I will now hand the conference over to Brinlea Johnson. Please go ahead.
Good afternoon, and thank you for joining us for MNTN's third quarter 2026 earnings call. With me today are Joe Kaiser, MNTN's Lead Independent Director, Tony Weisman, CEO, and Patrick Pohlen, CFO. Just to remind everyone, today's call includes forward-looking statements that are subject to risks and uncertainties, and actual results could materially differ from those anticipated in these forward-looking statements. For the risks and uncertainties that may affect future results, please see our most recently filed periodic report, which is also available on our website. We will also discuss non-GAAP financial measures on today's call. Reconciliations of these measures are available in our earnings materials on our website. With that, I will turn the call over to Joe. Please go ahead.
Thank you for joining us. I'm MNTN's Lead Independent Director. As you surely saw in the press release we issued a little while ago, Tony Weisman has been appointed MNTN's new CEO, effective November 2nd. The board determined it was time to bring more operational rigor to the business and asked Tony to step in as CEO. Tony joined MNTN's board earlier this year, and he has the unwavering support of MNTN's board to lead the company at this time. As a career marketer, Tony brings the voice of the customer to MNTN. From his time leading Digitas and serving as Chief Marketing Officer of Dunkin', Tony understands the decisions our customers make about where to spend their advertising dollars. Please join me in welcoming our new CEO, Tony Weisman.
Thanks, Joe. Let's start with the numbers. Third quarter revenue was $80.3 million, compared with the company's guidance of $86 million-$89 million. Adjusted EBITDA was $19.9 million, compared with guidance of $22 million-$25 million. For the fourth quarter, we expect revenue to be between $75 million and $78 million, and Adjusted EBITDA to be between $8 million and $10 million. Our Q3 results and outlook are disappointing. We have much higher expectations at MNTN. Before accepting this role, I reviewed the business, including product-market fit, customer demand, our technology, and our sales motion. I wanted to understand what had changed and whether we had a practical path to address it. I concluded the issue was exclusively go-to-market execution.
The company recently made significant changes in the sales team that did not work out, most notably a new compensation structure modeled after the biggest platforms in our industry, like Google and Meta. They were implemented too quickly, resulting in sales force attrition. We lost about 40% of our experienced quota-carrying sellers, reducing our ability to bring in new business. We have since corrected the compensation plans. We have also since hired 16 new sellers, and our first new hire class starts later this month. Additionally, we have added two proven executives, Lynn Knaak from Salesforce, leading brand sales, and Frank Lee from Snap, leading agency sales. They both report to me. It will take time for these sellers to fully ramp, and our updated outlook assumes that the disruption we saw in Q3 will continue into Q4.
Our new leaders have instilled more discipline around hiring, training, and supervision, resulting in increased new starting budgets. We have changed the leadership behind the decisions that got us here. Chris Innes and Garland Hill are no longer with MNTN. I have spent my career on the advertiser side of the table. MNTN does what marketers have always wanted: reach the right people and measure the return on their advertising spend. In a category full of complexity, I love how MNTN keeps it simple. We provide one frictionless platform that allows customers to invest in the CTV channel with clarity, simplicity, and accountability. Our technology, experience, and data help them decide which messages to run, how to allocate their budgets, and how to measure results all in one place, as easily as they buy on Meta or Google.
We give them the attribution they have come to expect, tying their TV spend to site visits and sales. I believe our opportunity for growth remains strong. MNTN is a performance channel like search and social. Combined with the power of television, it is the ultimate business-driving platform. What MNTN needs is operational rigor to achieve our goals. I plan to take a three-fold approach. One, identify the opportunities and the weaknesses early and address them quickly. Two, get the right leaders in charge of each team. Three, make sure everyone is aligned on common metrics and working together toward measurable results. I will rigorously review pipeline growth, conversion of demos into paying customers, and starting budgets with the team. I plan to judge our progress by whether those improvements translate into sustained customer spending and revenue. I plan to move quickly and decisively.
I have also begun to make changes to our leadership team. I am pleased to announce that Anna Sayre, who led marketing at The Trade Desk for seven years, joined us this week as MNTN's Chief Marketing Officer. She will make our offering salient to generate new customer growth. Finally, I excel at building cultures of accountability where the teams are focused on execution. I have been delighted to learn that some of the best industry talent is already inside our company, and I am committed to giving them the support and guidance to perform at their best. Let me wrap up by saying that I know we have to earn back your confidence. While we are hiring and onboarding salespeople now, it will take time for these sellers to fully ramp. Our outlook reflects this.
When we report fourth quarter results, I will lay out our 2027 operating plan and outlook, the measures we will use to assess progress, and what our changes have delivered to that point. Patrick, over to you to walk through the numbers and the outlook, and then we will take your questions.
Thank you, Tony. Our third quarter revenue increased to $80.3 million, up 15% year-over-year. Revenue growth this quarter was impacted by unforeseen execution disruption in our go-to-market organization. Third quarter gross margins remain consistent at 79%, flat with the prior year period. Our expansion rate, which measures the spend of our current customers as compared to those same customers' spend a year ago, remains quite healthy and is still well north of 115%. Total operating expenses for the third quarter decreased by $4.7 million sequentially to $54.5 million. This was primarily driven by a decrease in personnel costs as a result of the reduction in force in the second quarter and a one-time stock-based compensation award that also occurred in the second quarter.
For the third quarter, we achieved positive net income of $7.7 million for a GAAP EPS of $0.10, compared to a net income of $6.4 million and GAAP EPS of $0.09 in the prior year period. Adjusted EBITDA for the quarter increased to $19.9 million, up from $16 million in Q3 of 2025, an increase of 24%. The company's Adjusted EBITDA margin grew to 24.8%, up 200 basis points compared to 22.8% in Q3 of 2025. We plan on continuing to make disciplined investments in sales and marketing, specifically in experienced hires to drive broader customer adoption. We expect sales and marketing expenses to increase approximately 10% sequentially as we add qualified salespeople. Our balance sheet remains strong, and we ended the quarter at $252 million in cash and cash equivalents with no borrowings outstanding. We ended the quarter with 75.8 million shares outstanding.
We are reducing our fourth quarter and full year outlook to reflect ongoing changes to our go-to-market organization. It will take time for sellers to fully ramp, and our guidance assumes that the disruption we saw in Q3 will continue into the fourth quarter. For Q4, we expect revenue to be between $75 million and $78 million. We expect Adjusted EBITDA to be between $8 million and $10 million. Our fourth quarter guidance includes additional non-recurring general and administrative expenses related to our executive personnel changes. For the full year 2026, we are lowering our revenue guidance range to $311 million-$314 million, representing 10% year-over-year growth at the midpoint, excluding the impact of the Maximum Effort divestiture. We expect Adjusted EBITDA to be between $66 million and $68 million.
We are basing the revised outlook on our expectation for how the business will perform as we realign the go-to-market organization around our priorities. We will provide more detail on the operating plan and the outlook for 2027 when we announce our fourth quarter and fiscal year results. With that said, we will open the line for questions.
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star, nine to raise your hand and star, six to unmute. Please stand by as we compile the Q&A roster. Your first question comes from the line of Matthew Weber with Canaccord. Your line is open. Please go ahead.
Hi, good afternoon, and thanks for taking the question. Tony, welcome to the call. I guess just to start off, you have seen the business from the board, so you have had a view from the inside. What gives you the confidence that this is an execution problem rather than a demand or a competitive one? Then I have a follow-up.
Thank you, Matthew. I appreciate the welcome. I have studied this business for quite some time, and I know that it is delivering value to our customers, many of whom have been with us for a very long time, and it has proven to be one of the most effective ROAS channels. Of course, the growth in the market underscores the overall interest in this space. I am confident that MNTN has terrific product market fit, a terrific team, a great brand, and certainly the heritage of having essentially invented this space. The more I dug, the more I realized that it was decisions that were made in our own sales organization, primarily leading to attrition, that caused this slowdown. Those strike me as problems that are and are being fixed and can be addressed quickly so that we can get back to the historical growth we have seen.
Thank you. That is very helpful. Is there any incremental color that you can share with us just in terms of what specifically those changes were to the compensation structure and what the thought process was going into them, and how you have corrected today? Thanks so much.
Sure. I mean, when Garland joined the company from TikTok, there was a desire to move the sales organization to models that are underway at bigger platforms like TikTok, Google, Meta. Those had things to do. There was a verticalization that was deployed poorly and too quickly. There was a change in incentives from revenue to activity, and there was a change in the frequency with which sellers were paid. These were told to the team in late Q2, but implemented at the beginning of Q3, and it just did not work for many of the sellers who felt disaffected, and they felt like their opportunity for earning had been diminished, and that is what led to the attrition.
Got it. Thank you.
Thank you. Your next question comes from the line of Andrew Marok with Raymond James. Your line is open. Please go ahead.
Hi. Thanks for taking my questions. Two, if I could. So maybe again on the kind of culture reset and the operational rigor that you were talking about, is there anything else beyond kind of the sales force compensation structure that you were alluding to that you wanted to kind of put your stamp on the business in a particular way? Then I have a follow-up after that.
Thank you for the question. My analysis has determined that that is the number one issue and the first thing that needs to get addressed, and the thing I'm most focused on and most immediate. Across the board, I believe there is an opportunity for the company to operate with greater focus on outcomes, a higher level of accountability, and more transparency across the company on the metrics that matter, and that we're all pulling in the same direction. I've started to put some of those in place so that we have common dashboards reporting real-time insights that are relevant to the growth of the business. I think that just sort of falls in general under an approach of accountability, transparency, and holding people responsible.
Got it. All right. Thank you for the color there. Then one more, if I could. Just kind of on some of these sales force issues, is there any way to kind of disaggregate what you are seeing in terms of new customers versus existing customer spend and kind of the shortfalls that each of those buckets attributed? Thank you.
The overwhelming impact was on new customers, and that's because, excuse me, the frontline sellers were the ones where the attrition was. By contrast, many of our current customers retained and continued to expand, and we continue to see very high levels of satisfaction and performance with that group. It was predominantly in the net new.
Great. Thank you.
Your next question comes from the line of Robert Coolbrith with Evercore ISI. Your line is open. Please go ahead.
Great. Thank you very much for taking the question. Welcome, Tony. Just want a couple here. Maybe Patrick first, can we just talk about the gross expansion rate versus the net? It sounds like the gross remains quite healthy, but have you seen any changes in the net expansion rate, any uptick in churn, that maybe speaks to the issues that we're seeing maybe in the [Q4] guide in particular? Then, Tony, in your review, it sounds like you did some diligence, maybe before taking on the role. Just wondering if you could maybe give us your assessment of the evolving competitive set. There are a couple small players in the space who were recently acquired by much larger organizations.
Just wondering if that is at all weighing on the company's results or affects the way that you think MNTN has to grow and respond to market dynamics going forward. Thank you.
Robert, the expansion rate, which as you recall, measures customers in a 12-month period, so in this case ending September 30, 2026, going back 12 months, finding a customer in the prior 12-month period and seeing how much they have expanded their spend. That has been well north of 115% and continues to be well north of 115%. We do not really use NRR internally because we went down market to the small businesses, but they continue to churn more than the mid-sized market, which is the core of our business.
Hi, Robert. Thanks for the question. On the competitive front, I do not believe that that has been a factor. In head-to-head pitches, we are winning at the same rate that we were in the past. The issue is there were not enough opportunities. There were not enough new opportunities. I think the dynamics in the industry that you refer to, some of our competitors being acquired by larger platforms, is going to play out in such a way that potential customers are going to wonder about the difference between MNTN, which is a purely independent platform that only cares about the customers' growth and some of these others and wonder where their data is going and whose interests they are serving. So I believe that is an opportunity for us in the future to even grow greater share.
Okay. Thank you very much.
Your next question comes from Andrew Boone with Citizens. Your line is open. Please go ahead.
Thanks so much for taking the questions. Tony, what I am trying to understand here is kind of the direction of the business on the go forward. I want to go backwards in terms of some of the things that we understood previously about MNTN and kind of what you are saying today. So one of the key themes was kind of self-sign-up in the past in terms of MNTN, and it sounds like this is really a sales execution. Can you help us understand the evolution of what you guys need the sales team to be within a self-sign-up environment or whether just sales was more important there? Just tie kind of the historical messaging to now the sales execution.
Thanks for the question. There is still going to be an opportunity for that motion, obviously, for certain types and sizes of customers, and we want to be best in class in providing that level of service and doing it in a seamless, easy-to-use way. Customers still continue to sign up and request demos, and the sales team fields those as inbound. What we did had the highest impact on the non-self-serve opportunities, where sellers and demos that were brought in from the team themselves fell well below the volumes that we had seen historically in the past. So that is the area that we are focusing on the right hiring and the right training to get those folks on board so that they are quota-carrying going forward, and we are going to continue to operate both motions going forward.
That is helpful. I would love to ask around just the direction that is implied with the hires. So with Lynn Knaak coming over from Salesforce, who led brand, and then Frank Lee from Snap that led agency sales, it feels like there may be a change in direction where you guys are broadening out the platform from performance. One, is that right? Then two, can you step back and understood you have kind of been in the role for two days, but do you have any information around where you want to move the boat on a go-forward direction as we think about the broader opportunity for MNTN and where you want to take that ship? Thank you.
You bet. Let me clarify. Brand is inside sales, so we are using the term to describe direct sales from our team directly to the marketer for Lynn's team, whereas Frank's team is working with agencies. So the brand term there may be misleading because we are not looking to generate what would traditionally be considered as top of funnel or high awareness any differently than we have in the past. It is the distinction between the channels. I hope that clarifies that. I think the future for this business lies in being seen as the undisputed leader to deliver performance across every need that a customer might have, giving them a broad array of channels to choose from with the right message, the right time, and the right spend level to optimize the ROAS. This is a growing channel.
We have the opportunity to be the premier partner, whether directly to a brand or to a performance agency. I think my vision is for us to be seen as the most reliable, predictable partner that any of them could possibly have. Our focus, we are customer-obsessed, and our focus, our success, our growth is a function of theirs. I think the opportunity lies for us right ahead of us.
Thank you.
There are no further questions at this time. I will now turn the call back to management for closing remarks.
Thank you all for the welcome today, and thank you for joining us. I am looking forward to getting to know each of you better and learning from you, from your perspective, and having an ongoing dialogue as we pursue the plans that we have outlined. I really appreciate your time and attention today, and thank you for joining us.
This concludes today's call. Thank you for attending. You may now disconnect.