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Executives

Rob Fink – KCSA Strategic Communications

Ash Rofail – Chief Executive Officer

Mark Guirgis – Executive Vice President and Chief Financial Officer

Analysts

George Melas – MKH Management

Santeon Group Inc. (OTCPK:SANT) Q2 2013 Earnings Conference Call August 14, 2013 9:00 AM ET

Operator

Good morning and welcome to the Santeon Group Inc. second quarter earnings conference call. All participants are in a listen-only mode. After today’s formal remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I’d now like to turn the call over to Rob Fink. Please go ahead.

Rob Fink

Thank you, good morning and welcome to the Santeon second quarter 2013 earnings conference call. Again, my name is Rob Fink and I am with KCSA Strategic Communications, investor relations counsel to Santeon. We hope you've had an opportunity to review the earnings release we issued earlier today.

As a reminder, some of the matters we will discuss on this call are forward-looking, including the full-year guidance. You should keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements and that such statements are not a guarantee of our future performance. Such risks and uncertainties include, but are not limited to, general economic conditions and those factors set forth in today's earnings release and discussed under the Risk Factors sections of our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings.

During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of those measures, where appropriate, to GAAP in our earnings release or on the Investor Relations section of our website at www.santeon.com.

Representing Santeon today are Dr. Ash Rofail, Chief Executive Officer, and Mark Guirgis, Chief Financial Officer.

Let me quickly outline the agenda for today's call. Ash will begin with a brief introduction to Santeon and an overview of our operating results. Mark will then take you through the financial details, including the income statement and balance sheet, along with key operational metrics for the three months ended June 30, 2013. Following Mark’s comments, we’ll open the call for questions.

With those comments complete, allow me to turn the call over to Ash Rofail

Ash Rofail

Thanks, Rob, and thank you everyone for joining us on today’s call.

We’re very excited to be hosting what will be the first of many earnings conference calls. During the second quarter, we continued to expand our operations to meet the strong demand for our platform and services.

Before we dive into more detail about our operating performance this quarter, we want to take advantage of our inaugural call to introduce the Santeon story to those who may be new to the company.

At our core, we are an IT services company focusing on Enterprise Agility through our offering of platform and associated services. We provide enterprise training, consulting, coaching, software development outsourcing, and business process optimization to a wide variety of clients, both in the public and private sector. Our clients seek our help to guide them in their quest to improve service delivery, reduce product time to market, reduce costs, improve quality, improve response time, and take advantage of business opportunities and market demands, all of which we classify as Enterprise Agility.

The problems these companies face typically relate to how to optimize their core as well as their non-core business and technology processes. As you can imagine, companies and government agencies are complex organizations with lots of moving parts. Finding ways to continuously meet client or constituent demands, optimize business performance and work with tight budgets is their main objective in addition to finding ways for different departments or systems to communicate with each other is crucial to increasing efficiency.

Our work with the state of Maryland provides a great example. Before they hired us in 2005, Medicaid service providers had to physically mail in their claims every month in order to get reimbursed for their services. As you can imagine, opening every piece of mail and examining every claim—and repeating that process month after month—was a drag on resources for the state not to mention a significantly reduced quality of service. Not only was it inefficient, but it led to the state making a number of clerical errors and also made it easier for fraudulent claims to slip through.

Our solution automated the entire process. We deployed our Business Process Management Platform, created an online portal where service providers could submit their claims as well as transmit them electronically. The state then automated the processing of claims using our business rules engine (which is a components of our BPM Platform) sent reimbursement checks all without any human interference and with great accuracy and consistency. In the process, we were able to identify and reduce the number of fraudulent claims and significantly improve the performance of the claims adjudication process.

One of the reasons why we have been so successful with the state of Maryland and our other clients relates to our ability to help organizations effectuate performance process optimization. A prime example of how we help organizations realize efficiencies in software development is through Agile methodology, which is one of our core competencies, and a key component in achieving Enterprise Agility.

Agile is the programmer’s equivalent of lean manufacturing. It provides a framework or a series of methods that teams can use to develop software efficiently and more cost effectively. More importantly, Agile can also help these teams deliver a product that addresses the problems or processes they are trying to solve or improve.

Agile development continues to gain acceptance and utilization in the market. According to a 2012 study by VersionOne, the number of organizations that plan to implement Agile development in future projects increased from 59% in 2011 to 83% in 2012. That same study also found 49% of businesses say most of their company is using Agile development. We expect these numbers to continue to increase over the next decade.

The bottom line is that the IT community is recognizing the benefits of Agile. Underlying our market leadership position is the fact that a number of our consultants participated in the formation of the Agile methodology. This quality of intellectual capital provides us with a competitive advantage that will help us grow our business and drive shareholder value.

Santeon is highly effective across all levels of the agility ecosystem, through education, consulting, outsourcing, and business process optimization, referred to as BPM. By being able to service our clients regardless of where they enter the ecosystem, we are able to foster long term relationships, satisfying their immediate requirements and remaining integral as they mature and further achieve their business optimization objectives. While we very often enter through education and consulting, our engagements tend to result in longer term relationships which include the outsourcing of our clients non-core business processes, then ultimately leading into the use of Santeon’s BPM platform, to optimize their core business processes.

During the second quarter, we continued to make significant progress towards our goal of becoming an Enterprise Agility Platform and services leader, adding several new revenue generating employees to meet the increasing demand for our services. We’re seeing particularly strong demand within the federal government. And while it may seem counterintuitive, sequestration and government cuts are benefitting our business. With agencies strapped for cash and short on personnel, they’re leveraging technology to automate many of their processes and run more efficiently. Currently, we are seeing the volume of RFPs increase significantly and as a result, we are pursuing numerous engagements to provide consulting services as well as engineering and software services at several agencies and will continue to aggressively pursue opportunities in both the public and private sector.

To make sure that we can take advantage of opportunities in federal, Santeon has applied for its GSA Schedule-70 for IT Services and expects to receive approval within a few months. By getting the schedule, we will be eligible to serve as a prime on government contracts. And we will be able to tap into the $16 billion in IT contracts that government agencies acquire through this schedule.

An outgrowth of our Enterprise Agility Platform and service offering is our eBN Service. eBN is a cloud-based service that improves the benefits enrollment process by integrating HR systems with the systems of benefit providers. Since its launch in 2011, we have seen rapid adoption as both employers and benefits providers see how the system increases enrollment, while at the same time reducing errors and HR and IT workloads. Once organizations sign up for eBN, they’re sticking around. Churn has been minimal, which I think is perhaps the best measure of user satisfaction.

eBN showcases how Enterprise Agility can be achieved when organizations choose to outsource non-core business processes and simply plug into our network thus significantly reducing their administrative costs and improving business processes.

As of June 30, 2013, we had more than half a million subscribers on the eBN platform. Today the network has over 300 employers and over 400 benefits providers, representing a fraction of our addressable market. We anticipate that you will begin to see the operating leverage inherent in the business over the next few quarters as more organizations use the platform.

Much of that growth was driven by expanding relationships with our current partners. A perfect example of that is the news we announced in June that eBN had been named a preferred vendor by Blue Cross and Blue Shield organizations in five states. The designation allowed small- and mid-sized businesses that receive health coverage from those BCBS organizations to sign up and enroll their employees through eBN.

We’re also beginning to market eBN directly to employers. Many of our partners, which include leading payroll processors such as Kronos and Paycor, have been reselling the service to their customers through their sales force. By selling directly to employers, we will generate significantly higher margins and ensure that employers fully understand eBN’s tremendous benefits. Additionally, eBN is also finding a growth opportunity within the federal government by powering federal healthcare exchanges, and leveraging our current benefits provider network.

In conjunction, we are also rolling out new complimentary services that can be delivered over the network such as payroll information and payroll contribution as well as exploring ways our service can work with the new health exchanges that are starting as part of the healthcare reform act, better known as Obamacare.

We believe that we have a very unique and strong company that has exclusively focused its platform and services to providing enterprise agility in support of the enterprise maturity lifecycle.

Overall, we’re very excited about the development of our business and we look forward to continuing to communicate with the investment community about our value proposition.

With that, I’ll turn the call over to Mark to discuss the financial highlights.

Mark Guirgis

Thank you, Ash, and good morning everyone and thanks for listening in today.

First, I’d like to speak about highlights of the profit and loss statement:

In the second quarter 2013, Santeon recorded revenue of $1.4 million, up 46.3% from the same quarter a year ago, and up 12.5% from the first quarter 2013. Second quarter 2013 revenue was comprised of the following: 71% Agile, 19% software development and 10% eBN revenues as compared to 62% Agile, 29% software development and 9% eBN in the year ago quarter.

For those of you who have been following our recent announcements, you know we have been stating publicly that we are focusing heavily on the federal and state government sectors for new revenue growth. To that end, the commercial vs. government mix of revenues for the second quarter 2013 was 53% commercial and 47% government as compared to 76% commercial and 24% government in the year ago quarter. As you can see, we are making progress towards that objective.

Our gross margin for the second quarter was 52.5% of revenue, a year over year improvement of 920 basis points from 43.5% of revenue last year. It is our objective to continue growing this statistic each quarter, as it is an important measure of our business’ profitability and efficiency.

SG&A expense increased 84% year over year and 40% sequentially due to substantial investments in billable headcount, one additional pay period in the second quarter 2013 as compared to the second quarter 2012, an increase in administrative rent and associated expenses stemming from the new office lease that commenced April 1, 2013 and higher public company compliance costs.

We measure the operational profitability of our company through Adjusted EBITDA. We have a table in the press release that reconciles reported Net Income to Adjusted EBITDA for the comparative three months and six months ended June 30, 2013 and 2012. In the second quarter 2013, we reported $74,000 of Adjusted EBITDA, an increase of 304%, as compared to $18,000 of Adjusted EBITDA in the second quarter 2012.

In the second quarter 2013, we reported a net loss of $5,000 as compared to a small profit of $1,000 in the year ago quarter. A number of one-time items impacted our bottom line in the second quarter 2013, and these are detailed in our second quarter 10Q filing.

Now, I’ll turn to some cash flow and balance sheet highlights:

In the first half of 2013, we generated $83,000 of cash from operations and used $28,000 of that in the purchase of property, plant and equipment and investments in capitalized software assets.

In addition, we used $35,000 for the reduction of debt and to purchase treasury stock. The net increase in cash for the first six months was positive $20,000.

One of the accomplishments we are most proud of is the significant improvement in the company’s financial profile:

we now have a positive working capital ratio;

although relatively immaterial, we have worked hard to reduce significantly our outstanding debt obligations – both to vendors and lenders;

over the last few quarters, we have produced cash flow from operations and will do our best to continue this trend; and

we now have positive stockholders’ equity.

For those of you who have been shareholders for some time or perhaps just been following the company’s progress, I’m sure you’ll agree that we’ve come a long way and made huge strides on a number of fronts. We are very proud of how far we’ve come, and even more proud of the team we’ve assembled over the last two years.

And now operator, please open up the call for questions…

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Robert Gorski, Private Investor.

Robert Gorski, Private Investor

Hi, Mark and Ash, nice presentation.

Mark Guirgis

Thank you.

Robert Gorski, Private Investor

So you’re paying the KCSA $10,000 a month, how long is the contract for?

Mark Guirgis

The contract had an initial term of less than one year and it is within the Company’s option to extend it at our discretion and based on the value that we’ve been receiving. Thus far we’ve been extremely pleased with the service that we’ve received from KCSA and they have brought immediate value to the Company. And at this point in time, we intend to fulfill the initial term of the contract, which I believe is only six months and then at that time we’ll reevaluate.

Robert Gorski, Private Investor

As a shareholder, I haven’t been terribly pleased with them. So you guys announced that you would be using them on May 22, since May 22 the stock is down 30%, volumes down 25.93%, why not use that cash to do a buyback, so at least we get some kind of a return?

Mark Guirgis

That’s a good question, Rob. So KCSA did in fact begin with us, May 22 and just to highlight some of the positive things that have occurred since they joined. So KCSA was instrumental in getting Santeon a speaking slot at the Marcum Conference on May 30 in New York City, something that previously we had never been invited to any conferences to speak.

So there is one significant event. And for those who did attend the conference, the feedback from that event was quite positive. We got a lot of interest from both potential investors who are watching the Company now and also from other folks that are interested in helping the Company move forward in a strategic manner.

In addition, KCSA has put us in front of quite a few other potential investors after the Marcum Conference and we’ve also now as you’re participating in, this is our first earnings conference call that we’ve ever had, whereas previously we would just issue a press release and then take investor calls that came in passively.

So I also until not to defend KCSA, but one thing I do want to be careful about is investor relations firm is not responsible for the volume of trading in the stock. That’s not something they can influence, nor can they influence the value of the stock positively or negatively, what their objective is and their mandate with us is to enhance visibility of the Company to the investing public, which if I can speak for Ash, they have done quite a good job of in the last, slightly over two months.

Robert Gorski, Private Investor

Okay. Well, I’m someone that would love to go over 5% in the stock and not over 5% now. But I’m terrified to do so and I’ll tell you why and that’s because of the share structure. If there is no liquidity, when you guys go and speak with these places and KCSA gets you in front of, no one is going to get new stock because they’re not going to be able to get out of the stock.

You guys have done a good job. You’ve come along with the financials. You haven’t done anything to increase shareholder value. What I would highly recommend is doing a 5 or 10-to-1 forward split that would create some liquidity. You get more investors. Current holders would buy more and at that point, if you still like the stock was under value that’s when you guys could do a buyback.

Mark Guirgis

Those were all good suggestions Rob and I do appreciate that. I think strategic maneuvers like that or certainly things the Board considers all times and we always discussed the various strategic options in front of us to enhance shareholder value.

And Rob I want to remind you that the two folks on this call, Ash and myself, we are shareholders. We do share your same situation in terms of the illiquidity in the stock and we’re acutely aware of the level of low trading in the stock that could potentially hinder or prevent a potential investor from getting in, in a meaningful way.

However, one thing that we have always maintained is that the value of the stock will be driven by not necessarily greater volumes of trading or speculation of investors rather it’s the underlying fundamentals of the Company. If you’ve been a shareholder for a long time and I think you have Rob, you’ll realize that even pre-split before we did a reverse split in January the level of proportionate trading volume was similar to what it is today.

There was very little trading and we actually had a lot of market manipulators getting in and adversely impacting the stock that was not good for you and it wasn’t good for me. So I do appreciate your suggestions and certainly I always enjoyed hearing the feedback of investors.

Robert Gorski, Private Investor

Okay. I’ll come back with a follow-up question in a minute, someone else ask questions.

Mark Guirgis

Thanks, Rob.

Operator

Your next question comes from the line of Matt Wilkinson, Private Investor.

Mark Guirgis

Good morning, Matt.

Matt Wilkinson, Private Investor

Hi, guys. I just want to touch upon kind of the certain trend in SG&A as you highlighted in some 40% Q-over-Q. But I guess can you talk about the value being driven by the results and I agree with you, but as we look from Q3 2012 returning to the quarter, operating income was more from a positive $150,000 to $123,000 Q4, a positive $50,000 in Q1 to minus $53,000 in this current quarter.

Could you talk about a) why that trend may not continue or what are you guys doing to reverse that trend? And I guess also the growth structure is what from an annualized 80% per quarter to now, you to running about 40% this year. So you guys were targeting about 25%, can you talk about now with the revenue trend that more importantly with that potential operating income, is that concern positive here in the Q3 and Q4 of 2013?

Mark Guirgis

Okay. So number of questions there Matt, I’ll take some of the more strictly financial, and then I’ll let Ash handle some of the more operational ones. So in terms of the operating income one other thing that we’ve been talking about and I did mention that what we’re doing part of the increase in our SG&A expense is our substantial investments in billable head count.

So in the first quarter, as I mentioned in the beginning of my prepared remarks, we had three new billable head count and we had a full quarter of salary from them in Q2. And in the second quarter, we added four more billable head count. So we are making substantial investments in folks that are directly billed to other clients and those folks just from an operational perspective, we bring them on probably anywhere from four to eight weeks prior to the point where they can be billable to a customer either 75% or 100% of their time.

So we incurred some upfront expense and we need to do that. That is the right move for us, because we are getting lots of customer demand. We have lots of customers existing and new customers that want us to staff Agile coaches and consultants at their site as soon as possible.

So that’s part of the reduction in operating income you’re seeing. We expect that over time that trend will reverse as we start to sweat those assets and I use the term asset to describe these agile, coaches and consultants. And we hope to get back to the same level of growth that we’ve seen in the past. Ash?

Ash Rofail

On your second point, we definitely the Company has enjoyed a pretty in that industry, pretty aggressive growth trajectory as you mentioned maybe average of two year of 80%. The current indication as you state is around 40%, I don’t necessarily see that the business is slowing down.

I contribute this to some slow in delay in contract awards, longer cycles to bring in contracts that we’re expecting and some hiring challenges we’re in a very hyper hiring and highly qualified area that has slowed down some of the on-boarding of talents we’ve addressed, have been addressing the talent hired through engaging multiple recruitment agencies and almost have the percent of the company almost full-time dedicated to bringing on this talent.

So it’s mostly just delay in the contract awards and the recognition. But I think it’s by no mean, I see that as a slower business. I still see the business very healthy and we look for the second quarter to make up some of the time.

Matt Wilkinson, Private Investor

Do you guys continue to expect to I guess when you took yourself back on the 80% revenue growth?

Ash Rofail

We don’t, as you know be with us for a while, we don’t give guidance. But I can tell you from what we are seeing in the pipeline on pushing and everyone to see how fast we can realize some of the contract and how fast we’ll get some awards. Our business has been significantly growing in the federal side and that’s a cycle, sales cycle that we cannot influence as you can watch the news and see kind of the federal government has been functioning. But its work that is there, slow to be realize. I hope it in the second quarter. We’ll do second half of the year, do our best to bring it forward.

Matt Wilkinson, Private Investor

All right and just one last follow-up question and Ill hop out of the queue. If you could address the funding in terms of highlighted in the Q1 results that you might need to raise money, you got a couple of hundred thousand dollars now and bought some cash. On the commercial side, you also have a share buyback, which hasnt been used. Could you I guess give us some kind of guidance for the next, to say six months as Company paying on raising any money through equity sales?

Mark Guirgis

Yeah. So I think to answer your question Matt, youre asking for guidance thats not something we do. We do not have any plans in place aside from the authorized share buyback to either issue any new secondary or significant offerings of shares to the public. So in terms of rising funds, there is an old rule of thumb that you always raise money when you dont need it, because you never know when youre going to need. So again the Board is always considering how to most effectively leverage the Companys success, its investor base and also its potential investor base to raise capital and keep the Company funded operationally.

Matt Wilkinson, Private Investor

Okay. Thanks, Ash.

Ash Rofail

Thank you.

Operator

Your next question is a follow-up from the line of Robert Gorski, Private Investor.

Robert Gorski, Private Investor

Hey, guys, thanks. I want to jump back to KCSA. So the operating income for the last three quarters is $120,000. So youre paying three quarters worth of operating income for IR Services, how do you guys justify that?

Mark Guirgis

Sorry, Rob. KCSA is started in June 2013. So theyve only been with us one month.

Robert Gorski, Private Investor

But youre paying them $10,000 a month, so you kind of get where I’m going?

Mark Guirgis

Yeah. I mean again this is an investment that we have made and we feel is in the best long-term interest of the Company, because again any value that KCSA brings to the Company is going to accrete to all shareholders, yourself included. I guess you could make the same case and say, “Well, were spending close to $100,000 a year in audit fees.” But we really cant escape that either, right.

Robert Gorski, Private Investor

But KCSA isnt bringing you enough value. I want to jump back to what I said before, I own less than 5%, I would like to own over 5%, unless there is more liquidity, Im not going to go over 5% and it doesnt matter if you guys getting in front of every investment community and every market in the country, no one is going to get in this thing.

I know you want to say, “Hey, before it was manipulated too much when you had too many shares.” Yes, there is too many shares outstanding. But now there is just few shares outstanding. You guys need strongly consider doing five or 10-to-1 forward split. If the stock prices get manipulated at that point, you can certainly buy back stock.

But right now, you guys havent created much value. I bought more stock in the open market over the last 18 months than both of you combined. On top of it, since the reverse merger at Santeon, uBroadcast closed at May 12, 2010, S&P is up 44%, Russell 2000 Growth Index, Small Cap Growth stakes is up 60.59%, Santeon is down almost 76%.

Ash Rofail

Those were all good points Rob. And I clearly appreciate those insights. As I said before, all of the points you make a valid and the Board will continue to do evaluate all the options in firm strategically, how best to enhance liquidity, increase shareholder value and do what is the long-term best interest of the company and the shareholders. Appreciate your time.

Robert Gorski, Private Investor

I bring up these points because they havent done that. And Ash you can certainly speak if you like to Mark and I just kind of take on you. But certainly the Board hasnt done that. They havent increased shareholder value. Financials were up, like I said, you guys have come along with, I think you guys are doing a wonderful job running the Company, running the stock, trying to get investors, some of the banks that bought you guys you failed.

Ash Rofail

I think just the last work – to bring this, we definitely take your points that we have been discussing them. We understand that the spirit of that discussion. KCSA is kind of your first question like, we also thought that there need to be a higher quality of investors that brought to the Company and may not have an immediate impact, but we do try to balance short-term and long-term value and if it can be on the radar of some of the influential inventors. Long-term, as we continue to work on the fundamentals, this is something that well help shareholders and dont forget this that earlier we are investing side-by-side. We have a large stake and those things do concern as well, so…

Robert Gorski, Private Investor

Ash, Id love to see you buy some stock in your marketplace you havent; Ive bought more stock than you have for last 18 months. Let me ask this one last question, any of these conferences that you guys have been to as anyone expressed any concern about having to prompt in out of the stock?

Ash Rofail

Not directly to us.

Robert Gorski, Private Investor

Not directly to you. I have 1,000 companies on my radar and in the same, because I think its extremely under valued, but you guys arent going to get – youre not going to get true value for the most, you much rearrange the share structure.

Ash Rofail

Okay.

Mark Guirgis

I appreciate your comments Rob. Maria, lets go to the next question please.

Operator

Our next question comes from the line of George Melas with MKH Management.

George Melas - MKH Management

Good morning, gentlemen.

Ash Rofail

How are you?

George Melas - MKH Management

I’m fairly new to the story. So maybe I can ask you few questions first on eBN. How did that business get started? So maybe you can give us a brief history of that business? And then if I look at the metrics, if you have 0.5 million employees on the system and you’re getting roughly, it looks like 0.5 million bucks a year from that. So do you think like the charge or the revenue is a dollar per person and it seems kind of low, so I’m trying to understand what are the services that eBN really provides?

Ash Rofail

Okay, good question. So eBN is started as a solution on top of our business process management platform. Its inception came when the first HR Company reached out asking us to do some transition work similar to the work that we have done at the State of Maryland all within the transaction ecosystem, which includes claims eligibility authorization as well as enrollment, which is what eBN has initially started out.

The growth started when we realize that opportunity that all HR software companies, payroll software companies benefit providers on software companies are doing this enrollment in-house manually and it was distracting them from the core business, they reached out to leverage the platform to see if we can take this process away from them and do it on behalf of them to their client base.

We started to license our technology to first HR Company and others lined up and I believe we establish a very strong foothold and perhaps the market leader among the HR payroll and benefit providers as the last – delivery Company for these heavy volume transactions. This is how it started.

We continue that story. The growth of health exchanges, federal, states, private exchanges is still a challenge of how do you do the enrollment, we have a very large network of as I mentioned 400 benefit providers, it’s very easy for someone to plug it into that network and this is how it was designed from the beginning as an electronic benefits network that it’s easy to bring in your own data and we will do the rest.

Good observation on the 0.5 million, so the 0.5 million lives that we represent so far through employers, the current employer, 300 plus employer base. As I mentioned kind of a fraction of our addressable market, but that 0.5 million lives represent employees as well as their dependents. So we too get compensated on an employee basis. We do not charge for dependents, it is the same payload.

So that employee, number of employees that we are billing is about 225,000 employee lives that’s the number we bill. So you can adjust the cost to about – it runs about, anywhere depending on the volume pricing between $0.25 and $0.35 per employee per month.

George Melas - MKH Management

Okay. And then I will ask few questions there. So there is an enrollment process or what is the continuous service that you provide once that employee and their family is enrolled?

Ash Rofail

Right, so there are multiple processes. There is initial enrollment process. There is the intense open enrollment process that happens once a year. And there is the life changing events and that is a time consuming which is an employee changes, marital status has dependent, drops the dependent, those are constant and ongoing daily changes that we process. So it’s not a one-time saying in a typical world an employer who has 100 plus employees.

The HR Department is constantly consumed with managing benefits for every employee and connecting that with the three or four benefit providers that they are engaged with health, dental, vision, 401(k) and other voluntary benefits that’s any one significant change ripples into five different entries and five different systems using five different mechanisms.

So those are the things that it allow employers to see the value of why this should be automated. It happens transparently, we are not even aware that it is going on.

George Melas - MKH Management

Okay, got it. And then who pays you for that? Is it the – I imagine you don’t have a direct contract with the employers, so with the payroll company or with the benefits company?

Ash Rofail

Yeah. Whoever is licensing our technology, we have about 10 plus partners that represent HR software companies, payroll companies, benefit companies. They licensed from us and they build their – they resell the service, they select from their clients which was the employers and they pay us.

But as I mentioned in earlier in the call, we are starting to do with at the request of some of the larger partners do direct sales to their clients. So but mostly it is a 90% is coming from the partner who collects the money from their clients and then pays us.

George Melas - MKH Management

Okay, great. And then let me ask you another question on the 25 revenue generating people that you have now can you break them down into sort of different categories that you may have maybe how many work for eBN and how many do software development, where they located, I don’t know with coaches and consultants or in changeable. Can you give us little color there?

Mark Guirgis

So, George, this is Mark Guirgis. We actually have the 25 revenue generating folks is actually probably a little bit more than that. So we’ve got about 15 revenue generating folks here in the U.S. that are focused solely on Agile. So they either do training, coaching or consulting. So those folks tend to be higher end individuals who are extremely experienced in project management, have technical background and what we call Agile experts.

We also have about another 20 to 30 individuals that are software development folks. We have those split between – we have a couple here in the U.S. maybe two to four then we’ve got the rest in Egypt and in India. And those tend to be just your talented, but standard software development types.

George Melas - MKH Management

Got it, okay; and those 20 to 30 folks as on your payroll or they through the third-party contractor?

Mark Guirgis

No, those are all Santeon employees.

George Melas - MKH Management

Okay.

Mark Guirgis

And that’s also, George one of the things that you bring up an interesting point. We did last year have a number of folks that were more expensive and we have them on a contract basis, both developers and Agile consultants. In 2013, in order to reduce overall expenses, we moved them from contract status to full time employee or if they weren’t willing to do that we replace them with full time employees.

George Melas - MKH Management

Okay, very good, all right. Thanks for the introduction and I think doing a conference call is a great idea.

Ash Rofail

Thank you.

Look forward to talking to you again George.

George Melas - MKH Management

Great.

Operator

Thank you. That was our final question. And I’d like to turn the floor back over to Rob Fink for any closing remarks.

Rob Fink

Thank you all for joining us. Just as a reminder, a replay of this call and archive of the audio webcast will be available. Please refer to Santeon’s Investor Relations website or uBroadcast for more details. Thanks for joining us.

Operator

Thank you. This concludes today’s conference call. You may now disconnect.

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