Oct 29, 2013
Executives
Liz Bauer - Senior Vice President of Investor Relations and Strategic Communications Peter E. Kalan - Chief Executive Officer, President and Director Randy R.
Wiese - Chief Financial Officer and Executive Vice President
Analysts
Mark Sue - RBC Capital Markets, LLC, Research Division Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division Paul B. Thomas - Goldman Sachs Group Inc., Research Division Sterling P.
Auty - JP Morgan Chase & Co, Research Division
Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the CSG Systems Q3 2013 Conference Call.
[Operator Instructions] I would now like to turn the conference over to Liz Bauer. Please go ahead, ma'am.
Liz Bauer
Thank you, George, and thanks to everyone for joining us. Today's discussion will contain a number of forward-looking statements.
These will include, but are not limited to, statements regarding our projected financial results, our ability to meet our clients' needs through our products, services and performance, and our ability to successfully integrate and manage acquired businesses in order to achieve their expected strategic, operating and financial goals. While these statements reflect our best current judgment, they are subject to risks and uncertainties that could cause our actual results to differ materially.
Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release any revision to these forward-looking statements in light of new or future events. In addition to factors noted during this call, a more comprehensive discussion of our risk factors can be found in today's press release, as well as our most recently filed 10-K and 10-Q, which are all available in the Investor Relations section of our website.
Also, we will discuss certain financial information that is not prepared in accordance with GAAP. We believe that these non-GAAP financial measures, when reviewed in conjunction with our GAAP financial measures, provide investors with greater transparency to the information used by our management team in our financial and operational decision-making.
For more information regarding our use of non-GAAP financial measures, we refer you to today's earning's release and non-GAAP reconciliation tables on our website, which will also be furnished to the SEC on the Form 8-K. With me today on the phone are Peter Kalan, our Chief Executive Officer; and Randy Wiese, our Chief Financial Officer.
With that, I'd now like to turn the call over to Peter.
Peter E. Kalan
Thanks, Liz, and thanks to everyone for joining us on today's call. We had another solid quarter in both revenues and earnings, demonstrating the strength of our business model and our focus on execution.
We continue to see strong activity and momentum building in 2 areas that we believe are important to the company's long-term growth: our content monetization platform, which enables providers to compete in an all-digital world; and the expansion of our managed services offerings to our clients around the globe. Two weeks ago, I had the pleasure of spending time with our European, Middle Eastern and African clients at our EMEA client conference.
The conference provided these leaders with the opportunity to discuss their business challenges with us and their peers, as well as brainstorm on new ways to innovate for the future. As we've seen in other regions in the world, our clients are focused on several key issues that need to be addressed in order for them to continue to innovate and win the battle for their customers' loyalty and share of wallet.
The first issue that many operators are saying is that their core lines of business, whether that be voice, messaging or video, are challenged to grow. This can be attributed to many factors including new competitors, the rapid rise of the always on, connected mobile world, or just the challenging business environment.
As a result, providers are looking for ways to reduce the investment in these declining or no-growth areas. Many told me that they're not willing to invest in systems that support declining or no-growth businesses, and are redirecting those dollars towards new areas of growth.
Others expressed openness to a new way of running functions that were previously considered core by outsourcing those functions to achieve improved operations and cost efficiencies. Another shared that they are looking at a more staged approach to their investments, in which new services are being developed and treated as a separate stand-alone business in order to provide maximum flexibility to the market and not be encumbered by the processes, technologies and government structures associated with their legacy businesses.
I believe this all bodes well for CSG. While operators around the world spend north of 5% of revenue on their billing and back-office platforms, we have a proven reputation in helping some of the world's leading communication service providers optimize and standardize their existing platforms while continuing to provide a high quality service.
We have a process and a mindset aimed at identifying ways to manage and reduce the costs of system ownership, while continuing to move the business forward. Our 30-year approach to managed services is based on delivering not only enhanced technological and service results, but also an improved bottom line for our clients.
In the U.S., operators have embraced the managed services to offering over the years, and we're doing this for many of the industry's leaders. Overseas, this is a fairly new concept that operators are showing more interest in.
This past quarter, we signed 2 more managed services contracts, this time with existing clients: one in EMEA, and one in our Americas region. These contracts expand our relationship from a come-in-and-fix-issues project arrangement, to a multi-year commitment in which we help optimize the operational functionality and efficiencies through our maintenance and management of our solutions.
This provides us with a tremendous opportunity to do what we do best: get broader and deeper in our clients' operations by helping them solve problems. This is much easier to do when you have a long-term commitment from a client and working side-by-side with them in their daily operations.
This model has served us well here in North America and we believe it will serve us well with our clients around the world. The next trend that was discussed at our conference involved the unchecked growth that operators are experiencing from the explosive growth in connected devices and data consumption.
While it's probably not a stretch to say that we've truly become a connected society, the challenge for communication providers is that with the exponential increase in the amount of traffic and events that are traveling across their networks and systems, most of this growth is not being monetized. As a result, operators are looking for partners who can help them experiment with new and different business models and product offerings aimed at monetizing the growth and volumes across their network.
This means being able to monetize the areas of innovation that exist within the network and the screens that people are watching. It also means working with a different mindset, one in which competitors work side by side to increase the size of the pie versus focusing on a 0 sum gain.
And new ideas are trialed with a fail-fast mentality and discipline. This is a trend that we spotted years ago and was the impetus behind our Content Direct solution.
Our first mover advantage in helping operators monetize content in this new connected world is gaining momentum. For example, this quarter, we're helping Comcast launch a program called Xfinity on campus.
This next-generation offering enables college students to sign up for the live and on-demand content that they want delivered to their computer, tablet, phone or any IP-connected device. Importantly, by delivering content via the net, Comcast doesn't need to install proprietary equipment in the student's location.
In addition, because Content Direct is a cloud-based offering, Comcast is able to implement the solution quickly and without a significant outlaying capital expenditures. This is just one example of how we're helping operators innovate and deliver their products and services in a meaningful, personalized and interactive way to their consumers.
The final topic that many of our clients shared made me extremely proud of what our 3,600 employees have accomplished. As these clients talked about the factors that go into their decision-making, one factor kept emerging that we believe is a differentiator for CSG.
In determining whether or not an operator is going to hand over management of their systems, they want to know that they can trust their partner and know that when a bump occurs, which anyone who's run a complex system knows happens, that their partner will work tirelessly to mitigate the risk and the damage associated with such events. I can't tell you how much it pleased me to hear our clients share examples of how our employees have done the right things and how much they trust us as a partner.
I believe that CSG has set the standard in doing the right thing as a trusted partner for our clients and we have our employees to thank for this. Finally, before I turn it over to Randy, I'd like to summarize why I'm optimistic about our future.
First, we have prospects for growth by enabling our North American cable and satellite clients to navigate an increasingly complex and competitive business environment. Second, we have over 500 service providers worldwide that are transforming and evolving their businesses, and they depend upon us to help them be successful.
This base of clients provides us with opportunities to create new revenue streams with our broad suite of products and services aimed at helping them compete and prosper. And finally, we're actively competing and winning in several key growth areas, in emerging markets like Asia Pacific and Latin America, with new service offerings like our international managed services.
And we are in the forefront of the evolution of how content is distributed and monetized, from content creators and owners, to traditional retailers, the cable, satellite and communication service providers. While the business environment continues to be challenging, I can honestly say that I believe that we are in the best position to succeed in this evolving communications market.
I'd like to take this opportunity to thank our employees who make me proud, as I've heard stories from our clients about their great work, commitment and dedication to driving towards successful outcomes. This is part of our DNA and I'm pleased to see our clients value this as well.
With that, I'd like to turn it over to Randy to review our financial performance for the quarter.
Randy R. Wiese
Thank you, Peter, and welcome to all of you on the call today to discuss our financial results for the third quarter and the outlook for the remainder of 2013. We had another solid quarter of financial results.
We continue to execute on our business plan and we return value to our shareholders through the initial payments of our recently declared quarterly dividend. Overall, we are pleased with the progress we achieved this quarter and are maintaining our guidance for the full year 2013.
I'd now like to walk you through our financial results in more detail, so let us begin. Total revenues for the third quarter were $186 million, down 2% from the same quarter last year, primarily due to the renewal discounts on the Comcast and Time Warner extensions from earlier this year.
Sequentially, revenues were consistent with the second quarter, in spite of the reduction of approximately $2 million in quarterly revenues associated with our divesting of a small, non-core print center on July 1. Overall, we are pleased with the level of revenues reported for the third quarter.
Breaking down revenues further, during the third quarter, we had 3 clients that each individually generated revenues of 10% or more of our total revenues: Comcast, DISH and Time Warner. Together, they were 45% of our revenues for the third quarter.
Additionally during the quarter, we generated 85% of our revenues from the Americas region, 11% of our revenues from the Europe, Middle East and Africa region, and 4% of our revenues from the Asia Pacific region. Moving on, our non-GAAP operating income for the third quarter was $29 million, with a margin of 16%, which is in line with our expectations.
As anticipated, this represents the decline from last year, primarily due to the impact of our recent client contract renewals. GAAP operating income for the quarter was $21 million, our margin of 11%.
For the third quarter, our adjusted EBITDA was $38 million or 21% of our total revenues. Non-GAAP EPS for the third quarter was $0.52, which compares to $0.50 for the same period last year and $0.57 for the second quarter of this year.
Our non-GAAP effective income tax rate for the quarter was 36%. GAAP EPS for the third quarter was $0.47.
And now, onto the balance sheet and cash flows. We ended the quarter with $194 million of cash and short-term investments, an increase of $5 million from the ending balance last quarter, largely due to our cash flow generation.
We have a total of $289 million in par value debt on our balance sheet at quarter end. We had strong cash flows from operations for the quarter, coming in at $25 million.
We spent approximately $8 million on capital expenditures, thus resulting in $17 million in free cash flow for the quarter. Year-to-date, our cash flows from operations are now $87 million and our free cash flow is $68 million.
During the third quarter, we repurchased 6,000 shares of our common stock under our repurchase program and declared a cash dividend in the amount of $0.15 per share, or approximately $5 million. Together, these moves are consistent with our goal to return 25% to 50% of our annual free cash flow to our shareholders.
Our strong cash flow generation and solid balance sheet allow us to return capital to our shareholders while still having sufficient means available to strategically grow our business. Now let's move on to our guidance for 2013.
Overall, we are maintaining the full year guidance that we shared with you last quarter. For revenues, our guidance remains at $740 million to $760 million.
As mentioned last quarter, this guidance considers a reduction on our second half 2013 revenues of approximately $5 million due to the sale of a small print center on July 1. As a result, we continue to expect to come in more towards the midpoint of our revenue range.
We are maintaining our expectations for a non-GAAP operating margin of approximately 16% for the full year 2013, which is in line with our first 9 months of the year performance. We anticipate adjusted EBITDA to be in the range of $153 million to $158 million, or 21% of our expected total revenues.
We are maintaining our 2013 non-GAAP EPS guidance range of $2.05 to $2.15. We are also maintaining our guidance for operating cash flows for the year to be in the range of $110 million to $120 million.
Our expectation for our 2013 non-GAAP effective income tax remains at approximately 36%. We continue to expect capital expenditures in the $35 million range for the year, which is relatively in line with our historical spending levels.
And finally, consistent with our past practices, our guidance does not assume any share buybacks under our repurchase program for the remainder of the year. To summarize, we are pleased with our third quarter performance, the investments that we have made in our people and solutions have added value to our clients' businesses around the globe, as evidenced in this quarter's solid results and our expanded presence within the operations of our client base.
These achievements demonstrate the key pillars of our strong business model: cash flow generation, solid balance sheet and favorable shareholder returns. We look forward to sharing our continued successes in the upcoming quarters.
With that, I'll open up to the operator so that we can take any questions.
Operator
[Operator Instructions] Our first question is from Mark Sue with RBC Capital Markets.
Mark Sue - RBC Capital Markets, LLC, Research Division
If I could get a sense of regional -- some of the regional dynamics, I think things were a little bit stronger in EMEA and a little bit weaker perhaps in Asia. Maybe if you could help us understand the dynamics there as it really just to revenue recognition?
And then if -- I can understand the success behind the new wins that you announced, the one in the EMEA and one in the Americas. Were the competitive displacement or if you could just help us understand why you were not able to secure these 2 new wins?
Peter E. Kalan
Sure. Mark, I'll first give a comment about what we see, not on the specific revenues but the dynamics in the regional markets you talked about, and Randy can add if there's anything from a financial perspective that influence the percentages that came.
We can continue to see strengthening for us in the Asia Pacific region. The rebuilding of our client and market-facing teams continues to build pipeline.
We are in the process of deploying the managed services contract that we talked about last quarter and we continue to see the managed services opportunities grow in that region. And so the investments that we've made to rebuild are positive, and we think that the opportunities are improving.
In EMEA, we've been through a long cycle where it's been tough because of -- especially in Western Europe, the broader economic and financial conditions. We are refocusing in EMEA.
We've put a new leader in place for which has now been about 2.5 months. And he is getting very focused because we believe at some point, the EMEA market is going to turnaround for us, and that we've got a strong client base there that we'll be able to expand our relationships with and do more with.
So EMEA, the general market is not rebounding for us from what we see near term in opportunities, but we do see that longer term, we're in a good spot to pick up, and the investments that we're making around the leadership there will pay off. Randy, from a perspective of anything specific in the financials.
Randy R. Wiese
I'd say, EMEA kind of fluctuates anything from the $17 million to $20 million range on a given quarter, if you look to last several quarters. It's really kind of a timing of the -- on what's going on in the level of efforts that are put forth on some of the larger projects.
So I'd say, there's nothing unusual there. Probably on APAC, the one thing that you see is you see it coming down a little bit from the second quarter.
That's really a result of the success we had in the second quarter when we announced our first managed services win. There were some software and professional services revenues that were booked in the second quarter as we worked on some of the installations.
So it's just really kind of the sequence and I think of the projects, the way I look at it.
Peter E. Kalan
And then, Mark, on your second question about the 2 wins that I referenced around our managed services, these are with existing clients who are currently using our products. So I would not view them as competitive wins except competitive against the internal resources of our clients.
And what we're doing is just we're taking on a broader responsibility for the, what I'll call, the support and the application operations on behalf of our clients.
Mark Sue - RBC Capital Markets, LLC, Research Division
I see. And then as we look into 2014, just trying to get a sense of some of your planning assumptions.
Should we think of steady transit for some of the North American cable and satellite customers, some expectation on improvements in Europe and then just opportunistically, just continue to invest and broadening the pipeline in Asia. Is this the kind of the dynamics you should see for next year?
Peter E. Kalan
From a market dynamic, we continue to think that the North American cable and satellite clients will continue to evolve their businesses, which we think is good for us. We are past all the major renewals, which should give us a base from which to build from a reported revenue.
And so, we think those are good markets for us. Asia Pacific, we expect to continue to broaden for us.
We expect to see EMEA to start having better results for us. It may not happen on the nearer term, but longer term, we expect that we're going to see the benefits of our offerings.
And so those are the major pieces. We expect that overall, that we're going to be able to keep up with what's happening in those markets, from kind of the spend with our clients and the telco providers in those spaces for IT services.
Operator
And our next question is from Matt Van Vliet with Stifel.
Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division
On for Tom this evening. First question on Time Warner and Comcast, are there any early signs that they're seeing much of a growth in their consumer -- or their customer base as they started to roll out some of their new products and some of their new features?
Peter E. Kalan
Well, it's not appropriate for me to talk about how their business is performing based on their initiatives because that's for them to really report on, and we have a fiduciary responsibility not to report what we see happening in their business. What is important for us is, as I referenced in my prepared comments, that with folks like Comcast, they are -- they are clearly evolving their business and we're -- it's creating opportunities for us to bring new solutions such as our Content Direct, as they think about new ways to approach the market.
We believe from our investment that we've made in Content Direct and what we've done in other applications, that the -- that we're expecting to benefit and that the market will evolve and we'll be beneficiaries for that over time.
Randy R. Wiese
I think one good evidence to look at there, Matt, is that both the revenues for Comcast and Time Warner grew from the second quarter, so that's a good indication of some successes we're having with them.
Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division
Okay. And then segue to that, on the Content Direct product line, are you seeing an inflection point in terms of the demand for a product, both at the cable [indiscernible] and other service providers that are looking towards the IP-based content, to either add on or to complete with the cable?
Peter E. Kalan
I think we're clearly seeing see a strengthening of pipeline opportunities. We still believe we're in the early innings of a -- the evolution of how consumers truly shift their buying behavior and consumption of content and information.
But that being said, we are seeing the pipelines build up. What we need to see is as well as having the platform used by clients, we need to see volumes driven by the consumers through these client support.
And we think we're still early on that. But with -- I think we all watch the market and we believe that over time, whether it's the evolution of the cable and satellite operators, whether it's the content owners or whether it's independent aggregators, or call it, electronics superstores, they are all going to have some influence.
And we think we're in a good position to really participate with all those guys.
Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division
Right. And then finally on the managed services demand, it seems to be ahead of expectations.
Is there anything internally that you guys are looking at that might need additional CapEx versus maybe initial plans to help support the demand and being able to meet those -- go to the pipeline and kind of close the sale through that process?
Peter E. Kalan
You know from a CapEx perspective, Matt, I don't think that's been anything that we're seeing stress point on the business, because primarily for a lot of these wins, we're actually helping our clients run the applications on their hardware. Though we are open to doing it on our own proprietary hardware or proprietary data centers if we need to.
So we haven't seen that. We have been investing to make sure that we have the skills and capability in our people as we go out in both market and prospect and then deliver the results to make sure we have it.
But that's part of our core operations and not a CapEx piece.
Operator
And next is Paul Thomas with Goldman Sachs.
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
Just looking at the decline in revenue, so outside the top 5 customers, I guess that's somewhat of a mixed question earlier, with the driver there pretty much a divestiture from the small print operation, or was there any other changes that customers were pointing out?
Randy R. Wiese
If you're talking about sequentially, it was primarily the divestiture of the revenues. If it's year-over-year, it's primary, yes.
If it's sequentially, it's the divestiture. If it's year-over-year, then it's more of the renewal of both the Time Warner and Comcast.
Liz Bauer
Wait. Can I ask a clarifying question?
Did you say the top 5...
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
Outside the top 5, so looking at revenue from other customers.
Liz Bauer
Oh, okay. I'm sorry.
I misinterpreted.
Randy R. Wiese
The first question, to make the clarification of periods there, are you looking sequentially?
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
Yes, sequentially.
Randy R. Wiese
Yes. It's primarily the print divestiture.
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
Okay. And then on uses of cash, you may choose the dividend this year, but I was wondering what the appetite would be for a larger buyback program, similar to what you did in 2006 as your cash balance had passed $200 million, or should we think about uses beyond the dividend as just being for acquisitions?
Peter E. Kalan
Well, we came out as we instituted the dividend, Paul, and said that we are targeting between 25% and 50% of our cash flow, or free cash flow, to be returned to the shareholders, using different vehicles whether it's dividend or share buybacks. And so we continually evaluate that.
It will fluctuate from quarter-to-quarter how much we do. And so we're constantly evaluating that, but we do believe this is a dynamic market and we want to make sure that we still have capital available, both from a balance sheet perspective and readily available cash if we see opportunities to add to our capabilities or do something from an M&A perspective.
Operator
And next is Sterling Auty with JPMorgan.
Sterling P. Auty - JP Morgan Chase & Co, Research Division
So I'm bouncing between calls so my apologies if some of this is repetitive. But in some of the commentary about, I think it was Asia in particular, kind of doing piecemeal or smaller add-ons in terms of services, et cetera.
Does that mean that you expect a smaller recovery, or I should say, a longer recover where just kind of inches along until we get back to what you would consider normalized growth rate for the region?
Peter E. Kalan
I don't think that my comment was specific to Asia Pacific. It was just what some clients that I met with in the last quarter were commenting, that they -- instead of doing big projects, they're breaking them up into smaller projects to both change the rate of their CapEx investment, as well as derisking projects.
This is something that we've seen for some time. Not unique to this quarter.
But in APAC, we continue to see a strong pipeline there. And this has been a good year for growth for us in Asia Pacific and we're still expecting that to build as we move forward.
Sterling P. Auty - JP Morgan Chase & Co, Research Division
I got you. And on the Time Warner and the Comcast, I think in previous large contracts from those, you take price at the certain amount of time to get you back to kind of the revenue run rate, at least the last couple it's been about 4 quarters.
How would you characterize the trajectory of the growth off the bottom post the price cut?
Randy R. Wiese
I would say it's -- I would expect similar -- it's kind of early to tell. But I think, if history repeats itself, we've done a very good job of getting back within 4 to 6, 7 quarters.
I think you saw a little bit of evidence this quarter. You see a nice little uptick in Q2 going to Q3, and they both have the full amount of the discount in the second quarter.
So I think it's early, but we like the direction it's going.
Sterling P. Auty - JP Morgan Chase & Co, Research Division
So when we hear some of the projects like the one on college campuses, how would you characterize the economic model around those and the size of those projects, meaning are those kind of singles where we need a bunch of them to pile on top? Or some of them doubles and triples in terms of size?
Randy R. Wiese
I think you think of those as singles that we had to string quite a few singles to get it to score the homerun -- or to score the run. These are not the amount of complexity and the amount of the services that we provide or not as complex as your traditional legacy cable subscriber is.
So I think you look at these as dimes, nickels, quarters, as opposed to the full amount that we get from our cable operators.
Peter E. Kalan
And I would also say that similar to the on-campus piece that I mentioned in my prepared remarks that, that's a much smaller market set than the 20-plus million subs that something like Comcast has. And they take that larger potentially.
But early on, it's indicative of how they're thinking about their business. And so it may be above single versus a full single to use Randy's parallel.
And he doesn't have a big beard like the Red Sox though.
Sterling P. Auty - JP Morgan Chase & Co, Research Division
I got you. One last one and I'll jump back into the queue or turn it over, I should say.
As we look at the margins in the quarter, we're a little bit better than I would have thought. People ask about, I think the revenue mix dynamic between the large customers and the small.
Let me ask it this way, how did the rev mix look in terms of some of the lower -- or away from some of the lower margin like the print mail services versus some of the other higher margin. Was that a contributor to the margin that we saw this quarter?
Randy R. Wiese
I think, what I'd say is the margins are pretty close to my expectations. I'm not sure if there's anything that I'd read into that.
If you look at the expenses quarter-over-quarter, they're almost flat, except for SG&A is up a little bit, and that's as a result of us doing some investments and market research that we're doing. So I'd say there's really nothing all that -- that worth noting between the quarters, Sterling.
Peter E. Kalan
Yes, and it's not as -- Randy, maybe this is much of question to confirm, but when we see growth on our major clients after going to the repricing, if it has nice margin dynamics, because we've got a lot of fixed support infrastructure already in place for those clients, so growth on Time Warner and Comcast and others have a nice contribution too.
Randy R. Wiese
Yes, exactly. And you can see it also just in the general mix of the gross margin on the processing, it's probably in the low 50s, 50, 51, 52, and your professional services and software is usually in the low 40s.
So I think you probably saw a little bit of bump in the processing revenues this quarter, and a little bit of downtick on the software and services. So a little bit of mix going on there.
Operator
[Operator Instructions] Our next question is from Johnny Grubstein [ph] who is a student.
Unknown Attendee
I'm calling -- you actually just cut some of the [indiscernible] about the SG&A expense, picking up a little bit from the investments in market research. However, I've noticed that it's gone up since 2010 from 15% to 20% based on revenues.
Is there a plan in place for that to move it in the other direction?
Liz Bauer
So, Johnnie, I think if you look at the end of 2010, we acquired Intec, which had a higher SG&A as a result of being a software company, so I think what you're asking is directionally do we continue to expect that to grow, and I'll turn that over to Randy to give you some perspective.
Randy R. Wiese
I think you saw it go from probably from 12%, 15% to probably 18% or so shortly after the Intec acquisition which is...
Unknown Attendee
17.47%, yes.
Randy R. Wiese
Really kind of -- which is kind of the change in the business model. Probably the last couple of quarters, maybe the last 4 quarters, you saw it going up a little bit and that's really kind of a couple of different things that are going on, investments within the business, some marketing investments, some market research in a couple of different areas.
And the buildout of some of our IMS sales staff, right, or managed services staff. So there's a lot of investment going on within that line item which is what you're seeing.
I think longer term, you should probably see it settle more back down in that 18% range, through the growth of revenues. As you get additional leverage off of the SG&A platform, you should be able to get that back into the 18% range.
I think it may stay elevated for a few quarters as we go through some of these investments.
Operator
All right. And I'm showing no further questions.
I will turn the call back to Peter Kalan for closing comments.
Peter E. Kalan
Thank you, George. And I just want to thank for all who participated for giving us your time to hear our story today.
And we look forward to finishing up the year strongly and reporting in the first part of 2014 our results of this year. And I also like to give thanks to our employees who continue to work diligently to make sure that we can deliver on our promises to our clients.
Thank you.
Operator
Ladies and gentlemen, this concludes our conference for today. Thank you for your participation.
You may now disconnect.