageable cost, especially relative to the benefit you get.

Got it. Maybe we can close just on really zooming out. We've talked a lot about AI opportunities. I guess when you think about the single most underappreciated opportunity from AI at MNTN and then maybe a challenge that you think is worth highlighting that you think you're in a good position to execute through.

Yes. I mean in terms of underappreciated at this talk, maybe it's not because I've said targeting or what -- I like to call it matching because the targeting sounds like a sharp shootings on the matching is -- I always view our business as we are matching consumers with brands and products they're potentially going to love. And the TV commercial is the means to make that match. It is absolutely the biggest opportunity where we've already made -- seen a lot of benefit and continue to see the benefit. Same with the creative, it comes up a lot. It's because -- I mean, even in our own business, the number of commercials we're making for us has gone up substantially since we started using AI. If you do -- if you see a commercial from MNTN and it doesn't have Ryan Reynolds in it, it is AI generated. And if Ryan wasn't in SAG, maybe that would be AI generated also. So that's just been important. We can put out so much more content. And the thing about -- I think in this market, it's almost consumer level marketing, even though we're a B2B company. And so the first real consumer level marketing is you can never predict the behavior of the consumer. So it's really good to always have a lot of different messaging and trying out and see what resonates and see what people respond to. So I think it's a reiteration of what we've talked about in terms of targeting, creative and so forth. In terms of the biggest challenge, honestly, the -- we establish a market. It's really like is making sure that we remain like the market we created that we maintain that competitive moat and add to it. So we are the biggest winner in the market we created, which is Performance TV. That term is now a fairly broadly used term in the industry. That did not exist on the Internet when we -- the first time we put Performance TV on our website.

That's a great point to close on. Mark, thank you so much.

Thank you.