MNTN Cuts Its Revenue Guidance 11% and Blames a Comp Plan That Drove Out Sellers

MNTN changed how it paid its sellers at the start of the third quarter. One quarter later, its revenue forecast was down nearly $40 million.

The connected-TV ad company reported Q3 revenue of $80.3 million on November 4, below the $86 million to $89 million it had guided, according to PPC Land's account of the release and 8-K. Full-year guidance went to $311 million to $314 million from $347 million to $357 million. By PPC Land's calculation, that is a $39.5 million cut at the midpoint, or 11.2%. The company called the new range "updated."

On the call, new CEO Tony Weisman traced the miss to a redesign of the sales team compensation plan. In effect, the redesign worked like a churn event. It took out experienced selling capacity, and the revenue loss surfaced a quarter later, after guidance had already been reaffirmed.

Three pay changes in one quarter

Weisman said on the earnings call that the company "lost about 40% of our experienced quota-carrying sellers." The new plan moved incentives from revenue to activity and changed how often sellers were paid. It also split the sales team by industry. Weisman said that split was rolled out poorly and too fast.

According to Weisman, the plan was modeled on TikTok, Google and Meta after a sales leader joined from TikTok. It was announced late in Q2 and took effect when Q3 began. All three changes landed on the same sellers in the same quarter.

MNTN's business model made the timing worse. PPC Land reports that the company sells trials of one to three months, with no contracts and no commitment. New revenue depends on sellers landing new trials every quarter. There is no contracted backlog to carry the number while a sales team turns over.

Weisman said the damage fell mostly on net-new customers. Head-to-head win rates held, but MNTN had too few opportunities. A MarketBeat account of the call adds that seller-sourced deals took the biggest hit and self-serve held up better. Q3's net gain of 148 customers was the smallest in nine quarters.

Paying for activity suits a sales floor where demand arrives on its own and the seller manages accounts. MNTN's sellers had to find new trials. An activity plan likely paid them the same whether or not a trial closed, and the experienced sellers who knew how to close likely had the most reason to leave.

The slowdown started before the plan

MNTN was already slowing before these changes. Growth excluding Maximum Effort, the business it divested, fell from 25% in Q1 to 21% in Q2 and 15% in Q3. Year-over-year growth in active customers declined every quarter for a year, and the company cut staff in April. Weisman called the problem "exclusively go-to-market execution." The earlier quarters suggest it's more than that.

The CFO added another possible cause on the call. Small-business customers churn more than mid-market ones, so part of the slowdown may have come from MNTN's move down-market.

The new comp plan didn't start the slide, but it likely explains the size and timing of the miss. Growth slowed four points from Q1 to Q2 and six from Q2 to Q3. MNTN held its full-year range in August, weeks after the new plan took effect. That suggests management didn't see the loss coming in its own pipeline data. Three months later, it missed the low end of the quarterly guide by $5.7 million.

A pay plan that moved the guidance

Win rates and stage conversion held steady, but pipeline growth stalled, and the gap showed up when the quarter closed.

MNTN says it has corrected the comp plans and hired 16 sellers. Q4 sales and marketing spend will rise about 10% from Q3 to pay for the new hires. PPC Land reports that recent sales and marketing hires came from Salesforce, Snap and The Trade Desk. Adjusted EBITDA guidance fell to $66 million to $68 million, down 32% by PPC Land's math.

The new sellers also have to ramp on a business with no contracts behind it. Weisman said MNTN will track pipeline growth, demo-to-customer conversion and starting budgets. Those numbers will show whether the rebuilt team can refill the top of the funnel. MNTN guides Q4 revenue of $75 million to $78 million, a 12% year-over-year decline at the midpoint by PPC Land's math. The Q4 report is the first test of whether 16 new sellers can refill what 40% of the experienced ones took with them.

A comp redesign can quickly become a forecast risk

MNTN’s fix is to rehire, with 16 new sellers ramping on a business that has a thin pipeline and no contracts behind it.

If pipeline recovers and win rates hold, the problem was capacity, and the comp redesign cost MNTN two quarters.

If the small-business churn the CFO flagged keeps dragging down growth even with sellers back in seat, the comp plan explained the timing of the miss but not the cause.

For any company redesigning comp this year, MNTN’s quarter puts a number on the risk, with about 40% of experienced sellers gone and full-year guidance down 11% within one quarter.

lost about 40% of our experienced quota-carrying sellers

And whether the next company to redesign comp this year models the attrition first, or learns it from the quarter, the way MNTN did.

By Business of GTM