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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2015

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

Commission file number: 001-36778





CONNECTURE,
INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 58-2488736                          
|(State or other Jurisdiction of
Incorporation or Organization) |  | (IRS Employer
Identification Number)
|                                                               | 
|18500 West Corporate Drive, Suite 250
Brookfield, WI           |  | 53045                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(262) 432-8282

(Registrants telephone number, including area code)

Not Applicable

(Former
name, former address, and former fiscal year, if changed since last report)





Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

As of April 30, 2015, there were 21,703,244 shares of the registrants common stock issued and outstanding.









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##### Table of Contents

CONNECTURE, INC.

TABLE OF CONTENTS



|                              |  |                                                                                                                            |    |  |    | 
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I: FINANCIAL INFORMATION |  |                                                                                                                            |    | 
|                              |  |                                                                                                                           
|Item 1.                       |  | Condensed Consolidated Financial Statements (unaudited)                                                                    |    |  | 3  | 
|                              |  | Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014                                           |    |  | 3  | 
|                              |  | Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31,
 2015 and 2014 |    |  | 4  | 
|                              |  | Condensed Consolidated Statements of Stockholders Deficit for the Three Months Ended March 
31, 2015 and 2014             |    |  | 5  | 
|                              |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and
2014                         |    |  | 6  | 
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                       |    |  | 7  | 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |    |  | 17 | 
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                 |    |  | 33 | 
|Item 4.                       |  | Controls and Procedures                                                                                                    |    |  | 33 | 
|                              | 
|PART II: OTHER INFORMATION    |  |                                                                                                                            | 34 | 
|                              |  |                                                                                                                           
|Item 1.                       |  | Legal Proceedings                                                                                                          |    |  | 34 | 
|Item 1A.                      |  | Risk Factors                                                                                                               |    |  | 34 | 
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |    |  | 52 | 
|Item 3.                       |  | Defaults upon Senior Securities                                                                                            |    |  | 53 | 
|Item 4.                       |  | Mine Safety Disclosures                                                                                                    |    |  | 53 | 
|Item 5.                       |  | Other Information                                                                                                          |    |  | 53 | 
|Item 6.                       |  | Exhibits                                                                                                                   |    |  | 53 | 
|SIGNATURES                    |  |                                                                                                                            | 54 | 
|Exhibit Index                 |  |                                                                                                                            | 55 | 



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##### Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

CONNECTURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share information)



|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -------- | - | --------------------- | - | -------- | -
|                                                                                                                                                                                                                              |  | As ofMarch 31,2015 |          |   | As ofDecember 31,2014 |  
|ASSETS                                                                                                                                                                                                                        |  |                    |          |   |                       |   |          |  
|                                                                                                                                                                                                                              |  |                   
|CURRENT ASSETS:                                                                                                                                                                                                               |  |                    |          |   |                       |   |          |  
|Cash and cash equivalents                                                                                                                                                                                                     |  | $                  | 17,388   |   |                       | $ | 28,252   |  
|Accounts receivable  net of allowances                                                                                                                                                                                       |  |                    | 7,646    |   |                       |   | 12,128   |  
|Prepaid expenses and other current assets                                                                                                                                                                                     |  |                    | 1,021    |   |                       |   | 1,557    |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|Total current assets                                                                                                                                                                                                          |  |                    | 26,055   |   |                       |   | 41,937   |  
|PROPERTY AND EQUIPMENT  Net                                                                                                                                                                                                  |  |                    | 1,883    |   |                       |   | 1,892    |  
|GOODWILL                                                                                                                                                                                                                      |  |                    | 26,779   |   |                       |   | 26,779   |  
|OTHER INTANGIBLE ASSETS  Net                                                                                                                                                                                                 |  |                    | 14,362   |   |                       |   | 15,350   |  
|DEFERRED IMPLEMENTATION COSTS                                                                                                                                                                                                 |  |                    | 25,189   |   |                       |   | 24,552   |  
|OTHER ASSETS                                                                                                                                                                                                                  |  |                    | 1,745    |   |                       |   | 1,834    |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|TOTAL ASSETS                                                                                                                                                                                                                  |  | $                  | 96,013   |   |                       | $ | 112,344  |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|                                                                                                                                                                                                                              |  |                   
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                                         |  |                    |          |   |                       |   |          |  
|                                                                                                                                                                                                                              |  |                   
|CURRENT LIABILITIES:                                                                                                                                                                                                          |  |                    |          |   |                       |   |          |  
|Accounts payable                                                                                                                                                                                                              |  | $                  | 5,140    |   |                       | $ | 5,737    |  
|Accrued payroll and related liabilities                                                                                                                                                                                       |  |                    | 5,191    |   |                       |   | 3,880    |  
|Other liabilities                                                                                                                                                                                                             |  |                    | 3,811    |   |                       |   | 4,373    |  
|Current maturities of debt                                                                                                                                                                                                    |  |                    | 1,125    |   |                       |   | 4,479    |  
|Deferred revenue                                                                                                                                                                                                              |  |                    | 35,641   |   |                       |   | 42,578   |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|Total current liabilities                                                                                                                                                                                                     |  |                    | 50,908   |   |                       |   | 61,047   |  
|DEFERRED REVENUE                                                                                                                                                                                                              |  |                    | 29,673   |   |                       |   | 31,159   |  
|DEFERRED TAX LIABILITY                                                                                                                                                                                                        |  |                    | 19       |   |                       |   | 19       |  
|LONG-TERM DEBT                                                                                                                                                                                                                |  |                    | 48,337   |   |                       |   | 48,581   |  
|OTHER LONG-TERM LIABILITIES                                                                                                                                                                                                   |  |                    | 293      |   |                       |   | 379      |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|Total liabilities                                                                                                                                                                                                             |  |                    | 129,230  |   |                       |   | 141,185  |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|                                                                                                                                                                                                                              |  |                   
|COMMITMENTS AND CONTINGENCIES (Note 5)                                                                                                                                                                                        |  |                    |          |   |                       |   |          |  
|                                                                                                                                                                                                                              |  |                   
|STOCKHOLDERS DEFICIT:                                                                                                                                                                                                        |  |                    |          |   |                       |   |          |  
|Common stock, $0.001 par value, 75,000,000 shares authorized as of March 31, 2015 and December 31, 2014, and 21,700,492 and
21,689,223 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively |  |                    | 22       |   |                       |   | 22       |  
|Additional paid-in capital                                                                                                                                                                                                    |  |                    | 97,088   |   |                       |   | 96,365   |  
|Accumulated deficit                                                                                                                                                                                                           |  |                    | (130,327 | ) |                       |   | (125,228 | )
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|Total stockholders deficit                                                                                                                                                                                                   |  |                    | (33,217  | ) |                       |   | (28,841  | )
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  
|                                                                                                                                                                                                                              |  |                   
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                                                   |  | $                  | 96,013   |   |                       | $ | 112,344  |  
|                                                                                                                                                                                                                              |  |                    |          |   |                       |   |          |  

The accompanying notes to the condensed consolidated financial statements are an integral part of the statements.



3



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CONNECTURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(unaudited)

(In
thousands, except share and per share information)



|                                                 |  |                             |            |   |      |   |         |  
|------------------------------------------------ |  | --------------------------- | ---------- | - | ---- | - | ------- | -
|                                                 |  | Three Months EndedMarch 31, |           
|                                                 |  | 2015                        |            |   | 2014 |  
|                                                 |  |                            
|REVENUE                                          |  | $                           | 20,648     |   |      | $ | 16,050  |  
|                                                 |  |                            
|COST OF REVENUE                                  |  |                             | 11,321     |   |      |   | 12,567  |  
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|GROSS MARGIN                                     |  |                             | 9,327      |   |      |   | 3,483   |  
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|OPERATING EXPENSES:                              |  |                             |            |   |      |   |         |  
|Research and development                         |  |                             | 6,528      |   |      |   | 4,100   |  
|Sales and marketing                              |  |                             | 2,883      |   |      |   | 1,806   |  
|General and administrative                       |  |                             | 3,605      |   |      |   | 3,107   |  
|                                                 |  |                             |            |   |      |   |         |  
|Total operating expenses                         |  |                             | 13,016     |   |      |   | 9,013   |  
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|LOSS FROM OPERATIONS                             |  |                             | (3,689     | ) |      |   | (5,530  | )
|                                                 |  |                            
|OTHER EXPENSES:                                  |  |                             |            |   |      |   |         |  
|Interest expense                                 |  |                             | 1,413      |   |      |   | 1,014   |  
|Other (income) expense, net                      |  |                             | 8          |   |      |   | 75      |  
|                                                 |  |                             |            |   |      |   |         |  
|Total other expense                              |  |                             | 1,421      |   |      |   | 1,089   |  
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|LOSS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES |  |                             | (5,110     | ) |      |   | (6,619  | )
|                                                 |  |                            
|BENEFIT (PROVISION) FOR INCOME TAXES             |  |                             | 11         |   |      |   | (14     | )
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|NET LOSS                                         |  | $                           | (5,099     | ) |      | $ | (6,633  | )
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|COMPREHENSIVE LOSS                               |  | $                           | (5,099     | ) |      | $ | (6,633  | )
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|NET LOSS PER COMMON SHARE:                       |  |                             |            |   |      |   |         |  
|Basic and diluted                                |  | $                           | (0.24      | ) |      | $ | (41.34  | )
|                                                 |  |                             |            |   |      |   |         |  
|                                                 |  |                            
|WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:      |  |                             |            |   |      |   |         |  
|Basic and diluted                                |  |                             | 21,695,932 |   |      |   | 184,051 |  
|                                                 |  |                             |            |   |      |   |         |  

The accompanying notes to the condensed consolidated financial statements are an integral part of the statements.



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CONNECTURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(unaudited)

(In
thousands, except shares and per share information)



|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  
|---------------------------------------------------------------- |  | ------------ | ---------- |  | ------- | - | -- | ----------- |  | - | ------------- | - |  | ------- | -------- | - |  | - | -------- | -
|                                                                 |  |              |            |  |         |   |    | Additional  |  |   |               |   |  | Total   |         
|                                                                 |  | Common Stock |            |  | Paid-In |   |    | Accumulated |  |   | Stockholders |  
|                                                                 |  | Shares       |            |  | Amount  |   |    | Capital     |  |   | Deficit       |   |  | Deficit |         
|                                                                 |  |              |            |  |        
|BALANCES  January 1, 2015                                       |  |              | 21,689,223 |  |         | $ | 22 |             |  | $ | 96,365        |   |  | $       | (125,228 | ) |  | $ | (28,841  | )
|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  
|                                                                 |  |              |            |  |        
|Stock-based compensation expense                                 |  |              |            |  |         |   |    |             |  |   | 717           |   |  |         |          |   |  |   | 717      |  
|                                                                 |  |              |            |  |        
|Exercise of stock options and vesting of restricted stock units  |  |              | 11,269     |  |         |   |    |             |  |   | 6             |   |  |         |          |   |  |   | 6        |  
|                                                                 |  |              |            |  |        
|Net loss                                                         |  |              |            |  |         |   |    |             |  |   |               |   |  |         | (5,099   | ) |  |   | (5,099   | )
|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  
|                                                                 |  |              |            |  |        
|BALANCES  March 31, 2015                                        |  |              | 21,700,492 |  |         | $ | 22 |             |  | $ | 97,088        |   |  | $       | (130,327 | ) |  | $ | (33,217  | )
|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  
|                                                                 |  |              |            |  |        
|                                                                 |  |              |            |  |         |   |    | Additional  |  |   |               |   |  | Total   |         
|                                                                 |  | Common Stock |            |  | Paid-In |   |    | Accumulated |  |   | Stockholders |  
|                                                                 |  | Shares       |            |  | Amount  |   |    | Capital     |  |   | Deficit       |   |  | Deficit |         
|                                                                 |  |              |            |  |        
|BALANCES  January 1, 2014                                       |  |              | 184,051    |  |         | $ | 1  |             |  | $ | 9,013         |   |  | $       | (115,068 | ) |  | $ | (106,054 | )
|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  
|                                                                 |  |              |            |  |        
|Preferred Stock dividends, Series A and Series B Preferred Stock |  |              |            |  |         |   |    |             |  |   | (975          | ) |  |         |          |   |  |   | (975     | )
|                                                                 |  |              |            |  |        
|Stock-based compensation expense                                 |  |              |            |  |         |   |    |             |  |   | 345           |   |  |         |          |   |  |   | 345      |  
|                                                                 |  |              |            |  |        
|Net loss                                                         |  |              |            |  |         |   |    |             |  |   |               |   |  |         | (6,633   | ) |  |   | (6,633   | )
|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  
|                                                                 |  |              |            |  |        
|BALANCES  March 31, 2014                                        |  |              | 184,051    |  |         | $ | 1  |             |  | $ | 8,383         |   |  | $       | (121,701 | ) |  | $ | (113,317 | )
|                                                                 |  |              |            |  |         |   |    |             |  |   |               |   |  |         |          |   |  |   |          |  

The accompanying notes to the condensed consolidated financial statements are an integral part of the statements.



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CONNECTURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(unaudited)

(In
thousands)



|                                                                                          |  |                             |         |   |      |   |        |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                          |  | Three Months EndedMarch 31, |        
|                                                                                          |  | 2015                        |         |   | 2014 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                             |         |   |      |   |        |  
|Net loss                                                                                  |  | $                           | (5,099  | ) |      | $ | (6,633 | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |                             |         |   |      |   |        |  
|Depreciation and amortization                                                             |  |                             | 1,270   |   |      |   | 1,271  |  
|Bad debt expense                                                                          |  |                             | 45      |   |      |   |       |  
|Stock-based compensation expense                                                          |  |                             | 717     |   |      |   | 345    |  
|Interest accretion on financing obligations                                               |  |                             | 138     |   |      |   | 354    |  
|Change in operating assets and liabilities:                                               |  |                             |         |   |      |   |        |  
|Accounts receivable                                                                       |  |                             | 4,437   |   |      |   | 8,736  |  
|Prepaid expenses and other assets                                                         |  |                             | 535     |   |      |   | (437   | )
|Deferred implementation costs                                                             |  |                             | (637    | ) |      |   | (2,017 | )
|Accounts payable                                                                          |  |                             | 75      |   |      |   | (3,075 | )
|Accrued expenses and other liabilities                                                    |  |                             | 683     |   |      |   | (193   | )
|Deferred revenue                                                                          |  |                             | (8,423  | ) |      |   | (6,618 | )
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|Net cash used in operating activities                                                     |  |                             | (6,259  | ) |      |   | (8,267 | )
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                             |         |   |      |   |        |  
|Purchases of property and equipment                                                       |  |                             | (251    | ) |      |   | (286   | )
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|Net cash used in investing activities                                                     |  |                             | (251    | ) |      |   | (286   | )
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                             |         |   |      |   |        |  
|Borrowings under revolving line of credit                                                 |  |                             |        |   |      |   | 4,900  |  
|Repayments under revolving line of credit                                                 |  |                             | (340    | ) |      |   | (4,735 | )
|Borrowings of term debt                                                                   |  |                             |        |   |      |   | 6,842  |  
|Repayments of term debt                                                                   |  |                             | (3,181  | ) |      |   |       |  
|Payment of initial public offering costs                                                  |  |                             | (694    | ) |      |   |       |  
|Other                                                                                     |  |                             | (139    | ) |      |   | (176   | )
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|Net cash (used in) provided by financing activities                                       |  |                             | (4,354  | ) |      |   | 6,831  |  
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 |  |                             | (10,864 | ) |      |   | (1,722 | )
|                                                                                          |  |                            
|CASH AND CASH EQUIVALENTS  Beginning of period                                           |  |                             | 28,252  |   |      |   | 2,277  |  
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|CASH AND CASH EQUIVALENTS  End of period                                                 |  | $                           | 17,388  |   |      | $ | 555    |  
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                       |  |                             |         |   |      |   |        |  
|Cash paid for interest                                                                    |  | $                           | 2,159   |   |      | $ | 1,661  |  
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|Cash paid for income taxes                                                                |  | $                           | 49      |   |      | $ | 87     |  
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|Non-cash investing and financing activities:                                              |  |                             |         |   |      |   |        |  
|Purchase of property and equipment in accounts payable                                    |  | $                           | 37      |   |      | $ |       |  
|                                                                                          |  |                             |         |   |      |   |        |  
|                                                                                          |  |                            
|Accrued preferred stock dividends                                                         |  | $                           |        |   |      | $ | 975    |  
|                                                                                          |  |                             |         |   |      |   |        |  

The accompanying notes to the condensed consolidated financial statements are an integral part of the statements.



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##### Table of Contents

CONNECTURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(Dollars in thousands, except share and per share data information)



|1. | DESCRIPTION OF BUSINESS
|-- | -----------------------

Connecture, Inc. and its subsidiaries, including DestinationRx, Inc., or DRX, RxHealth Insurance Agency, Inc., and Insurix,
Inc. (collectively, the Company) is a Delaware corporation. The Company is a web- based consumer shopping, enrollment and retention platform for health insurance distribution. The Companys solutions support the industry evolution
towards a consumer-centric experience that is transforming how health insurance is purchased and distributed. The Companys solutions offer a personalized health insurance shopping experience that recommends the best fit insurance plan based on
an individuals preferences, health status, preferred providers, medications and expected out-of-pocket costs. The Companys customers are health insurance marketplace operators, including health plans, brokers and exchange operators. The
Companys solutions automate key functions in the health insurance distribution process, allowing our customers to price and present plan options accurately to consumers and efficiently enroll, renew and manage members.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Basis of PresentationThe consolidated financial statements include the accounts of Connecture, Inc. and its
wholly owned subsidiaries. All inter-company transactions and balances have been eliminated.

Interim Unaudited Condensed
Consolidated Financial InformationThe accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, as
contained in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or the Codification or ASU, for interim financial information, and with Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of
operations, financial position, changes in stockholders deficit and cash flows. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results for the full year or the results for any
future periods. These unaudited consolidated financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2014.

Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires
management to make extensive estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Cash and Cash EquivalentsThe Company considers all highly liquid investments with maturities of three months or less when
purchased to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances.
Interest-bearing amounts on deposit in excess of federally insured limits as of March 31, 2015 approximated $17,100.

Accounts Receivable and Allowance for Doubtful AccountsThe Companys normal and customary terms for customer payment is 30
days. The outstanding accounts receivable can vary significantly based on timing of billing milestones, renewals and other factors. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. The estimates are based on the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, and current economic trends. The Company writes off
uncollectible receivables after all reasonable efforts are made to collect payment.

Financial Instruments and Concentration of
Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk are principally cash and cash equivalents and accounts receivable. The Companys credit risk is managed by investing its cash and
cash equivalents in high quality money market instruments with established financial institutions. Concentrations of credit risk relate to accounts receivable are limited to several customers to whom the Company makes substantial sales.



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The Company has not experienced any material losses related to receivables from individual
customers, geographic regions or groups of customers. As of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014 the Company had the following customers that accounted for 10% of total revenue
and/or total accounts receivables:



|          |  |                                 |      |   |                                 |  |        |                    |  |  |                       |   |  |  |        |  
|--------- |  | ------------------------------- | ---- | - | ------------------------------- |  | ------ | ------------------ |  |  | --------------------- | - |  |  | ------ | -
|          |  | Revenue                         |      |   | Accounts Receivable             | 
|Customers |  | Three MonthsEndedMarch 31, 2015 |      |   | Three MonthsEndedMarch 31, 2014 |  |        | As ofMarch 31,2015 |  |  | As ofDecember 31,2014 |  
|A         |  |                                 | 23.4 | % |                                 |  | < 10.0 | %                  |  |  | < 10.0                | % |  |  | < 10.0 | %
|B         |  |                                 | 10.6 | % |                                 |  | < 10.0 | %                  |  |  | 14.7                  | % |  |  | 15.2   | %

Revenue RecognitionThe Companys revenue is derived from four sources: (a) the sales of
implementation and ongoing support of the Companys software automation solutions; (b) fees from brokers for the right to access our multi-payer quoting platform; (c) a government cost-plus-fixed-fee contract; and
(d) commissions. In all contractual arrangements, the Company determines whether persuasive evidence of an arrangement exists, services have been rendered, the fee is fixed or determinable and collection is probable. If any of these criteria
are not met, the Company does not recognize revenue until all of the criteria are met.

a) Software Automation Solutions Fees

Contractual terms for the delivery and ongoing support of the Companys software automation solutions generally consist of multiple
components including: (a) software license fees (non-hosted arrangements), (b) software maintenance fees, (c) software usage fees, (d) professional services fees, hosting fees and (f) production support fees.

Software license fees represent amounts paid for the right to use the solution. Software usage fees represent amounts paid to cover only a
specific period of time, after which usage and access rights expire. Software maintenance fees typically accompany software license fees and represent amounts paid for the right to receive commercially available updates and upgrades to the solution.
Professional services fees represent amounts charged for services performed in connection with the configuration, integration and implementation of the solutions in accordance with customer specifications. Hosting fees represent fees related to post
implementation hosting and monitoring of the solution. Production support fees are charged for the ongoing rate, benefits and related content management of the platform.

The Companys contracts with its customers typically bundle multiple services and are generally priced on a fixed fee basis. The term
over which the Company is committed to deliver these services can range from several months to several years.

The majority of the
Companys software automation solution services sold in the Enterprise/Commercial and Medicare segments and a portion of the Private Exchange segment are arrangements in which the Company hosts the web-based software automation solution and the
customer pays a fee for access to and usage of the web-based software. The ownership of the technology and rights to the related code of such hosted web-based software remain with the Company and a customer has no contractual right to take
possession of the software and run it on its own hardware platform. These arrangements are referred to as hosted arrangements and are accounted for as software-as-a-service under ASC 605, Revenue Recognition. A small percentage of the Companys
software automation solutions, sold primarily in the Enterprise/State segment, are arrangements in which the software is not hosted on the Companys infrastructure. These arrangements include the licensed use of the software and are subject to
accounting under ASC 985, Software Revenue Recognition.

For all arrangements (whether hosted or non-hosted) that include multiple
elements, the Company evaluates each element in an arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the
undelivered element is probable. Elements generally include implementation services, software licensing or usage fees and maintenance or other services.

Accounting guidance for multiple element arrangements containing hosted software provide a hierarchy to use when determining the relative
selling price for each unit of accounting. Vendor-specific objective evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a standalone basis, should be used if it exists. If VSOE of selling price
is not available, third-party evidence of selling price is used to establish the selling price if it exists. If VSOE and third-party evidence do not exist, the Company allocates the arrangement fee to the separate units of accounting based on its
best estimate of selling price.



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For hosted arrangements with multiple elements that are separate units of accounting, VSOE and
third- party evidence do not currently exist and accordingly, the Company allocates the arrangement fee to the separate units of accounting based on managements best estimate of selling price, when available. The Company determines its best
estimate of selling price for services based on its overall pricing objectives, taking into consideration market conditions and customer-specific factors and by reviewing historical data related to sales of the Companys services.

Hosted arrangement revenue is recognized as follows by revenue element:



| |  |  | Software usage fees and hosting feesRecognized ratably over the longer of the customer contract or estimated customer relationship based on facts and circumstances of each relationship.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Professional services for new customer software solution implementationInitially deferred and recognized ratably from completion of implementation through the longer of the customer contract or estimated
customer relationship based on facts and circumstances of each relationship.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Professional services for modifications to existing customer software solutionsInitially deferred and then recognized in the period services are completed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Production support feesRecognized as the work is performed consistent with the contractual terms of the production support.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

Multiple deliverable arrangements accounting guidance for non-hosted arrangements provide an allocation of revenue to the separate elements
based upon VSOE. To date, the elements of the Companys non- hosted arrangements, whereby the customers take possession of the software, have not been sold separately. Therefore, the contractual consideration for a delivered element for the
non-hosted arrangements does not qualify as a separate unit of accounting as VSOE does not currently exist for any element of the Companys non-hosted arrangements. Accordingly, the delivered elements are combined with the other consideration
for the remaining undelivered elements as a single unit of accounting. Revenue for non-hosted arrangements is recognized once all elements are delivered over the longer of the customer contract or expected customer relationship.

b) Broker Multi-Payer Quoting Platform Fees

The Company provides an online quoting platform service to insurance brokers through its Private Exchange segment. The Company charges the
brokers a monthly fee for access to the service. Revenue from the access fees is recognized in the period that the service is provided.

c)
Government Cost-Plus-Fixed-Fee

The Company uses a percentage-of-completion method of accounting for its federal government
contract in its Medicare segment. Costs incurred to date are compared to total estimated project costs and revenue is recognized in proportion to costs incurred. The Company periodically evaluates the actual status of the project to ensure that the
estimated cost to complete each contract remains accurate and estimated losses, if any, are recognized in the period in which such losses are determined. There was no unbilled revenue as of the consolidated balance sheet dates, relating to the
government contract.

d) Commissions

Within the Private Exchange segment, the Company earns commissions on annual employee enrollments in which the Companys health plan
network and software solutions are used in connection with each enrollment. Commissions are recorded in the period the enrollment is completed.



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Cost of RevenueCost of revenue primarily consists of employee compensation and
benefits, professional services costs and depreciation and amortization of assets directly associated with generating revenue. In addition, the Company allocates a portion of overhead, such as rent, facility depreciation and utilities, to cost of
revenue based on employee salary.

Deferred Implementation CostsThe Companys accounting policy is to capitalize
direct, incremental employee labor and fringe benefits along with third-party independent contractor costs related to implementing new customer software solutions, to the extent that they are deemed recoverable. Deferred implementation costs are
amortized over the respective term of the related customer contract arrangement consistent with the recognition of deferred revenue.

Stock-Based CompensationThe Company applies a fair-value based measurement method in accounting for share-based payment
transactions with employees. Compensation cost is recognized based on the grant-date fair value, amortized on a straight-line basis over the options vesting period.

Comprehensive LossThe Companys net loss equals comprehensive loss for the three months ended March 31, 2015 and
2014.

Income TaxesDeferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the change becomes enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Companys policy for recording interest and penalties associated with uncertain tax positions is to record such items in income tax expense.

Basic and Diluted Net Loss Per Common ShareThe Company uses the two-class method to compute net loss per common share
because the Company has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common
stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Holders of each series of the Companys redeemable convertible preferred stock are entitled to participate in
distributions, when and if declared by the board of directors that are made to common stockholders, and as a result are considered participating securities.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable
to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the
participating securities would have been entitled to receive pursuant to their dividend rights had all of the years earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the
participating securities have no obligation to fund losses. Due to net losses for the three months ended March 31, 2015 and 2014, basic and diluted loss per share were the same, as the effect of potentially dilutive securities would have been
anti-dilutive.

New Accounting StandardsIn May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting
Standards Update, or ASU No. 2014-09,Revenue From Contracts With Customers (Topic 606), that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most
current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts,
including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new
standard. In April 2015, the FASB voted to propose a one-year deferral of the effective date of the new revenue recognition standard. If the deferral is approved, the new standard will become effective for the Company beginning with the first
quarter of 2019. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.



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In April 2015, the FASB issued ASU No. 2015-3, Interest - Imputation of Interest:
Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be recorded as a direct reduction of the debt liability on the balance sheet rather than as an asset. The provisions of this update are effective as of
January 1, 2016, and are not expected to have a material effect on the Companys consolidated financial position, results of operations or cash flows.



|3. | NET LOSS PER COMMON SHARE
|-- | -------------------------

Diluted loss per common share is the same as basic loss per common share for all periods presented because the effects of
potentially dilutive items were anti-dilutive given the Companys net loss. The following common share equivalent securities have been excluded from the calculation of weighted-average common shares outstanding because the effect is
anti-dilutive for the periods presented:



|                                             |  |                            |         |  |      |  |            | 
|-------------------------------------------- |  | -------------------------- | ------- |  | ---- |  | ---------- | 
|                                             |  | Three MonthsEnded March 31 |        
|                                             |  | 2015                       |         |  | 2014 | 
|Anti-Dilutive Common Share Equivalents       |  |                            |         |  |      |  |            | 
|Redeemable convertible preferred stock       |  |                            |        |  |      |  | 14,861,539 | 
|Stock options                                |  |                            | 924,580 |  |      |  | 1,390,077  | 
|                                             |  |                            |         |  |      |  |            | 
|Total anti-dilutive common share equivalents |  |                            | 924,580 |  |      |  | 16,251,616 | 
|                                             |  |                            |         |  |      |  |            | 

Basic and diluted net loss per common share is calculated as follows:



|                                                              |  |                            |            |   |      |   |         |  
|------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ------- | -
|                                                              |  | Three MonthsEnded March 31 |           
|                                                              |  | 2015                       |            |   | 2014 |  
|Numerator:                                                    |  |                            |            |   |      |   |         |  
|Net loss                                                      |  | $                          | (5,099     | ) |      | $ | (6,633  | )
|Less: Preferred stock dividends                               |  |                            |           |   |      |   | 975     |  
|                                                              |  |                            |            |   |      |   |         |  
|Net loss attributable to common stock                         |  | $                          | (5,099     | ) |      | $ | (7,608  | )
|                                                              |  |                            |            |   |      |   |         |  
|Denominator:                                                  |  |                            |            |   |      |   |         |  
|Weighted-average common shares outstanding, basic and diluted |  |                            | 21,695,932 |   |      |   | 184,051 |  
|                                                              |  |                            |            |   |      |   |         |  
|Net loss per common share, basic and diluted                  |  | $                          | (0.24      | ) |      | $ | (41.34  | )
|                                                              |  |                            |            |   |      |   |         |  



|4. | GOODWILL AND OTHER INTANGIBLE ASSETS
|-- | ------------------------------------

GoodwillThe Company has no accumulated goodwill impairments as of March 31, 2015 and December 31, 2014. Goodwill
consists of following as of March 31, 2015 and December 31, 2015:



|      |        |  |                       |   |       |                  |  |   |          |  |  |                 |        |  |  |   |       | 
|----- | ------ |  | --------------------- | - | ----- | ---------------- |  | - | -------- |  |  | --------------- | ------ |  |  | - | ----- | 
|Total |        |  | Enterprise/Commercial |   |       | Enterprise/State |  |   | Medicare |  |  | PrivateExchange |       
|$     | 26,779 |  |                       | $ | 7,732 |                  |  | $ |         |  |  | $               | 14,711 |  |  | $ | 4,336 | 
|      |        |  |                       |   |       |                  |  |   |          |  |  |                 |        |  |  |   |       | 

Other Intangibles AssetsOther intangible assets consist of the following at March 31, 2015:



|                         |  |                        |  |                    |        |  |                         |   |         |                   |  |   |        | 
|------------------------ |  | ---------------------- |  | ------------------ | ------ |  | ----------------------- | - | ------- | ----------------- |  | - | ------ | 
|                         |  | Useful Lives -In Years |  | GrossCarryingValue |        |  | AccumulatedAmortization |   |         | Net CarryingValue | 
|                         |  |                        |  |                   
|Customer Relationship    |  | 3-10                   |  | $                  | 7,298  |  |                         | $ | (1,806  | )                 |  | $ | 5,492  | 
|Covenants Not to Compete |  | 2.5-5                  |  |                    | 800    |  |                         |   | (702    | )                 |  |   | 98     | 
|Acquired Technology      |  | 3-5                    |  |                    | 11,792 |  |                         |   | (5,841  | )                 |  |   | 5,951  | 
|Trademarks               |  | 10                     |  |                    | 2,800  |  |                         |   | (618    | )                 |  |   | 2,182  | 
|Software                 |  | 3                      |  |                    | 1,743  |  |                         |   | (1,104  | )                 |  |   | 639    | 
|                         |  |                        |  |                    |        |  |                         |   |         |                   |  |   |        | 
|                         |  |                        |  | $                  | 24,433 |  |                         | $ | (10,071 | )                 |  | $ | 14,362 | 
|                         |  |                        |  |                    |        |  |                         |   |         |                   |  |   |        | 



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Other intangible assets consist of the following at December 31, 2014:



|                         |  |                        |  |                    |        |  |                         |   |        |                   |  |   |        | 
|------------------------ |  | ---------------------- |  | ------------------ | ------ |  | ----------------------- | - | ------ | ----------------- |  | - | ------ | 
|                         |  | Useful Lives -In Years |  | GrossCarryingValue |        |  | AccumulatedAmortization |   |        | Net CarryingValue | 
|                         |  |                        |  |                   
|Customer Relationship    |  | 3-10                   |  | $                  | 7,298  |  |                         | $ | (1,625 | )                 |  | $ | 5,673  | 
|Covenants Not to Compete |  | 2.5-5                  |  |                    | 800    |  |                         |   | (627   | )                 |  |   | 173    | 
|Acquired Technology      |  | 3-5                    |  |                    | 11,792 |  |                         |   | (5,266 | )                 |  |   | 6,526  | 
|Trademarks               |  | 10                     |  |                    | 2,800  |  |                         |   | (548   | )                 |  |   | 2,252  | 
|Software                 |  | 3                      |  |                    | 1,699  |  |                         |   | (973   | )                 |  |   | 726    | 
|                         |  |                        |  |                    |        |  |                         |   |        |                   |  |   |        | 
|                         |  |                        |  | $                  | 24,389 |  |                         | $ | (9,039 | )                 |  | $ | 15,350 | 
|                         |  |                        |  |                    |        |  |                         |   |        |                   |  |   |        | 

Amortization expense for the three months ended March 31, 2015 and 2014 was $1,032 and has been recorded in cost of
revenue and general and administrative expenses.

Estimated future amortization expense for the Companys intangible assets is as follows:



|                                  |  |        |        | 
|--------------------------------- |  | ------ | ------ | 
|Year Ending December 31           |  | Amount |       
|Remainder of 2015                 |  | $      | 2,983  | 
|2016                              |  |        | 3,272  | 
|2017                              |  |        | 3,086  | 
|2018                              |  |        | 1,088  | 
|2019                              |  |        | 1,000  | 
|Thereafter                        |  |        | 2,933  | 
|                                  |  |        |        | 
|Total future amortization expense |  | $      | 14,362 | 
|                                  |  |        |        | 



|5. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

Capital LeasesAs of March 31, 2015 and December 31, 2014, capital lease obligations consisted of the following:



|                                                                                                                                                                   |  |      |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | -
|                                                                                                                                                                   |  | 2015 |      |   | 2014 |  
|7.98% lease obligation on ERP software, expiring July 2016, payable in variable monthly installments                                                               |  | $    | 303  |   |      | $ | 411  |  
|Various lease obligations on computer equipment and office furniture, expiring April 2017, payable in fixed monthly installments
bearing interest of 3.7% to 11.8% |  |      | 141  |   |      |   | 156  |  
|                                                                                                                                                                   |  |      |      |   |      |   |      |  
|                                                                                                                                                                   |  |      | 444  |   |      |   | 567  |  
|Less current maturities                                                                                                                                            |  |      | (363 | ) |      |   | (418 | )
|                                                                                                                                                                   |  |      |      |   |      |   |      |  
|Long-term portion                                                                                                                                                  |  | $    | 81   |   |      | $ | 149  |  
|                                                                                                                                                                   |  |      |      |   |      |   |      |  

Future minimum capital lease payments are as follows:



|                                  |  |        |     |  
|--------------------------------- |  | ------ | --- | -
|Years Ended December 31           |  | Amount |    
|Remainder of 2015                 |  | $      | 354 |  
|2016                              |  |        | 94  |  
|2017 and thereafter               |  |        | 35  |  
|                                  |  |        |     |  
|                                  |  |        | 483 |  
|Less amount representing interest |  |        | (39 | )
|                                  |  |        |     |  
|Total                             |  | $      | 444 |  
|                                  |  |        |     |  



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The Companys most significant capital lease relates to the lease of enterprise resource
planning, or ERP, software. The leased software asset is included in other intangible assetsnet, in the accompanying March 31, 2015 and December 31, 2014, consolidated balance sheets as follows:



|                              |  |      |       |   |      |   |       |  
|----------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                              |  | 2015 |       |   | 2014 |  
|ERP Software                  |  | $    | 1,232 |   |      | $ | 1,232 |  
|Less accumulated amortization |  |      | (856  | ) |      |   | (753  | )
|                              |  |      |       |   |      |   |       |  
|Total                         |  | $    | 376   |   |      | $ | 479   |  
|                              |  |      |       |   |      |   |       |  

Amortization of the software asset under capital lease for the three months ended March 31, 2015 and 2014
totaled $103, and is included in general and administrative expense in the accompanying condensed consolidated statements of operations.

Operating LeasesThe Company leases office space under operating leases that expire at various dates through 2025. Rent expense
for the three months ended March 31, 2015 and 2014, was $425 and $383, respectively.

Letter of CreditAs security
for certain leased property, the Company was required to provide a lessor an unconditional and irrevocable letter of credit in the amount $200 at March 31, 2015 and December 31, 2014.

IndemnificationsThe Company provides certain indemnifications from time to time in the normal course of business to its customers
in its professional services and software license agreements and to strategic partners through certain insurance industry association marketing agreements that contain certain indemnifications for claims that may arise from acts or omissions, patent
or trademark infringement, breach of contractual representations and warranties or intentional or grossly negligent acts. These indemnifications may require the Company to reimburse the indemnified party for losses suffered or incurred by the
indemnified party. The Company has not had an indemnification claim, and does not expect to have a material claim in the future. As such, the Company has not recorded any liability for these indemnifications in the consolidated financial
statements.

In August 2013, a client of the Companys acquired DRX subsidiary tendered a demand for indemnification for a
claim filed against the client arising from the alleged incorrect ranking of plans on the clients Medicare Part D website (the Indemnification Claim). DRX designed and hosted the interactive website. No specific damages were
asserted in the claim, and the claim relates to services provided to the client prior to the Companys 2013 acquisition of DRX. The DRX sellers have specifically indemnified the Company for any liability arising from this matter in the DRX
Agreement and Plan of Merger. On February 10, 2015, the Company, the Companys client and DRX sellers settled the Indemnification Claim for $100. Pursuant to the terms of the DRX Agreement and Plan of Merger, the DRX sellers and the
Company offset the Indemnification Claim settlement against the $3,000 DRX Seller Note (See Note 6).

LitigationIn the normal
course of business, the Company and its subsidiaries are named as defendants in lawsuits and are party to contract terminations and settlements in which claims are or may be asserted against the Company. In the opinion of management, the
liabilities, if any, which may ultimately result from such lawsuits and contract terminations are not expected to have a material effect on the Companys consolidated financial statements.



|6. | DEBT
|-- | ----

Debt consisted of the following at March 31, 2015 and December 31, 2014:



|                                 |  |      |        |   |      |   |        |  
|-------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                 |  | 2015 |        |   | 2014 |  
|Senior term loans                |  | $    | 19,969 |   |      | $ | 20,250 |  
|Senior revolving credit facility |  |      |       |   |      |   | 354    |  
|Subordinated loans               |  |      | 29,493 |   |      |   | 32,456 |  
|                                 |  |      |        |   |      |   |        |  
|                                 |  |      | 49,462 |   |      |   | 53,060 |  
|Less: current maturities of debt |  |      | (1,125 | ) |      |   | (4,479 | )
|                                 |  |      |        |   |      |   |        |  
|Long-term debt                   |  | $    | 48,337 |   |      | $ | 48,581 |  
|                                 |  |      |        |   |      |   |        |  

Senior DebtOn January 15, 2013, the Company entered into a bank credit facility to provide
for short- term working capital and long-term investment needs (the Credit Facility as amended and restated from time- to-time). The Credit Facility is collateralized by all of the Companys assets.



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The Credit Facility provides for $22,500 of term loans (the Senior Term Loans) and a
$10,000 revolving credit (the Senior Revolving Credit Facility) through January 15, 2018 (the Maturity Date). The Senior Term Loans require quarterly principal payments of $281, with the unpaid principal balance payable
in full on the Maturity Date.

The Senior Term Loans accrue interest at a rate based on LIBOR plus a LIBOR Margin payable monthly. The
Senior Revolving Credit Facility accrues interest monthly at a rate based on LIBOR, the Fed Funds Rate or banks Prime Rate. As of March 31, 2015, the interest rate on the outstanding Senior Term Loans was 6.54%. There were no Senior
Revolving Credit Facility advances at March 31, 2015.

The Credit Facility contains customary representations, warranties and
covenants of the Company, as well as various limitations on the activities of the Company as they relate to additional indebtedness, junior liens, investments, capital expenditures, and mergers and acquisitions. Furthermore, the Credit Facility does
not permit the payment of cash dividends if such payment would result in a covenant violation. During the three months ended March 31, 2015, the Credit Facility was amended, to among other things, establish financial covenants for the year
ended December 31, 2015. The amendment established (i) quarterly building EBITDA covenants and (ii) minimum liquidity covenants, as defined in the Credit Facility. The Company was in compliance with the financial covenants at
March 31, 2015. The Company believes that it will continue to be in compliance with the financial covenants throughout the year ended December 31, 2015.

THL Promissory NoteOn March 18, 2013, the Company entered into a Senior Subordinated Term Loan Agreement with THL Corporate
Finance, Inc., or the THL Note, as amended and restated from time-to-time, for total proceeds of $30,000 less $683 of original issue discount, or OID.

In the three months ended March 31, 2015, the THL Note was amended to among other things, establish financial covenants for the year
ended December 31, 2015. The amendment established (i) quarterly building EBITDA covenants and (ii) minimum liquidity covenants, as defined in the THL Note. The Company was in compliance with the financial covenants at March 31,
2015. The Company believes that it will continue to be in compliance with the financial covenants throughout the year ended December 31, 2015.

The THL Note maturity date is July 15, 2018, with the principal balance payable in full at the maturity date. Interest on the THL Note
accrues at a variable rate of LIBOR plus a LIBOR Margin, as defined, and is payable monthly. At March 31, 2015, the rate was 12.00% and the outstanding balance, net of OID, was $29,493.

DRX Seller NoteOn January 15, 2013, the Company entered into a subordinated promissory note with the sellers of DRX (the
DRX Seller Note). The initial $3,000 principal amount was subject to adjustment upon resolution of the Closing Day Working Capital, as defined in the Companys purchase agreement with the DRX sellers. The Seller Note accrued
interest at 8.0% per annum payable on the January 15, 2015 maturity date. In the three months ended March 31, 2015, the principal amount was decreased by $100 as a result of settling the DRX Indemnification Claim (See Note 5). The
Company paid $2,900 of principal and $480 of interest to settle the DRX Seller Note in the three months ended March 31, 2015.

Based on rates for instruments with comparable maturities and credit quality, the estimated fair value of the Companys total debt as of
March 31, 2015 and December 31, 2014 approximates the carrying value.



|7. | STOCK-BASED COMPENSATION
|-- | ------------------------

The Company recognized $717 and $345 in stock-based compensation expense for the three months ended March 31, 2015 and
2014, respectively.

Restricted Stock UnitsOn January 23, 2015, the Company granted 156,250 Restricted Stock Units
(RSUs) to employees with an aggregate grant date fair value of $1,536. The 156,250 RSUs vest on December 11, 2015. The Company recognizes the fair value of the RSUs that are expected to vest on a straight-line basis over the period of vesting.
The Company recognizes the income tax benefits resulting from vesting of RSUs in the period they vest; to the extent the compensation expense has been recognized (see Note 11).



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##### Table of Contents

On January 23, 2015, the Company granted 33,000 RSUs to non-employee directors with an
aggregate grant date fair value of $324. The 33,000 RSUs vest 1/12 a month through December 2015. The fair value of the RSUs is expensed over the vesting period based on the fair value on the date of grant.

Stock OptionsA summary of stock options as of March 31, 2015, is presented below:



|            |  |                 |           |  |                 |   |       |                       |  |  |                                  |  |  |   |        | 
|----------- |  | --------------- | --------- |  | --------------- | - | ----- | --------------------- |  |  | -------------------------------- |  |  | - | ------ | 
|            |  | Number ofShares |           |  | AveragePrice(a) |   |       | AverageLife(Years)(b) |  |  | AggregateIntrinsicValue(in 000s) | 
|Outstanding |  |                 | 1,835,061 |  |                 | $ | 1.931 |                       |  |  | 7.15                             |  |  | $ | 15,450 | 
|            |  |                 |           |  |                 |   |       |                       |  |  |                                  |  |  |   |        | 
|Exercisable |  |                 | 1,379,124 |  |                 | $ | 1.871 |                       |  |  | 7.14                             |  |  | $ | 11,694 | 
|            |  |                 |           |  |                 |   |       |                       |  |  |                                  |  |  |   |        | 



|(a) | Weighted-average exercise price
|--- | -------------------------------

|(b) | Weighted-average contractual life remaining
|--- | -------------------------------------------

During the three months ended March 31,
2014, the Company granted 95,400 stock options with a weighted average exercise price of $2.268 and estimated grant date fair value of $16.20 per option. Forfeitures were immaterial and there were no exercises during the three months ended
March 31, 2014.

As of March 31, 2015, approximately $1,130 of unrecognized compensation costs related to unvested stock options
is expected to be recognized over the remaining vesting periods; approximately 1.25 years (see Note 11).



|8. | INCOME TAXES
|-- | ------------

The Companys effective tax benefit/(provision) rate of 0.22% and (0.21)% for the three months ended March 31,
2015 and 2014, respectively, differs from statutory federal income tax rates primarily due to changes in the deferred tax asset valuation allowance and current state income taxes.



|9. | RELATED PARTIES
|-- | ---------------

On February 10, 2015, the Company, settled the Indemnification Claim for $100 (See Note 5). Pursuant to the terms of
the DRX Agreement and Plan of Merger, the DRX sellers and the Company offset the Indemnification Claim settlement against the $3,000 DRX Seller Note. The Company paid $2,900 of principal and $480 of interest to settle the DRX Seller Note during the
three months ended March 31, 2015.

Current employees of the Company, including the Companys current Chief Innovation Officer,
New Markets, were employees and stockholders of DRX at the time of its acquisition, and as previous stockholders of DRX they received an interest in the DRX Seller Note.

The $480 interest was paid to two related party stockholders, or entities controlled by the stockholders of the Company, pursuant to a note
guarantee agreement the DRX sellers had with such related parties.



15



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##### Table of Contents

|10. | SEGMENTS OF BUSINESS
|--- | --------------------

The Company is organized into four reportable segments, which are based on software and service offerings. The following
reflects the revenue and operating results of the Companys reportable segments:



|                                            |  |                             |        |   |      |   |        |  
|------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                            |  | Three Months EndedMarch 31, |       
|                                            |  | 2015                        |        |   | 2014 |  
|                                            |  |                            
|Revenue from external customers by segment: |  |                             |        |   |      |   |        |  
|Enterprise/Commercial                       |  | $                           | 10,985 |   |      | $ | 8,522  |  
|Enterprise/State                            |  |                             | 4,291  |   |      |   | 2,478  |  
|Medicare                                    |  |                             | 3,983  |   |      |   | 3,899  |  
|Private Exchange                            |  |                             | 1,389  |   |      |   | 1,151  |  
|                                            |  |                             |        |   |      |   |        |  
|Consolidated revenue                        |  | $                           | 20,648 |   |      | $ | 16,050 |  
|                                            |  |                             |        |   |      |   |        |  
|                                            |  |                            
|Gross margin by segment:                    |  |                             |        |   |      |   |        |  
|Enterprise/Commercial                       |  | $                           | 4,923  |   |      | $ | 482    |  
|Enterprise/State                            |  |                             | 1,714  |   |      |   | 94     |  
|Medicare                                    |  |                             | 2,276  |   |      |   | 2,435  |  
|Private Exchange                            |  |                             | 414    |   |      |   | 472    |  
|                                            |  |                             |        |   |      |   |        |  
|Consolidated gross margin                   |  | $                           | 9,327  |   |      | $ | 3,483  |  
|                                            |  |                             |        |   |      |   |        |  
|                                            |  |                            
|Consolidated operating expenses:            |  |                             |        |   |      |   |        |  
|Research and development                    |  | $                           | 6,528  |   |      | $ | 4,100  |  
|Sales and marketing                         |  |                             | 2,883  |   |      |   | 1,806  |  
|General and administrative                  |  |                             | 3,605  |   |      |   | 3,107  |  
|                                            |  |                             |        |   |      |   |        |  
|Total consolidated operating expenses       |  | $                           | 13,016 |   |      | $ | 9,013  |  
|                                            |  |                             |        |   |      |   |        |  
|                                            |  |                             |        |   |      |   |        |  
|                                            |  |                             |        |   |      |   |        |  
|Consolidated loss from operations           |  | $                           | (3,689 | ) |      | $ | (5,530 | )
|                                            |  |                             |        |   |      |   |        |  
|                                            |  |                            
|Depreciation and amortization by segment:   |  |                             |        |   |      |   |        |  
|Enterprise/Commercial                       |  | $                           | 137    |   |      | $ | 142    |  
|Enterprise/State                            |  |                             | 24     |   |      |   | 37     |  
|Medicare                                    |  |                             | 641    |   |      |   | 644    |  
|Private Exchange                            |  |                             | 232    |   |      |   | 216    |  
|Corporate                                   |  |                             | 236    |   |      |   | 232    |  
|                                            |  |                             |        |   |      |   |        |  
|Consolidated depreciation and amortization  |  | $                           | 1,270  |   |      | $ | 1,271  |  
|                                            |  |                             |        |   |      |   |        |  

The following are identifiable assets by segment as of March 31, 2015 and December 31, 2014:



|                                |  |                    |        |  |                       |   |         | 
|------------------------------- |  | ------------------ | ------ |  | --------------------- | - | ------- | 
|                                |  | As ofMarch 31,2015 |        |  | As ofDecember 31,2014 |  
|Identifiable assets by segment: |  |                    |        |  |                       |   |         | 
|Enterprise/Commercial           |  | $                  | 32,259 |  |                       | $ | 32,749  | 
|Enterprise/State                |  |                    | 4,757  |  |                       |   | 6,349   | 
|Medicare                        |  |                    | 26,618 |  |                       |   | 28,314  | 
|Private Exchange                |  |                    | 9,298  |  |                       |   | 10,107  | 
|Corporate                       |  |                    | 23,081 |  |                       |   | 34,825  | 
|                                |  |                    |        |  |                       |   |         | 
|Consolidated assets             |  | $                  | 96,013 |  |                       | $ | 112,344 | 
|                                |  |                    |        |  |                       |   |         | 

All Company assets were held and all revenue was generated in the United States during the three months ended
March 31, 2015 and 2014.



|11. | SUBSEQUENT EVENTS
|--- | -----------------

On April 29, 2015 the Company granted 326,000 RSUs and 508,400 incentive stock options (ISOs) to employees pursuant to
the terms of the 2014 Equity Incentive Plan. The estimated grant date fair value of the RSUs and ISOs are expected to be recognized ratably over a three year vesting period.

*    *    *    *    *    *



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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations

Forward-Looking Statements

Except for the historical financial information contained herein, the matters discussed in this Quarterly Report on Form 10-Q (as well as documents incorporated herein by reference) may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, statements regarding our
future financial position, business strategy and plans and objectives of management for future operations. When used in this Quarterly Report, the words believe, may, could, will, estimate,
continue, intend, expect, anticipate, plan, project and similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends
that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to certain risks and
uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this
report, and in particular, the risks discussed under Risk Factors in this Quarterly Report on Form 10-Q and those discussed in other documents we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K
for the year ended December 31, 2014. Except as required by law, we do not intend to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available in the future.

In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this report and in the documents incorporated in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the
forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview

We are a leading web-based consumer shopping, enrollment and retention platform for health insurance distribution. Our solutions support the
industry evolution towards a consumer-centric experience that is transforming how health insurance is purchased and distributed. Our solutions offer personalized health insurance shopping experience that recommends the best fit insurance plan based
on an individuals preferences, health status, preferred providers, medications and expected out-of-pocket costs. Our customers are health insurance marketplace operators, such as health plans, brokers, and exchange operators, that must
distribute health insurance in a cost-effective manner to a growing number of insured consumers. Our solutions automate key functions in the health insurance distribution process, allowing our customers to price and present plan options accurately
to consumers and efficiently enroll, renew and manage plan members.

We serve four separate but related market segments:
Enterprise/Commercial, Enterprise/State, Medicare and Private Exchange. Our largest market segment is the Enterprise/Commercial market, in which we sell our solutions to health plans. Our Enterprise/State segment sells our sales automation solutions
to state governments, which allow our state government customers to offer customized individual and small group exchanges. Our Medicare segment sells web-based Medicare plan comparison and enrollment tools to a variety of different customers,
including health plans, pharmacy benefit managers, or PBMs, pharmacies, field marketing organizations, or FMOs, and call centers. Lastly, our Private Exchange segment sells comprehensive defined-contribution benefit exchange solutions to benefit
consultants, brokers, exchange operators and aggregators. We believe our presence in these markets and resulting access to such a broad and diverse customer base gives us a strong position at the center of the health insurance distribution
marketplace.

We sell our web-based solutions and related services primarily through our direct sales force. We derive most of our revenue
from software services fees, which primarily consist of monthly subscription fees paid to us for access to, usage and hosting of our web-based insurance distribution software solutions, and related production support services. Software services fees
paid to us from our Enterprise/Commercial customers are based on the size of the health plan for a specified period of time, which usually ranges from three to five years, and the number of software modules used. Software services fees paid to us
from our Enterprise/State customers are based on the number of software solutions modules contracted to be used, for a specified period of time, which usually ranges from one to three years. Software services fees paid to us from our Medicare and
Private Exchange customers are based on the volume of enrollments for which our software solutions are utilized for a contracted period, which usually ranges from one to three years.



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Our Enterprise/State software service fees are largely derived from multiple element contracts
for non-hosted software solutions and related services for which we do not have vendor specific objective evidence, or VSOE, of relative fair value of the contractual elements. For purposes of presentation in managements discussion and
analysis, management classifies a portion of the overall arrangement fee as software services based on an evaluation of various available indicators of fair value, including relative contract value of the software and professional services elements
to total contractual value, and applies judgment to reasonably classify the arrangement fee. Our classification of multiple element arrangement fees is for managements discussion and analysis purposes only and does not affect the timing or
amount of revenue recognized.

Our customer contracts are generally only cancellable by the customer in an instance of our uncured breach,
although some of our customers (including government customers) are able to terminate their respective contracts without cause or for convenience. Of our top 20 customers by 2014 revenue, eleven customers could terminate their contract for
convenience upon written notice of between 30 and 60 days. These customers represented $16.4 million, or 17.1% of our Contracted Backlog balance as of March 31, 2015.

Another component of our revenue is professional services, which we primarily derive from the implementation of our customers onto our
platform, typically including discovery, configuration and deployment, integration, testing and training. In general, it takes from six to fifteen months to implement a new Enterprise/Commercial or Enterprise/State customers insurance
distribution solution and from one to three months to implement a new Medicare or Private Exchange insurance distribution solution.

Our
Enterprise/State software professional services fees are largely derived from multiple element contracts for non-hosted software solutions and related services for which we do not have VSOE of relative fair value for the contractual elements. For
purposes of presentation in managements discussion and analysis, management classifies a portion of the overall arrangement fee as professional fees based on an evaluation of various available indicators of fair value, including relative
contract value of the software and professional services elements to total contractual value, and applies judgment to reasonably classify the arrangement fee. Our classification of multiple element arrangement fees is for managements
discussion and analysis purposes only and does not affect the timing or amount of revenue recognized.

We also derive a small portion of
our revenue from commissions earned on annual employee enrollments in which our health plan network and software solutions are used in connection with each enrollment.

We believe that there is a substantial market for our products and services, and we have been investing in growth over the past several years.
In particular, we have continued to invest in technology and services to better serve our customers, which we believe are an important source of growth for our business. We have also substantially increased our marketing and sales efforts and expect
those increased efforts to continue. As we have invested in growth, we have had operating losses in each of the last three years. Due to the nature of our customer relationships, which have been very stable with relatively few customer losses over
the past three years, and the long-term subscription nature of our financial model, we believe that our current investment in growth may lead to increased revenue, which would allow us to achieve profitability in the future. Of course, our ability
to achieve profitability will continue to be subject to many factors beyond our control.

Management is focused on risks that could have
an adverse impact on our operations and our key financial and operating performance metrics, as described below, and takes actions to mitigate those risks. In our Enterprise/Commercial segment, for example, while fluctuations in bookings are not
uncommon given the sales cycle for product and services in that segment, management routinely assesses staffing levels required to support contracted business volume and adjusts staffing levels accordingly. As part of its ongoing assessment of our
software capabilities, management also considers industry trends, such as consumers increased reliance on mobile devices, to determine where to allocate research and development funding. One of our overall strategic initiatives is to continue
to increase the percentage of software services revenue (and reduce professional services revenue as a percentage of total revenue) as we believe this will have a positive impact on overall gross margins in the future.

Key Financial and Operating Performance Metrics

We regularly monitor a number of financial and operating metrics in order to measure our current performance and project our future
performance. These metrics help us develop and refine our growth strategies and make strategic decisions. We discuss consolidated revenue, gross margin and the components of operating loss, as well as segment revenue and components of segment gross
margin, in Managements Discussion and Analysis of Financial Condition and Results of OperationsComponents of Operating Results. In addition, we utilize other key metrics as described below.



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Contracted Backlog

We believe the balance of contracted future billings, or Contracted Backlog, is an important indicator of the economic health of our business,
as it provides an important source of visibility into our future sources of revenue.

We have generally signed multiple-year subscription
contracts for our software services. The timing of our invoices to our customer is a negotiated term and thus varies among our software contracts. For multiple-year agreements, it is common to invoice an initial amount at contract signing for
implementation work that is deferred, followed by subsequent annual, quarterly or monthly invoices once we launch a customer, which is when our product is usable by the customer. At any point in the contract term, there may be amounts that we have
not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenue, deferred revenue or elsewhere in our consolidated financial statements and are considered by us to be Contracted Backlog.
The amount of our total Contracted Backlog for software services and professional services contracts, which we define as including both cancellable and non-cancellable portions of our customer agreements that we have not yet billed, was
approximately $96.2 million and $78.2 million as of March 31, 2015 and December 31, 2014, respectively. Our total Contracted Backlog does not take into account contractual provisions that give customers a right to terminate their
agreements with us. We fulfill Contracted Backlog associated with a customer contract when the customer implementation process is complete. Our implementation timelines can vary between one and 15 months based on the type of solution, source and
condition of the data we receive from third parties, the configurations that we agree to provide and the size of the customer. As a result, our implementation timelines are subject to significant uncertainties, which can have a material impact on
our total Contracted Backlog and Contracted Backlog that we fulfill in the current year. Based on our current implementation forecasts, we expect to fulfill our total Contracted Backlog as of March 31, 2015 over a period of approximately four
years.

The anticipated impact of the March 31, 2015 Contracted Backlog on each future year is as follows:



|                        |  |                     |      | 
|----------------------- |  | ------------------- | ---- | 
|Year Ending December 31 |  | Millions of Dollars |     
|                        | 
|Remainder of 2015       |  | $                   | 39.0 | 
|2016                    |  |                     | 35.4 | 
|2017                    |  |                     | 11.2 | 
|Thereafter              |  |                     | 10.6 | 
|                        |  |                     |      | 
|TOTAL                   |  | $                   | 96.2 | 
|                        |  |                     |      | 

We expect that the amount of our Contracted Backlog relative to the total value of our contracts will change
from period to period for several reasons, including the amount of cash collected early in the contract term, the specific timing and duration of large customer contracts, varying invoicing cycles of customer contracts, potential customer upsells
dependent on our customer contracts, the specific timing of customer renewal and changes in customer financial circumstances. Accordingly, we believe that fluctuations in our Contracted Backlog may not be a reliable indicator of our future revenue
beyond one year.

Software Revenue Retention Rate

We believe that our ability to retain our customers and expand the revenue we generate from them over time is an important component of our
growth strategy and reflects the long-term value of our customer relationships. We measure our performance on this basis using a metric we refer to as our Software Revenue Retention Rate. We calculate this metric for a particular period by
establishing the group of our customers that had active contracts for a given period. We then calculate our Software Revenue Retention Rate by taking the amount of software revenue we recognized for this group in the subsequent comparable period
(for which we are reporting the rate) and dividing it by the software revenue we recognized for the group in the prior period. For the trailing twelve months ended March 31, 2015 and 2014, our Software Revenue Retention Rate was approximately
95%.

Adjusted Gross Margin and Adjusted EBITDA

Within this Quarterly Report on Form 10-Q, we use adjusted gross margin and adjusted earnings before interest, taxes, depreciation and
amortization, or adjusted EBITDA, to provide investors with additional information regarding our financial results. Adjusted gross margin and adjusted EBITDA are non-GAAP (Generally Accepted Accounting Principles) financial measures. We have
provided below reconciliations of these measures to the most directly comparable GAAP financial measures, which for adjusted gross margin is gross margin, and for adjusted EBITDA is net loss.



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We have included adjusted gross margin and adjusted EBITDA in this filing because they are key
measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short- and long-term operational plans. We believe the exclusion of
non-cash charges such as depreciation, amortization and stock-based compensation from adjusted EBITDA and adjusted gross margin allows us to have better insight into the core operating performance of our business. The amount of such expenses in any
specific period may not directly correlate with the underlying performance of our business operations during the period and such expenses can vary significantly between periods. The use of adjusted EBITDA and adjusted gross margin provides
consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations that could otherwise be masked by the effect of the expenses that we exclude from these non-GAAP financial measures and
facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. Additionally, securities analysts use a measure similar to adjusted EBITDA and adjusted gross margin as
supplemental measures to evaluate the overall operating performance and comparison of companies, and we anticipate that our investor and analyst presentations will continue to include these measures. Accordingly, we believe that adjusted gross
margin and adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results.

Our
use of adjusted gross margin and adjusted EBITDA as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. Some of these limitations are:



| |  |  | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized might have to be replaced in the future, and adjusted gross margin and adjusted EBITDA do not reflect cash capital
expenditure requirements for such replacements or for new capital expenditure requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adjusted gross margin and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | adjusted gross margin and adjusted EBITDA do not reflect the potentially dilutive impact of stock-based compensation;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | adjusted gross margin and adjusted EBITDA do not reflect interest or tax payments that could reduce the cash available to us; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | other companies, including companies in our industry, might calculate adjusted gross margin and adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Because of these and other limitations, you should consider adjusted gross margin and adjusted
EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, gross margin, net loss and our other GAAP financial results. The following table presents a reconciliation of adjusted gross margin to gross
margin and adjusted EBITDA to net loss for each of the periods indicated:



|                                                           |  |                             |        |   |      |   |        |  
|---------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                           |  | Three Months EndedMarch 31, |       
|                                                           |  | 2015                        |        |   | 2014 |  
|                                                           |  | (in thousands)              |       
|Reconciliation from Gross Margin to Adjusted Gross Margin: |  |                             |        |   |      |   |        |  
|Gross margin                                               |  | $                           | 9,327  |   |      | $ | 3,483  |  
|Depreciation and amortization                              |  |                             | 948    |   |      |   | 971    |  
|Stock-based compensation expense                           |  |                             | 147    |   |      |   | 30     |  
|                                                           |  |                             |        |   |      |   |        |  
|Adjusted gross margin                                      |  | $                           | 10,422 |   |      | $ | 4,484  |  
|                                                           |  |                             |        |   |      |   |        |  
|                                                           |  |                            
|Reconciliation from Net Loss to Adjusted EBITDA:           |  |                             |        |   |      |   |        |  
|Net loss                                                   |  | $                           | (5,099 | ) |      | $ | (6,633 | )
|Depreciation and amortization                              |  |                             | 1,270  |   |      |   | 1,271  |  
|Interest expense                                           |  |                             | 1,413  |   |      |   | 1,014  |  
|Other expense                                              |  |                             | 8      |   |      |   | 75     |  
|Income taxes                                               |  |                             | (11    | ) |      |   | 14     |  
|Stock-based compensation expense                           |  |                             | 717    |   |      |   | 345    |  
|                                                           |  |                             |        |   |      |   |        |  
|Total net adjustments                                      |  | $                           | 3,397  |   |      | $ | 2,719  |  
|                                                           |  |                             |        |   |      |   |        |  
|Adjusted EBITDA                                            |  | $                           | (1,702 | ) |      | $ | (3,914 | )
|                                                           |  |                             |        |   |      |   |        |  

Components of Operating Results

Revenue

We derive
most of our revenue from software services fees, which primarily consist of monthly subscription fees paid to us for access to, usage and hosting of our web-based insurance distribution software solutions, and related production support services.

Software services fees paid to us from our Enterprise/Commercial customers are contracted rates based on the size of the health plan
using our solutions for a specified period of time, which usually ranges from three to five years, and the number of software modules used. Software services fees paid to us from our Enterprise/State customers are contracted rates based on the
number of software solutions modules being used for a specified period of time, which usually ranges from one to three years. Software services fees paid to us from our Medicare and Private Exchange customers are based on the volume of enrollments
for which our software solutions are utilized for a contracted period, which usually ranges from one to three years. Our customer contracts are generally only cancellable by the customer in an instance of our uncured breach, although some of our
customers are able to terminate their respective contracts without cause or for convenience. Software services revenue accounted for approximately 62.0% and 70.9% of our total revenue during the three months ended March 31, 2015 and 2014,
respectively.

Another component of our revenue is professional services, which we primarily derive from the implementation of our
customers onto our platform, typically including discovery, configuration and deployment, integration, testing and training. We derive the majority of our professional services revenue from the implementation of our customers onto our platform. In
general, it takes from six to 15 months to implement a new enterprise customers insurance distribution solutions and from one to three months to implement a new Medicare or Private Exchange customers insurance distribution solutions.
Professional services revenue accounted for approximately 36.4% and 25.1% of our total revenue during the three months ended March 31, 2015 and 2014, respectively.

We also derive a small portion of other revenue from commissions earned on annual employee enrollments in which our health plan network and
software solutions are used in connection with each enrollment.

For all contractual arrangements that include multiple elements, we
allocate revenue from a customer contract to software services and professional services based on the type of multiple element arrangement. For instance, with respect to multiple-element arrangements containing hosted software, we identify each
software and professional services unit of accounting based on the terms of the customer contract and allocate revenue to each unit of accounting based on the relative selling price of each deliverable. Revenue from each element is recognized as
each element is delivered. Similarly, for multiple-element arrangements containing non-hosted software, during the periods reported, we accounted for the entire arrangement as a single unit of accounting, because some or all of the deliverable
elements did not have stand-alone value when the related contracts were executed. In these situations, all revenue has



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been deferred until delivery of the final element, at which time the contract value is recognized ratably over the longer of the contract or expected customer relationship. For purposes of
presentation in managements discussion and analysis, management classifies a portion of the overall multiple-element non-hosted software arrangement fee as software and professional services fees based on an evaluation of various available
indicators of fair value, including relative contract value of the software and professional services elements to total contractual value, and applies judgment to reasonably classify the arrangement fee. Our classification of non-hosted multiple
element arrangement fees does not affect the timing or amount of revenue recognized.

We generally invoice our customers for software
services in advance, in monthly, quarterly or annual installments. We invoice our Medicare and Private Exchange customers for implementation fees at the inception of the arrangement. We generally invoice our Enterprise/Commercial and
Enterprise/State customers for implementation fees at various contractually defined times throughout the implementation process. Implementation fees that have been invoiced are initially recorded as deferred revenue until recognized.

Overhead Allocation

Expenses associated with our facilities and depreciation are allocated between cost of revenue and operating expenses based on employee payroll
costs determined by the nature of work performed.

Cost of Revenue

Cost of revenue primarily consists of salaries and other personnel-related costs, including benefits, bonuses and stock-based compensation, for
employees providing services to our customers and supporting our Enterprise or SaaS platform infrastructures. Additional expenses in cost of revenue include co-location facility costs for our data centers, depreciation expense for computer equipment
directly associated with generating revenue, infrastructure maintenance costs, amortization expenses associated with deferred implementation costs and acquired intangible assets, allocated overhead and other direct costs.

Our cost of revenue is expensed as we incur the costs, with the exception of certain direct, incremental costs associated with new customer
implementation efforts, which we defer. The related revenue from fees we receive for our implementation services performed before a customer is operating on our platform is deferred until the commencement of the monthly subscription and recognized
as revenue ratably over the longer of the related contract term or the estimated expected life of the customer relationship. Therefore, certain costs incurred in providing these services are expensed in periods prior to the recognition of the
corresponding revenue. Our cost associated with providing implementation services has been significantly higher as a percentage of revenue than our cost associated with providing our monthly subscription services due to the labor associated with
providing implementation services.

We plan to continue to expand our capacity to support our growth, which will result in higher cost of
revenue in dollars. However, we expect cost of revenue as a percentage of revenue to decline and gross margins to increase primarily from the growth of the percentage of our revenue from software services and the realization of economies of scale
driven by retention of our customers.

Operating Expenses

Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Salaries and
personnel-related costs are the most significant component of each of these expense categories. We expect to continue to hire new employees in these areas in order to support our anticipated revenue growth. As a result, we expect our operating
expenses to increase in both aggregate dollars and as a percentage of revenue in the near term, but to decrease as a percentage of revenue over the longer term as we achieve greater economies of scale.

Research and development expense. The nature of our research and development activities includes market requirements and
definition, product design, software development, quality assurance and product release. Research and development expense consists primarily of salaries and other personnel-related costs, including benefits, bonuses and stock-based compensation for
our research and development employees. Additional expenses include costs related to the development, quality assurance, and testing of new technology, and enhancement of our existing platform technology, consulting, travel and allocated overhead.
We believe continuing to invest in research and development efforts is essential to maintaining our competitive position. We expect our research and development expense to increase in dollars and as a percentage of revenue for the near term, but
decrease as a percentage of revenue over the longer term as we achieve greater economies of scale.

Sales and marketing
expense. Sales and marketing expense consists primarily of salaries and other personnel-related costs, including benefits, bonuses, stock-based compensation and commissions for our sales and marketing employees. We generally incur a
liability to pay and record expense for commissions at the time of contract signing. Additional expenses include advertising, lead



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generation, promotional event programs, corporate communications, travel and allocated overhead. We expect our sales and marketing expense to increase in both dollars and as a percentage of
revenue in the foreseeable future as we further increase the number of our sales and marketing employees and expand our marketing activities in order to continue to grow our business.

General and administrative expense. General and administrative expense consists primarily of salaries and other personnel-related
costs, including benefits, bonuses and stock-based compensation for administrative, finance and accounting, information systems, legal, information technology and human resource employees. Additional expenses include consulting and professional
fees, insurance and other corporate expenses, and travel. Our general and administrative expenses have, and we expect that they will continue to, increase as a result of operating as a public company and include costs associated with compliance with
the Sarbanes-Oxley Act and other regulations governing public companies, increased costs of directors and officers liability insurance, increased professional services expenses and costs associated with an enhanced investor relations
function.

Other Expenses

Other expenses primarily consists of interest expense incurred on outstanding borrowings under our financing obligations, existing notes and
credit facilities.

Income Tax (Expense) Benefit

Income taxes primarily consist of United States federal and state income tax net operating loss benefits, net of changes in valuation
allowances. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Our income tax (expense) benefit was not meaningful in the three months ended March 31, 2015 and 2014.

As a result of prior equity issuances and other transactions in our stock, we have previously experienced ownership changes
under Section 382 which limit the amount of net operating loss carryforwards available to us. We may also experience ownership changes in the future, which may result in further limitation of the amount of net operating losses which may be
available in future years. At March 31, 2015 and December 31, 2014, we had a full tax valuation allowance offsetting the recorded tax benefit of our federal and state net operating loss carryforwards.



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Results of Operations

Condensed Consolidated Statements of Operations Data

The following table sets forth our condensed consolidated statements of operations data for each of the periods indicated.



|                                                               |  |                                                   |            |   |      |   |         |  
|-------------------------------------------------------------- |  | ------------------------------------------------- | ---------- | - | ---- | - | ------- | -
|                                                               |  | Three Months EndedMarch 31,                       |           
|                                                               |  | 2015                                              |            |   | 2014 |  
|                                                               |  | (in thousands, except share andper share amounts) |           
|Condensed Consolidated Statements of Operations Data:          |  |                                                   |            |   |      |   |         |  
|Revenue                                                        |  | $                                                 | 20,648     |   |      | $ | 16,050  |  
|Cost of Revenue (1)                                            |  |                                                   | 11,321     |   |      |   | 12,567  |  
|                                                               |  |                                                   |            |   |      |   |         |  
|Gross Margin                                                   |  |                                                   | 9,327      |   |      |   | 3,483   |  
|                                                               |  |                                                   |            |   |      |   |         |  
|                                                               |  |                                                  
|Operating Expenses:                                            |  |                                                   |            |   |      |   |         |  
|Research and Development (1)                                   |  |                                                   | 6,528      |   |      |   | 4,100   |  
|Sales and Marketing (1)                                        |  |                                                   | 2,883      |   |      |   | 1,806   |  
|General and Administrative (1)                                 |  |                                                   | 3,605      |   |      |   | 3,107   |  
|                                                               |  |                                                   |            |   |      |   |         |  
|Total Operating Expenses                                       |  |                                                   | 13,016     |   |      |   | 9,013   |  
|                                                               |  |                                                   |            |   |      |   |         |  
|Loss from Operations                                           |  |                                                   | (3,689     | ) |      |   | (5,530  | )
|                                                               |  |                                                   |            |   |      |   |         |  
|Other Expenses:                                                |  |                                                   |            |   |      |   |         |  
|Interest Expense                                               |  |                                                   | 1,413      |   |      |   | 1,014   |  
|Other (Income) Expense, net                                    |  |                                                   | 8          |   |      |   | 75      |  
|                                                               |  |                                                   |            |   |      |   |         |  
|Loss before Income Taxes                                       |  |                                                   | (5,110     | ) |      |   | (6,619  | )
|                                                               |  |                                                   |            |   |      |   |         |  
|Income Tax (Expense) Benefit                                   |  |                                                   | 11         |   |      |   | (14     | )
|                                                               |  |                                                   |            |   |      |   |         |  
|Net Loss                                                       |  | $                                                 | (5,099     | ) |      | $ | (6,633  | )
|                                                               |  |                                                   |            |   |      |   |         |  
|Net loss per common share - basic and diluted                  |  | $                                                 | (0.24      | ) |      | $ | (41.34  | )
|                                                               |  |                                                   |            |   |      |   |         |  
|Weighted Average Common Shares Outstanding - basic and diluted |  |                                                   | 21,695,932 |   |      |   | 184,051 |  
|                                                               |  |                                                   |            |   |      |   |         |  
|Other Financial Data:                                          |  |                                                   |            |   |      |   |         |  
|Adjusted gross margin                                          |  | $                                                 | 10,422     |   |      | $ | 4,484   |  
|Adjusted EBITDA                                                |  |                                                   | (1,702     | ) |      |   | (3,914  | )



|(1) | Cost of revenue and operating expenses include stock-based compensation expense as follows:
|--- | -------------------------------------------------------------------------------------------



|                           |  |                              |     |  |      |   |     | 
|-------------------------- |  | ---------------------------- | --- |  | ---- | - | --- | 
|                           |  | Three Months Ended March 31, |    
|                           |  | 2015                         |     |  | 2014 |  
|                           |  | (dollars in thousands)       |    
|Cost of Revenue            |  | $                            | 147 |  |      | $ | 30  | 
|Research and Development   |  |                              | 215 |  |      |   | 20  | 
|Sales and Marketing        |  |                              | 46  |  |      |   | 8   | 
|General and Administrative |  |                              | 309 |  |      |   | 287 | 



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The following table sets forth our condensed consolidated statements of operations data as a
percentage of revenue for each of the periods indicated.



|                                                                     |  |                              |       |    |      |  |       |   
|-------------------------------------------------------------------- |  | ---------------------------- | ----- | -- | ---- |  | ----- | --
|                                                                     |  | Three Months Ended March 31, |      
|                                                                     |  | 2015                         |       |    | 2014 | 
|Consolidated Statements of Operations Data as Percentage of Revenue: |  |                              |       |    |      |  |       |   
|Revenue                                                              |  |                              | 100.0 | %  |      |  | 100.0 | % 
|Cost of Revenue                                                      |  |                              | 54.8  | %  |      |  | 78.3  | % 
|                                                                     |  |                              |       |    |      |  |       |   
|Gross Margin                                                         |  |                              | 45.2  | %  |      |  | 21.7  | % 
|                                                                     |  |                              |       |    |      |  |       |   
|                                                                     |  |                             
|Operating Expenses:                                                  |  |                              |       |    |      |  |       |   
|Research and Development                                             |  |                              | 31.6  | %  |      |  | 25.5  | % 
|Sales and Marketing                                                  |  |                              | 14.0  | %  |      |  | 11.3  | % 
|General and Administrative                                           |  |                              | 17.5  | %  |      |  | 19.4  | % 
|                                                                     |  |                              |       |    |      |  |       |   
|Total Operating Expenses                                             |  |                              | 63.0  | %  |      |  | 56.2  | % 
|                                                                     |  |                              |       |    |      |  |       |   
|Loss from Operations                                                 |  |                              | (17.9 | %) |      |  | (34.5 | %)
|                                                                     |  |                              |       |    |      |  |       |   
|Other Expenses:                                                      |  |                              |       |    |      |  |       |   
|Interest Expense                                                     |  |                              | 6.8   | %  |      |  | 6.3   | % 
|Other (Income) Expense                                               |  |                              | 0.0   | %  |      |  | 0.5   | % 
|                                                                     |  |                              |       |    |      |  |       |   
|Loss before Income taxes                                             |  |                              | (24.7 | %) |      |  | (41.2 | %)
|                                                                     |  |                              |       |    |      |  |       |   
|Income Tax (Expense) Benefit                                         |  |                              | 0.0   | %  |      |  | (0.1  | %)
|                                                                     |  |                              |       |    |      |  |       |   
|Net Loss                                                             |  |                              | (24.7 | %) |      |  | (41.3 | %)
|                                                                     |  |                              |       |    |      |  |       |   

Our Segments

The following table sets forth segment results for revenue and gross margin for the periods indicated:



|                                       |  |                              |        |  |      |   |        | 
|-------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------ | 
|                                       |  | Three Months Ended March 31, |       
|                                       |  | 2015                         |        |  | 2014 |  
|                                       |  | (dollars in thousands)       |       
|Segment Statements of Operations Data: |  |                              |        |  |      |   |        | 
|Revenue:                               |  |                              |        |  |      |   |        | 
|Enterprise/Commercial                  |  | $                            | 10,985 |  |      | $ | 8,522  | 
|Enterprise/State                       |  |                              | 4,291  |  |      |   | 2,478  | 
|Medicare                               |  |                              | 3,983  |  |      |   | 3,899  | 
|Private Exchange                       |  |                              | 1,389  |  |      |   | 1,151  | 
|                                       |  |                              |        |  |      |   |        | 
|Total Revenue                          |  | $                            | 20,648 |  |      | $ | 16,050 | 
|                                       |  |                              |        |  |      |   |        | 
|Gross Margin:                          |  |                              |        |  |      |   |        | 
|Enterprise/Commercial                  |  | $                            | 4,923  |  |      | $ | 482    | 
|Enterprise/State                       |  |                              | 1,714  |  |      |   | 94     | 
|Medicare                               |  |                              | 2,276  |  |      |   | 2,435  | 
|Private Exchange                       |  |                              | 414    |  |      |   | 472    | 
|                                       |  |                              |        |  |      |   |        | 
|Total Gross Margin                     |  | $                            | 9,327  |  |      | $ | 3,483  | 
|                                       |  |                              |        |  |      |   |        | 



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Comparison of Three Months Ended March 31, 2015 and 2014

Revenue



|                      |  |                              |        |  |             |  |       |                         |  |   |             |  |  |        |       |   |   |   |       |   |  |  |       |   
|--------------------- |  | ---------------------------- | ------ |  | ----------- |  | ----- | ----------------------- |  | - | ----------- |  |  | ------ | ----- | - | - | - | ----- | - |  |  | ----- | --
|                      |  | Three Months Ended March 31, |        |  |             | 
|                      |  | 2015                         |        |  | 2014        |  |       | Period-to-Period Change | 
|                      |  | Amount                       |        |  | % ofRevenue |  |       | Amount                  |  |   | % ofRevenue |  |  | Amount |       |   | % |  
|Revenue by Type:      |  | (dollars in thousands)       |       
|Software services     |  | $                            | 12,815 |  |             |  | 62.0  | %                       |  | $ | 11,391      |  |  |        | 70.9  | % |   | $ | 1,424 |   |  |  | 12.5  | % 
|Professional services |  |                              | 7,509  |  |             |  | 36.4  | %                       |  |   | 4,022       |  |  |        | 25.1  | % |   |   | 3,487 |   |  |  | 86.7  | % 
|Other                 |  |                              | 324    |  |             |  | 1.6   | %                       |  |   | 637         |  |  |        | 4.0   | % |   |   | (313  | ) |  |  | (49.1 | %)
|                      |  |                              |        |  |             |  |       |                         |  |   |             |  |  |        |       |   |   |   |       |   |  |  |       |   
|Total revenue         |  | $                            | 20,648 |  |             |  | 100.0 | %                       |  | $ | 16,050      |  |  |        | 100.0 | % |   | $ | 4,598 |   |  |  | 28.6  | % 
|                      |  |                              |        |  |             |  |       |                         |  |   |             |  |  |        |       |   |   |   |       |   |  |  |       |   

The growth in software services revenue was primarily attributable to year-over-year growth in customers
implemented on our software solutions. The increase in professional services revenue was primarily attributable to the recognition of revenues from the satisfaction of several Enterprise/Commercial customer implementation obligations in the three
months ended March 31, 2015.

For all contractual arrangements that include multiple elements, we allocate revenue from a customer
contract to software services and professional services based on the type of multiple element arrangement. For instance, with respect to multiple-element arrangements containing hosted software, we identify each software and professional services
unit of accounting based on the terms of the customer contract and allocate revenue to each unit of accounting based on the relative selling price of each deliverable. Revenue from each element is recognized as each element is delivered. Similarly,
for multiple-element arrangements containing non-hosted software, during the periods reported we accounted for the entire arrangement as a single unit of accounting, because some or all of the deliverable elements did not have stand-alone value when
the related contracts were executed. In these situations, all revenue has been deferred until delivery of the final element, at which time the contract value is recognized ratably over the longer of the contract or expected customer relationship.
For purposes of presentation in managements discussion and analysis, management classifies a portion of the overall multiple-element non-hosted software arrangement fee as software and professional services fees based on an evaluation of
various available indicators of fair value, including relative contract value of the software and professional services elements to total contractual value, and applies judgment to reasonably classify the arrangement fee. Our classification of
non-hosted multiple element arrangement fees does not affect the timing or amount of revenue recognized.

Segment Revenue



|                      |  |                              |        |  |             |  |       |                         |  |   |             |  |  |        |       |   |   |   |       |  |  |  |      |  
|--------------------- |  | ---------------------------- | ------ |  | ----------- |  | ----- | ----------------------- |  | - | ----------- |  |  | ------ | ----- | - | - | - | ----- |  |  |  | ---- | -
|                      |  | Three Months Ended March 31, |        |  |             | 
|                      |  | 2015                         |        |  | 2014        |  |       | Period-to-Period Change | 
|                      |  | Amount                       |        |  | % ofRevenue |  |       | Amount                  |  |   | % ofRevenue |  |  | Amount |       |   | % |  
|Revenue by Segment:   |  | (dollars in thousands)       |       
|Enterprise/Commercial |  | $                            | 10,985 |  |             |  | 53.2  | %                       |  | $ | 8,522       |  |  |        | 53.1  | % |   | $ | 2,463 |  |  |  | 28.9 | %
|Enterprise/State      |  |                              | 4,291  |  |             |  | 20.8  | %                       |  |   | 2,478       |  |  |        | 15.4  | % |   |   | 1,813 |  |  |  | 73.2 | %
|Medicare              |  |                              | 3,983  |  |             |  | 19.3  | %                       |  |   | 3,899       |  |  |        | 24.3  | % |   |   | 84    |  |  |  | 2.2  | %
|Private Exchange      |  |                              | 1,389  |  |             |  | 6.7   | %                       |  |   | 1,151       |  |  |        | 7.2   | % |   |   | 238   |  |  |  | 20.7 | %
|                      |  |                              |        |  |             |  |       |                         |  |   |             |  |  |        |       |   |   |   |       |  |  |  |      |  
|Total Revenue         |  | $                            | 20,648 |  |             |  | 100.0 | %                       |  | $ | 16,050      |  |  |        | 100.0 | % |   | $ | 4,598 |  |  |  | 28.6 | %
|                      |  |                              |        |  |             |  |       |                         |  |   |             |  |  |        |       |   |   |   |       |  |  |  |      |  

The growth in our Enterprise/Commercial revenue was primarily attributable to the recognition of revenue upon the satisfaction
of several customer obligations in the three months ended March 31, 2015. The growth in our Enterprise/State revenue was primarily attributable to an increase of $1.3 million in software services revenue and a $0.5 million increase in professional
services revenue from the recognition of previously deferred implementation revenue related to state exchange implementations completed in the fourth quarter of 2013, as well as an increase in support services. The growth in our Medicare and Private
Exchange revenue was primarily attributable to a $0.6 million increase in software services revenue driven by an increase in the number of health plan and broker customers using our platform as of March 31, 2015 as compared to March 31,
2014, partially offset by a $0.3 million decrease in professional services and other revenue.



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Cost of Revenue



|                |  |                              |        |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |        |   |  |  |      |   
|--------------- |  | ---------------------------- | ------ |  | ----------- |  | ---- | ----------------------- |  | - | ----------- |  |  | ------ | ---- | - | - | - | ------ | - |  |  | ---- | --
|                |  | Three Months Ended March 31, |        |  |             |  |      |                         | 
|                |  | 2015                         |        |  | 2014        |  |      | Period-to-Period Change | 
|                |  | Amount                       |        |  | % ofRevenue |  |      | Amount                  |  |   | % ofRevenue |  |  | Amount |      |   | % |  
|                |  | (dollars in thousands)       |       
|Cost of Revenue |  | $                            | 11,321 |  |             |  | 54.8 | %                       |  | $ | 12,567      |  |  |        | 78.3 | % |   | $ | (1,246 | ) |  |  | (9.9 | %)

The dollar decrease in cost of revenue was primarily attributable to a $1.5 million decrease in professional fees to outside
contractors, a $0.8 million decrease in salaries and personnel-related costs and a $0.2 million decrease in travel and facilities costs due to staffing realignments following the completion of our efforts related to the October 2013 Affordable Care
Act, or ACA rollout, which was partially offset by a corresponding $0.4 million decrease in capitalization of new customer deferred implementation costs. Additionally, during the three months ended March 31, 2015 we amortized an additional $0.9
million of previously deferred implementation costs, as compared to the three months ended March 31, 2014.

Segment Gross
Margins



|                      |  |                              |       |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |       |   |  |  |       |   
|--------------------- |  | ---------------------------- | ----- |  | ----------- |  | ---- | ----------------------- |  | - | ----------- |  |  | ------ | ---- | - | - | - | ----- | - |  |  | ----- | --
|                      |  | Three Months Ended March 31, |       |  |             | 
|                      |  | 2015                         |       |  | 2014        |  |      | Period-to-Period Change | 
|                      |  | Amount                       |       |  | % ofRevenue |  |      | Amount                  |  |   | % ofRevenue |  |  | Amount |      |   | % |  
|Segment Gross Margin: |  | (dollars in thousands)       |      
|Enterprise/Commercial |  | $                            | 4,923 |  |             |  | 44.8 | %                       |  | $ | 482         |  |  |        | 5.7  | % |   | $ | 4,441 |   |  |  |       | * 
|Enterprise/State      |  |                              | 1,714 |  |             |  | 39.9 | %                       |  |   | 94          |  |  |        | 3.8  | % |   |   | 1,620 |   |  |  |       | * 
|Medicare              |  |                              | 2,276 |  |             |  | 57.1 | %                       |  |   | 2,435       |  |  |        | 62.5 | % |   |   | (159  | ) |  |  | (6.5  | %)
|Private Exchange      |  |                              | 414   |  |             |  | 29.8 | %                       |  |   | 472         |  |  |        | 41.0 | % |   |   | (58   | ) |  |  | (12.3 | %)
|                      |  |                              |       |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |       |   |  |  |       |   
|Total Gross Margin    |  | $                            | 9,327 |  |             |  | 45.2 | %                       |  | $ | 3,483       |  |  |        | 21.7 | % |   | $ | 5,844 |   |  |  | 167.8 | % 
|                      |  |                              |       |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |       |   |  |  |       |   



|* | Not meaningful
|- | --------------

The Enterprise/Commercial gross margin increase in dollars was driven primarily by a $2.5
million increase in revenue and $1.9 million decrease in cost of revenue. The increase in revenue was primarily attributable to recognition of previously deferred revenue related to software implementations and ancillary professional services upon
the satisfaction of remaining contractual obligations during the three months ended March 31, 2015. The decrease in cost of revenue was primarily attributable to a reduction in direct labor and outside contractor costs following the completion
of our efforts related to the October 1, 2013 ACA rollout offset by an increase in deferred cost Amortization related to previously installed software solutions. Our Enterprise/Commercial gross margin included $0.1 million of depreciation and
amortization for each of the three months ended March 31, 2015 and 2014.

The Enterprise/State gross margin increase in dollars was driven primarily
by a $1.8 million increase in revenue and $0.2 million increase in cost of revenue. The increase in revenue and cost of revenue were both primarily attributable to amortization of previously deferred implementation revenue and costs related to new
customer implementations that were completed in fourth quarter of 2013 and throughout 2014. Our Enterprise/State gross margin included less than $0.1 million of depreciation and amortization for each of the three months ended March 31, 2015 and
2014.

The Medicare gross margin decrease in dollars was driven primarily by a $0.1 million increase in revenue and $0.3 million increase in cost of
revenue. The increase in cost of revenue was primarily attributable to personnel-related cost increases to support anticipated growth in this segment. Our Medicare gross margin included $0.6 million of depreciation and amortization for each of the
three months ended March 31, 2015 and 2014.

The Private Exchange gross margin decrease in dollars was driven primarily by a $0.2 million increase in
revenue and $0.3 million increase in cost of revenue. The increase in cost of revenue was primarily attributable to personnel-related cost increases to support anticipated customer growth in this segment. Our Private Exchange gross margin included
$0.2 million of depreciation and amortization for each of the three months ended March 31, 2015 and 2014.



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Research and Development



|                         |  |                              |       |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |       |  |  |  |      |  
|------------------------ |  | ---------------------------- | ----- |  | ----------- |  | ---- | ----------------------- |  | - | ----------- |  |  | ------ | ---- | - | - | - | ----- |  |  |  | ---- | -
|                         |  | Three Months Ended March 31, |       |  |             |  |      |                         | 
|                         |  | 2015                         |       |  | 2014        |  |      | Period-to-Period Change | 
|                         |  | Amount                       |       |  | % ofRevenue |  |      | Amount                  |  |   | % ofRevenue |  |  | Amount |      |   | % |  
|                         |  | (dollars in thousands)       |      
|Research and Development |  | $                            | 6,528 |  |             |  | 31.6 | %                       |  | $ | 4,100       |  |  |        | 25.5 | % |   | $ | 2,428 |  |  |  | 59.2 | %

The increase in research and development expense in dollars was primarily attributable to a $1.6 million increase in salaries
and personnel-related costs, due to additional research and development headcount. Additionally, we experienced a $0.8 million increase in engineering consulting fees for assistance in product development.

The increased research and development spending during the quarter continues our second half of 2014 initiative to invest in efforts to accelerate development
of new software solutions intended to take advantage of opportunities presented by our growing customer base and the emerging private exchange market opportunity.

Sales and Marketing



|                    |  |                              |       |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |       |  |  |  |      |  
|------------------- |  | ---------------------------- | ----- |  | ----------- |  | ---- | ----------------------- |  | - | ----------- |  |  | ------ | ---- | - | - | - | ----- |  |  |  | ---- | -
|                    |  | Three Months Ended March 31, |       |  |             |  |      |                         | 
|                    |  | 2015                         |       |  | 2014        |  |      | Period-to-Period Change | 
|                    |  | Amount                       |       |  | % ofRevenue |  |      | Amount                  |  |   | % ofRevenue |  |  | Amount |      |   | % |  
|                    |  | (dollars in thousands)       |      
|Sales and Marketing |  | $                            | 2,883 |  |             |  | 14.0 | %                       |  | $ | 1,806       |  |  |        | 11.3 | % |   | $ | 1,077 |  |  |  | 59.6 | %

The increase in sales and marketing expense in dollars was primarily attributable to a $0.4 million increase in commissions
expense associated with significantly higher bookings levels in the three months ended March 31, 2015, as compared to the three months ended March 31, 2014, along with a $0.4 million increase in salaries and personnel-related costs, due to
the hiring of sales employees to continue driving revenue growth, as well as a year-over-year $0.3 million increase in other expenses attributable to our 2015 Client Forum.

General and Administrative



|                           |  |                              |       |  |             |  |      |                         |  |   |             |  |  |        |      |   |   |   |     |  |  |  |      |  
|-------------------------- |  | ---------------------------- | ----- |  | ----------- |  | ---- | ----------------------- |  | - | ----------- |  |  | ------ | ---- | - | - | - | --- |  |  |  | ---- | -
|                           |  | Three Months Ended March 31, |       |  |             |  |      |                         | 
|                           |  | 2015                         |       |  | 2014        |  |      | Period-to-Period Change | 
|                           |  | Amount                       |       |  | % ofRevenue |  |      | Amount                  |  |   | % ofRevenue |  |  | Amount |      |   | % |  
|                           |  | (dollars in thousands)       |      
|General and Administrative |  | $                            | 3,605 |  |             |  | 17.5 | %                       |  | $ | 3,107       |  |  |        | 19.4 | % |   | $ | 498 |  |  |  | 16.0 | %

The increase in general and administrative expense in dollars was primarily attributable to incremental costs associated with
being a public company. While we expect our general and administrative expenses will grow in dollars as our business grows, we believe such expenses as a percent of revenue will decline, which was observed in the three months ended March 31,
2015, as compared to the three months ended March 31, 2014.



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Interest Expense



|                 |  |                              |       |  |             |  |     |                         |  |   |             |  |  |        |     |   |   |   |     |  |  |  |      |  
|---------------- |  | ---------------------------- | ----- |  | ----------- |  | --- | ----------------------- |  | - | ----------- |  |  | ------ | --- | - | - | - | --- |  |  |  | ---- | -
|                 |  | Three Months Ended March 31, |       |  |             |  |     |                         | 
|                 |  | 2015                         |       |  | 2014        |  |     | Period-to-Period Change | 
|                 |  | Amount                       |       |  | % ofRevenue |  |     | Amount                  |  |   | % ofRevenue |  |  | Amount |     |   | % |  
|                 |  | (dollars in thousands)       |      
|Interest Expense |  | $                            | 1,413 |  |             |  | 6.8 | %                       |  | $ | 1,014       |  |  |        | 6.3 | % |   | $ | 399 |  |  |  | 39.3 | %

The increase in interest expense in dollars was primarily attributable to a higher weighted average cost of debt on our
outstanding borrowings, as well as a higher average debt balance during the three months ended March 31, 2015, as compared to the three months ended March 31, 2014.

Liquidity and Capital Resources

Sources of Liquidity

In December 2014, we completed an initial public offering in which we issued and sold 6,635,000 shares of our common stock and existing
shareholders sold 995,250 shares of our common stock at a public offering price of $8.00 per share. We did not receive any proceeds from the sale of our common stock by the existing shareholders. We received net proceeds of $45.2 million after
deducting underwriting discounts and commissions and other direct offering expenses, which were available for general corporate purposes.

Prior to our initial public offering, we funded our operations primarily through cash from operating activities, bank and subordinated debt
borrowings and the private issuance of equity securities. As of March 31, 2015, we had cash and cash equivalents of $17.4 million which is held for working capital and other general corporate purposes, including to develop new technologies,
fund capital expenditures, make investments in or acquisitions of other businesses, solutions or technologies or repay a portion of our outstanding borrowings. We do not enter into investments for trading or speculative purposes. Our policy is to
invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit and money market accounts
that are currently providing only a minimal return.

Senior Credit Facility

On January 15, 2013, we entered into a bank credit facility to provide for short-term working capital and long-term investment needs, as
amended and restated from time-to-time, or the Credit Facility. The Credit Facility initially provided for $22.5 million of term loans, or Senior Term Loans, and a $10.0 million revolving line of credit, or the Senior Revolving Credit Facility,
through January 15, 2018, or the Maturity Date. The Senior Term Loans require quarterly principal payments of $281, with the unpaid principal balance payable in full on the Maturity Date.

The Senior Term Loans accrue interest at a rate based on LIBOR plus a LIBOR Margin payable monthly. The Senior Revolving Credit Facility
accrues interest monthly at a rate based on LIBOR, the Fed Funds Rate or banks Prime Rate.

The Credit Facility contains customary
representations, warranties and financial covenants of the Company, as well as various limitations on the activities of the Company as they relate to additional indebtedness, junior liens, investments, capital expenditures, and mergers and
acquisitions. The financial covenants include a quarterly building EBITDA covenant and a minimum liquidity covenant. The quarterly building EBITDA covenant sets forth specific levels of cumulative trailing twelve month EBITDA measured on calendar
quarter ends, as defined. The quarterly building EBITDA covenant increases from $3.5 million for the measurement period ending March 31, 2015 to $9.0 million for the year ending December 31, 2015. The minimum liquidity covenant requires us
to maintain a minimum liquidity level of $15.0 million at all times, with minimum liquidity defined as the sum of cash and cash equivalents and borrowing capacity available to us under the $10.0 million Senior Revolving Credit Facility. The minimum
liquidity covenant expires once we achieve a Fixed Coverage Ratio, as defined, in excess of 1.25:1.00 for two consecutive quarters. As of March 31, 2015, we were in compliance with the financial covenants, and we believe we will continue to be
in compliance with the financial covenants throughout the year ended December 31, 2015.



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Subordinated Loans

On March 18, 2013, we entered into a Senior Subordinated Term Loan Agreement with THL Corporate Finance, Inc., or the THL Note, as amended
and restated from time-to-time, for total proceeds of $30.0 million less $0.7 million of original issue discount, or OID. The THL Note maturity date is July 15, 2018, with the principal balance payable in full at the maturity date. Interest on
the THL Note accrues at a variable rate of LIBOR plus a LIBOR margin, and is payable monthly.

THL Note contains customary financial
covenants including a quarterly building EBITDA covenant and a minimum liquidity covenant. The quarterly building EBITDA covenant sets forth specific levels of cumulative trailing twelve month EBITDA measured on calendar quarter ends, as defined.
The quarterly building EBITDA covenant increases from $2.6 million for the measurement period ending March 31, 2015 to $8.1 million for the year ending December 31, 2015. The minimum liquidity covenant requires us to maintain a minimum
liquidity level of $13.5 million at all times, with minimum liquidity defined as the sum of cash and cash equivalents and borrowing capacity available to us under the $10.0 million Senior Revolving Credit Facility. The minimum liquidity covenant
expires once we achieve a Fixed Coverage Ratio, as defined, in excess of 1.25:1.00 for two consecutive quarters. As of March 31, 2015, we were in compliance with the financial covenants, and we believe we will continue to be in compliance with
the financial covenants throughout the year ended December 31, 2015.

On January 15, 2013, we entered into a subordinated
promissory note with the sellers of DRX, or the DRX Seller Note. The initial $3.0 million principal amount was subject to adjustment upon resolution of the working capital, as well as the satisfaction of customary escrow provisions. The DRX Seller
Note accrued interest at a rate of 8.0% payable upon the January 15, 2015 maturity date. During the three months ended March 31, 2015, the principal amount was decreased by $0.1 million as a result of settling the DRX Indemnification Claim
(see Note 5 to the Condensed Consolidated Financial Statements) and we paid the adjusted principal amount of $2.9 million and $0.5 million of interest to settle the DRX Seller Note.

The following table summarizes the principal balances of our outstanding borrowings as of March 31, 2015:



|                                          |  |                              |        | 
|----------------------------------------- |  | ---------------------------- | ------ | 
|                                          |  | OutstandingPrincipal Balance |       
|                                          |  | (in thousands)               |       
|                                          | 
|Credit Facility: Revolving line of credit |  | $                            |       | 
|Credit Facility: Term loans               |  |                              | 19,969 | 
|Subordinated loans                        |  |                              | 29,493 | 
|                                          |  |                              |        | 
|                                          |  | $                            | 49,462 | 
|                                          |  |                              |        | 

We believe that cash from operations, the proceeds from our initial public offering, cash on hand and
available capacity under our Credit Facility will provide liquidity to meet anticipated future short-term capital requirements for the next twelve months. The sufficiency of these liquidity sources to fund necessary and committed capital needs will
be dependent upon our ability to meet our covenant requirements of our Credit Facility.

In the future, we may seek to access the capital
markets to raise additional equity financing for various business reasons, including required debt payments and acquisitions. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there
can be no assurance that we will be able to obtain any such financing. In addition, if we are unable to comply with our debt covenants in the future and as a result default on our loan agreements, approximately $49.5 million of our outstanding
borrowings would become immediately payable, which could adversely affect our financial condition.



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Cash Flows

Our cash flows were as follows for the three months ended March 31, 2015 and 2014:



|                                          |  |                             |         |   |      |   |        |  
|----------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                          |  | Three Months EndedMarch 31, |        
|                                          |  | 2015                        |         |   | 2014 |  
|Net cash flows provided by (used in):     |  |                             |         |   |      |   |        |  
|Operating activities                      |  | $                           | (6,259  | ) |      | $ | (8,267 | )
|Investing activities                      |  |                             | (251    | ) |      |   | (286   | )
|Financing activities                      |  |                             | (4,354  | ) |      |   | 6,831  |  
|                                          |  |                             |         |   |      |   |        |  
|Net decrease in cash and cash equivalents |  | $                           | (10,864 | ) |      | $ | (1,722 | )
|                                          |  |                             |         |   |      |   |        |  

Operating Activities

For the three months ended March 31, 2015, our net cash and cash equivalents used in operating activities of $6.3 million consisted of a
net loss of $5.1 million and $3.3 million of cash used by changes in working capital, partially offset by $2.2 million in adjustments for non-cash items. The cash used by changes in working capital primarily consisted of a decrease in deferred
revenue of $8.4 million, partially offset by a $4.4 million decrease in accounts receivable. The decrease in deferred revenue was primarily a result of contracts closed during prior periods with associated upfront cash fees, on which we are
currently recognizing revenue as the contractual obligations are complete and software service usage periods have begun. The decrease in accounts receivable was primarily attributable to collections of our typically higher fourth quarter billings
associated with insurance plan annual enrollment periods.

For the three months ended March 31, 2014, net cash and cash equivalents
used in operating activities of $8.3 million consisted of a net loss of $6.6 million and $3.6 million of cash used by changes in working capital, partially offset by $2.0 million in adjustments for non-cash items. The cash provided by changes in
working capital primarily consisted of a seasonal first quarter decrease in accounts receivable of $8.7 million, offset by a $3.1 million use of cash to reduce accounts payable. Additionally, working capital was impacted by a $6.6 million net
decrease in deferred revenue and a $2.0 million net increase in deferred implementation costs. The decrease in deferred revenue and increase in deferred implementation costs was primarily the result of timing differences between receipt of upfront
cash fees, cash outlays for new customer implementation efforts, and recognition of previously deferred revenues and deferred implementation cost on implemented software solutions. For the three months ended March 31, 2014, we had more deferred
revenue recognition on implemented customer software services than net cash collections for future implementations, which was anticipated as several large multi-year software implementations were completed in conjunction with the October 2013 ACA
rollout efforts.

Generally, a substantial amount of revenue in any given period comes from the recognition of previously collected and
deferred revenue, while period-end accounts receivable balances are directly influenced by the timing of contractually negotiated milestone and time-based advance billings and their subsequent collection. We generally have the contractual right to
invoice and collect fees from customers ahead of delivery and revenue recognition of our software and professional services.

Investing Activities

For the three months ended March 31, 2015 and 2014, net cash used in investing activities was $0.3 million consisting primarily of the
purchase of property and equipment.

Financing Activities

For the three months ended March 31, 2015, net cash used in financing activities was $4.4 million, consisting of $3.5 million of
repayments of debt, including the scheduled repayment of the DRX Seller Note, payment of $0.7 million of direct offering costs associated with our December 2014 initial public offering and $0.2 million other payments including capital leases and
debt financing fees paid.

For the three months ended March 31, 2014, net cash provided by financing activities was $6.8 million,
consisting of $11.7 million in proceeds from credit facility and term-debt borrowings, partially offset by $4.9 million of debt repayments and payment of capital lease obligations and debt financing fees.



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Quarterly Trends and Seasonality

Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, some of which are out of our control.
These fluctuations are primarily driven by an increase in the third and fourth quarters in activity at our customers in preparation for and during the annual insurance enrollment cycle, which occurs annually during our fourth quarter. Our historical
results should not be considered a reliable indicator of our future results of operations.

Contractual Obligations and Commitments

Our principal commitments consist of obligations under our outstanding debt facilities, non-cancelable leases for our office space and computer
equipment and purchase commitments for our co-location and other support services. There have been no material changes to these contractual obligations since reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Off-Balance Sheet Arrangements

As
of March 31, 2015, we had standby letters of credit totaling $0.2 million as security for rented office space.

Critical Accounting Policies and
Significant Judgments and Estimates

During the three months ended March 31, 2015, there were no significant changes to our
critical accounting policies and significant judgments and estimates since reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Recent Accounting Pronouncements

See
Note 2 to the Condensed Consolidated Financial Statements for information on new accounting standards.

JOBS Act

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As defined in
the JOBS Act, a public company whose initial public offering of common equity securities occurred after December 8, 2011 and whose annual gross revenue is less than $1.0 billion will, in general, qualify as an emerging growth
company until the earliest of:



| |  |  | the last day of its fiscal year following the fifth anniversary of the date of its initial public offering of common equity securities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the last day of its fiscal year in which it has annual gross revenue of $1.0 billion or more;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | the date on which it has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the date on which it is deemed to be a large accelerated filer, which will occur at such time as the company (a) has an aggregate worldwide market value of common equity securities held by
non-affiliates of $700 million or more as of the last business day of its most recently completed second fiscal quarter, and (b) has been required to file annual and quarterly reports under the Securities Exchange Act of 1934 for a period of at
least 12 months and (c) has filed at least one annual report pursuant to the Securities Act of 1934.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under this
definition, we are an emerging growth company and could remain an emerging growth company until as late as December 31, 2019.

As an emerging growth company we have chosen to rely on such exemptions and are therefore not required to, among other things,
(i) provide an auditors attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditors report providing
additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and
comparisons of the Chief Executive Officers compensation to median employee compensation.



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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have operations solely in the United States and are exposed to market risks in the ordinary course of our business. Market risk is the risk
of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument might change as a result of changes in interest rates, exchange rates, commodity prices,
equity prices and other market changes. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we might enter into exchange rate hedging arrangements to manage the risks described below.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates. Borrowings under the term loan and revolving line of credit with Wells
Fargo Bank, which was entered into in January 2013, bear interest at rates that are variable. Borrowings under the THL Corporate Finance, Inc. subordinated promissory note bear interest at rates that are variable. Increases in the LIBOR or Prime
Rate would increase the amount of interest payable under these borrowings. As of March 31, 2015, we had total borrowings of $49.5 million subject to a variable interest rate. As a result, each change of one percentage point in interest rates
would result in an approximate $0.5 million change in our annual interest expense on our outstanding borrowings as of March 31, 2015. Any debt we incur in the future may also bear interest at variable rates. Borrowings outstanding under
our other credit arrangements are not subject to interest rate risk because they bear interest at fixed rates.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. We
continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to
fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act
refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a companys
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures as of March 31, 2015, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures were effective as of such date.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2015, which were identified in
connection with managements evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.



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Part II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising in the ordinary
course of business. Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material impact on our consolidated financial position, results of operations or
cash flows.

Item 1A. Risk Factors

Our business, prospects, financial condition or operating results could be materially adversely affected by any of these risks, as well as
other risks not currently known to us or that are currently considered immaterial. The trading price of our common stock could decline due to any of the risks and uncertainties described below, and you may lose all or part of your investment. In
assessing these risks, you should also refer to the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes.

Risks Related to Our Business

We have had a
history of losses and we may be unable to achieve or sustain profitability.

We experienced a net loss of $10.2 million, $26.4
million and $16.8 million in 2014, 2013 and 2012, respectively. We cannot predict if we will achieve profitability in the near future or at all. We expect to make significant future expenditures to develop and expand our business. Our recent growth
in revenue may not be sustainable, and we might not achieve sufficient revenue to achieve or maintain profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this Quarterly Report
on Form 10-Q, and we may encounter unforeseen expenses, difficulties, complications and delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability, and we may incur significant losses for the foreseeable
future.

Failure to manage our growth effectively could increase our expenses, decrease our revenue and prevent us from implementing our business
strategy.

We have been experiencing a period of growth, which puts strain on our business. To manage this and our anticipated
future growth effectively, we must continue to maintain and enhance our information technology infrastructure, financial and accounting systems and controls. We also must attract, train and retain a significant number of qualified software
engineers, technical and management personnel, sales and marketing personnel, customer support personnel and professional services personnel. Failure to effectively manage our rapid growth could lead us to over-invest or under-invest in development
and operations, result in weaknesses in our infrastructure, systems or controls, give rise to operational mistakes, losses, loss of productivity or business opportunities and result in loss of employees and reduced productivity of remaining
employees. Our growth could require significant capital expenditures and might divert financial resources from other projects such as the development of new products and services. If our management is unable to effectively manage our growth, our
expenses might increase more than expected, our revenue could decline or might grow more slowly than expected, and we might be unable to implement our business strategy. The quality of our products and services might suffer, which could negatively
affect our reputation and harm our ability to retain and attract customers.

The market for health insurance exchanges in the United States is
relatively undeveloped, rapidly evolving and volatile, which makes it difficult to forecast adoption rates and demand for our solutions. If the market does not develop or develops more slowly than we expect, or if individuals, brokers or health
plans select more traditional or alternative channels for the purchase and sale of health insurance, it could have a material adverse effect on our business and results of operations.

The market for health insurance exchanges in the United States is relatively undeveloped, rapidly evolving and volatile. Accordingly, our
future financial performance will depend in part on growth in this market and on our ability to adapt to emerging demands and trends in this market. Demand for our exchange solutions has been driven in large part by recent regulatory changes,
broader use of the Internet, shifts from group plans to the purchase of individual plans and advances in technology. It is difficult to predict, with any precision, adoption rates or the future growth rate and size of our target market. The market
for health insurance sales automation software is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand and market acceptance. The volatility and rapidly evolving nature of the market in which we
operate, as well as other factors that are beyond our control, reduces our ability to accurately evaluate our long-term outlook and forecast annual performance.



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Additionally, our success depends in part upon widespread individual and health plan acceptance
of the Internet as a shopping platform and marketplace for the purchase and sale of health insurance. Individuals, employers, employees and health plans may choose to depend on more traditional sources, such as individual agents, or alternative
sources may develop, including as a result of significant reforms to healthcare legislation through the Patient Protection and Affordable Care Act, or PPACA, and the Healthcare and Education Reconciliation Act of 2010, or HCERA, which we refer to
collectively as Healthcare Reform.

A reduction in demand for health insurance exchanges caused by lack of acceptance, technological
challenges, competing solutions or as a result of individuals, brokers or health plans determining that other distribution channels for health insurance are superior to ours would have a material adverse effect on our business, growth, results of
operations and financial condition.

Our estimate of the market size for our solutions may prove to be inaccurate, and even if the market size is
accurate, we cannot assure you that our business will serve a significant portion of the market.

Our estimate of the market size
for our solutions is subject to significant uncertainty and is based on assumptions and estimates, including our internal analysis and industry experience, which may not prove to be accurate. Our ability to serve a significant portion of this
estimated market is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, even if our estimate of the market size is accurate, we cannot assure you that
our business will serve a significant portion of this estimated market for our solutions.

We operate in the highly competitive software industry.
If we are not able to compete effectively, our business and operating results will be harmed.

The software market is highly
competitive and is likely to attract increased competition, which could make it hard for us to succeed. Small, specialized providers continue to become more sophisticated and effective. In addition, large, well-financed, and technologically
sophisticated software companies might focus more on our market. The size and financial strength of these entities is increasing as a result of continued consolidation in both the IT and health insurance industries. We expect large integrated
software companies to become more active in our market, both through acquisitions and internal investment. As costs fall and technology improves, increased market saturation might change the competitive landscape in favor of our competitors.

Some of our current competitors have greater name recognition, longer operating histories, and significantly greater resources than we do. As
a result, our competitors might be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. In addition, current and potential competitors have established, and
might in the future establish, cooperative relationships with vendors of complementary products, technologies, or services to increase the availability of their products in the marketplace. Accordingly, new competitors or alliances might emerge that
have greater market share, a larger customer base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources and larger sales forces than we have, which could put us at a competitive disadvantage.
Further, in light of these advantages, even if our products and services are more effective than those of our competitors, current or potential customers might accept competitive offerings in lieu of purchasing our offerings. Increased competition
is likely to result in pricing pressures, which could negatively impact our sales, profitability or market share. In addition to new niche vendors, who offer stand-alone products and services, we face competition from existing enterprise vendors,
including those currently focused on software solutions that have information systems in place with potential customers in our target market. These existing enterprise vendors might promise products or services that offer ease of integration with
existing systems and which leverage existing vendor relationships. In addition, large health plans often have internal technology staffs and proprietary software for benefits and distribution management, making them less likely to buy our solutions.

If our existing customers do not continue or renew their agreements with us, renew at lower fee levels or decline to license additional software or
purchase additional applications and services from us, it could have a material adverse effect on our business and operating results.

We derive a significant portion of our revenue from renewal of existing customer agreements and sales of additional software and services to
existing customers and expect to continue to do so. As a result, achieving a high renewal rate of our customer agreements and selling additional software and services is critical to our future operating results.

We generally sell our software and services pursuant to agreements for terms of multiple years. Our customers may choose not to renew these
contracts after the initial contract period expires. Additionally, some of our customers are able to terminate their respective contracts without cause or for convenience at any time. We may not be able to accurately predict future trends in
customer renewals, and our customers renewal rates may decline or fluctuate. Without the continuance or renewal of our customer contracts our business and operating results may suffer.



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Factors that may affect the renewal rate for our existing contracts, and our ability to sell
additional applications and services, include:



| |  |  | the price, performance and functionality of our offering;
| | - |  | ---------------------------------------------------------



| |  |  | the availability, price, performance and functionality of competing solutions;
| | - |  | ------------------------------------------------------------------------------



| |  |  | our ability to develop complementary applications and services;
| | - |  | ---------------------------------------------------------------



| |  |  | our continued ability to access the pricing and other data necessary to enable us to deliver reliable offerings to customers;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the stability, performance and security of our hosting infrastructure and hosting services;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | changes in healthcare laws, regulations or trends; and
| | - |  | ------------------------------------------------------



| |  |  | the business environment of our customers.
| | - |  | ------------------------------------------

If any of our customers terminate or do not renew
their contracts for our services, renew on less favorable terms, or do not purchase additional functionality or software, our revenue may grow more slowly than expected or decline, and our profitability and gross margins may be harmed.

A significant amount of our revenue is derived from a limited number of customers, and any reduction in revenue from any of these customers could have a
material adverse effect on our business.

Our ten largest customers by revenue in the past two years accounted for 56.9% and 49.1%
of our consolidated revenue in 2014 and 2013, respectively. If any of our key customers decides not to renew its contracts with us, or to renew on less favorable terms, our business, revenue, reputation, and our ability to obtain new customers could
be materially and adversely affected. Except for one customer, none of our customers exceeded 10% of our revenue in 2014 or 2013. Contracts related to the Maryland Health Benefit Exchange accounted for 11.8% of our 2014 revenue due in part to the
termination of the exchange contract with the prime contractor, Noridian Healthcare Solutions, LLC, and our recognition of the accompanying previously deferred in-process revenue.

We have experienced quarterly fluctuations, and expect to continue to experience quarterly fluctuations, in our operating results due to a number of
factors, including the seasonality of our revenue, the sales and implementation cycles for our products and services and other factors, that make our future results difficult to predict and could cause our operating results to fall below
expectations.

Our business is subject to seasonal fluctuations and our operating results are traditionally strongest in the
fourth quarter of each year as a result of the open enrollment period established by PPACA. Therefore, our stock price might be based on expectations of future performance that we might not meet and, if our revenue or operating results fall below
the expectations of investors or securities analysts, the price of our common stock could decline substantially.

The sales cycle for our
products and services can vary from, on average, two to four months for our cloud-based solutions, and from four to 12 or more months for our enterprise solutions, from initial contact to contract execution. After a customer contract is signed, we
provide an implementation process for the customer which typically ranges from two to four months for our cloud-based implementations and from three to 15 months for complex enterprise implementations, each from contract execution to completion of
implementation. As a result, the period of time between contract signing and recognition of associated revenue may be lengthy, and we are not able to predict with certainty the period in which implementation will be completed.

During the sales and implementation cycles for our enterprise segments, we expend substantial time and effort, and incur significant
additional operating expenses, but accounting principles do not allow us to recognize the resulting revenue until implementation is complete and the services are available for use by our customers, at which time we begin recognition of
implementation revenue over the life of the contract or the expected life of the customer relationship, whichever is longer. Unanticipated difficulties and delays in implementation might arise as a result of failure by us or our customers to
complete one or more of our or their respective responsibilities and, if implementation periods are extended or implementations are cancelled, revenue recognition could be delayed or fail to occur.



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Our operating results have varied in the past. In addition to the other risk factors listed in
this section, some of the important factors that may cause fluctuations in our quarterly operating results include:



| |  |  | the extent to which our products and services achieve or maintain market acceptance;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | our ability to introduce new products and services and enhancements to our existing products and services on a timely basis;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | new competitors and the introduction of enhanced products and services from competitors;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the financial condition of our current and potential customers;
| | - |  | ---------------------------------------------------------------



| |  |  | changes in customer budgets and procurement policies;
| | - |  | -----------------------------------------------------



| |  |  | the amount and timing of our investment in research and development activities;
| | - |  | -------------------------------------------------------------------------------



| |  |  | technical difficulties with our products or interruptions in our services;
| | - |  | --------------------------------------------------------------------------



| |  |  | our ability to hire and retain qualified personnel, including the rate of expansion of our sales force;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | changes in the regulatory environment related to benefits and healthcare;
| | - |  | -------------------------------------------------------------------------



| |  |  | regulatory compliance costs;
| | - |  | ----------------------------



| |  |  | the timing, size and ability to successfully integrate potential future acquisitions; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | unforeseen legal expenses, including litigation and settlement costs.
| | - |  | ---------------------------------------------------------------------

In addition, a
significant portion of our operating expense is relatively fixed in nature, and planned expenditures are based in part on expectations regarding future revenue. Accordingly, unexpected revenue shortfalls might decrease our gross margins and could
cause significant changes in our operating results from quarter to quarter. If this occurs, the trading price of our common stock could fall substantially, either suddenly or over time.

In the event that our proprietary software does not operate properly, our reputation would suffer, claims would likely be asserted against us, and we
would likely be required to divert our resources from other purposes, any of which could have a material adverse effect on our business.

Proprietary software development is time-consuming, expensive and complex. We may experience difficulties with software development, industry
standards, design or marketing that could delay or prevent the development, introduction, or implementation of new solutions and enhancements. If our solutions do not function reliably or fail to achieve customer expectations in terms of
performance, customers could assert liability claims against us and/or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers.

Moreover, software as complex as ours has in the past contained, and may in the future contain, or develop, undetected defects or errors.
Material performance problems or defects in our products and services might arise in the future. Errors might result from the interface of our services with legacy systems and data, which we did not develop and the function of which is outside of
our control. Defects or errors might arise in our existing or new software or service processes. Because changes in health plan and legal requirements and practices relating to health insurance are frequent, we are continuously discovering defects
and errors in our software and service processes compared against these requirements and practices. These defects and errors and any failure by us to identify and address them could result in loss of enrollment by our customers, loss of revenue or
market share, liability to customers or others, failure to achieve market acceptance or expansion, diversion of development and other resources, injury to our reputation, and increased service and maintenance costs. Defects or errors in our product
or service processes might discourage existing or potential customers from purchasing services from us. Correcting defects or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects or errors or in
responding to resulting claims or liability might be substantial and could adversely affect our operating results.

Our customers might
assert claims against us in the future alleging that they suffered damages due to a defect, error, or other failure of our product or service processes. A claim could subject us to significant legal defense costs and adverse publicity regardless of
the merits or eventual outcome of such claim.



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If our transition from our current technology platforms to new platforms does not occur rapidly or as
efficiently as anticipated, it could have a material adverse effect on our business and results of operations.

We are expanding
our cloud-based software-as-a-service, or SaaS, offerings, including building new shared capabilities such as consumer shopping and personalization. Our ability to (i) complete that development and (ii) efficiently transition existing
enterprise-platform customers to new cloud-based components is important to our future operating results. We are also investing in platform delivery improvements that will lower our cost of implementation and configuration and improve
competitiveness. Our SaaS business model depends heavily on achieving economies of scale because the initial upfront investment is costly and the associated revenue is recognized on a ratable basis. If we fail to achieve efficient transitions,
improvements to our capabilities, appropriate economies of scale or if we fail to manage or anticipate the evolution and demand of the SaaS pricing model, then our business and operating results will be adversely affected.

If we do not continue to provide innovative products and services, along with high quality support services, that are useful to our customers and
consumers of insurance products, we might not remain competitive and our newer solutions may not be adopted by new and existing customers, which would have a material adverse effect on our business and results of operations.

Our success depends in part on our ability to successfully develop and sell innovative products and services that health insurance plans and
brokers and their customers will utilize. We must continue to invest significant resources in research and development in order to enhance our existing products and services and introduce new high quality products and services that customers will
want. If we are unable to predict preferences of our customers or consumers or industry changes, or if we are unable to modify our products and services on a timely basis, we might lose customers. Our operating results would also suffer if our
innovations are not responsive to the needs of our customers, are not appropriately timed with market opportunity, or are not effectively brought to market. As technology continues to develop, our competitors might be able to offer results that are,
or that are perceived to be, substantially similar to or better than those generated by us. This would force us to compete on additional product and service attributes and to expend significant resources in order to remain competitive.

Our success also depends on providing high quality support services to resolve any issues related to our products and services. High quality
education and customer support are important for the successful marketing and sale of our products and services and for the renewal of existing customers. If we do not help our customers quickly resolve issues and provide effective ongoing support,
our ability to sell additional products and services to existing customers would suffer and our reputation with existing or potential customers would be harmed.

We rely on data center providers, Internet infrastructure, bandwidth providers, third-party computer hardware and software, other third parties, and our
own systems for providing services to our customers, and any failure of or interruption in the services provided by these third parties or our own systems could expose us to litigation and may negatively impact our relationships with customers,
adversely affecting our brand and our business.

We currently serve our customers from two data centers, one located in Atlanta,
Georgia and the other located in El Segundo, California. While we control and have access to our servers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with
us on commercially reasonable terms, or at all. With respect to the provision of core services, our two data center agreements have remaining terms of approximately one year, and the agreements provide for either automatic renewal or routine annual
renewal unless terminated by one of the parties. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, we may be required to transfer our servers and other infrastructure to
new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so. Problems faced by our third-party data center locations, with the telecommunications network providers with whom we or they
contract, or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers. Our third-party data centers operators could decide to close their
facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy faced by our third-party data centers operators or any of the service providers with whom we or they contract may have negative effects on our business,
the nature and extent of which are difficult to predict.

In addition, our ability to deliver our web-based services depends on the
development and maintenance of the infrastructure of the Internet by third parties. This includes maintenance of a reliable network backbone with the necessary speed, data capacity, bandwidth capacity and security. Our services are designed to
operate without interruption in accordance with our service level commitments. However, we have experienced and expect that we will experience future interruptions and delays in services and availability from time to time. In the event of a
catastrophic event with respect to one or more of our systems, we may experience an extended period of system unavailability, which could negatively impact our relationship with customers. To operate without interruption, both we and our service
providers must guard against:



| |  |  | damage from fire, power loss, natural disasters and other force majeure events outside our control;
| | - |  | ---------------------------------------------------------------------------------------------------



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| |  |  | communications failures;
| | - |  | ------------------------



| |  |  | software and hardware errors, failures and crashes;
| | - |  | ---------------------------------------------------



| |  |  | security breaches, computer viruses, hacking, denial-of-service attacks and similar disruptive problems; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | other potential interruptions.
| | - |  | ------------------------------

We also rely on purchased or leased computer hardware and
software licensed from third parties in order to offer our services. These licenses are generally commercially available on varying terms. However, it is possible that this hardware and software might not continue to be available on commercially
reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained
and integrated.

We exercise limited control over third-party vendors, which increases our vulnerability to problems with technology and
information services they provide. Interruptions in our network access and services might in connection with third-party technology and information services reduce our revenue, cause us to issue refunds to customers for prepaid and unused
subscription services, subject us to potential liability, or adversely affect our renewal rates. Although we maintain insurance for our business, the coverage under our policies might not be adequate to compensate us for all losses that may occur.
In addition, we might not be able to continue to obtain adequate insurance coverage at an acceptable cost, if at all.

Various events could
interrupt customers access to our platform, exposing us to significant costs.

The ability to access our platform is
critical to our customers. Our operations and facilities are vulnerable to interruption and/or damage from a number of sources, many of which are beyond our control, including, without limitation: (i) power loss and telecommunications failures,
(ii) fire, flood, hurricane, and other natural disasters, (iii) software and hardware errors, failures or crashes in our own systems or in other systems, (iv) computer viruses, denial-of-service attacks, hacking and similar disruptive
problems in our own systems and in other systems, and (v) civil unrest, war, and/or terrorism. We have implemented various measures to protect against interruptions of customers access to our platform. If customers access is
interrupted because of problems in the operation of our facilities, we could be exposed to significant claims by customers. Our plans for disaster recovery and business continuity rely on third-party providers of related services. If those vendors
fail us at a time when our systems are not operating correctly, we could incur a loss of revenue and liability for failure to fulfill our obligations. Any significant instances of system downtime could negatively affect our reputation and ability to
retain customers and sell our services, which would adversely impact our revenue.

If our security measures are breached or fail, and unauthorized
persons gain access to customers and consumers data, our products and services might be perceived as being unsecure, customers and consumers might curtail or stop using our products and services, and we might incur significant
liabilities.

Our products and services involve the collection, processing, storage and transmission of customers and
consumers confidential information, which may include sensitive individually identifiable information that is subject to stringent statutory and regulatory obligations. Because of the sensitivity of this information, security features of our
software and applications are very important. From time to time we may detect vulnerabilities in our systems, which, even if they do not result in a security breach, may reduce customer confidence and require substantial resources to address. If our
security measures or those of our third-party service providers are breached or fail and/or are bypassed as a result of third-party action, employee error, malfeasance, or otherwise, someone might be able to obtain unauthorized access to our
customers confidential information and/or patient data. As a result, our reputation could be damaged, our business might suffer, and we could face damages for contract breach, penalties for violation of applicable laws or regulations, and
significant costs for remediation efforts to prevent future occurrences.

In addition, we rely on various third parties, including health
plans, brokers and other third-party service providers and consumers themselves, as users of our system, for key activities to protect and promote the security of our systems and the data and information accessible within them, such as enrollment
information, consumer status changes and payment. On occasion, certain individuals have failed to perform these activities. For example, authorized users have failed to administer and use the login/password appropriately, which may allow the system
to be accessed by unauthorized third parties. When we become aware of such breaches or incidents, we work with our customers to remedy the issue, terminate inappropriate access as necessary, and provide additional instruction in order to avoid the
reoccurrence of such problems. Although to date these breaches have not resulted in claims against us or in material harm to our business, failures to perform these activities might result in claims against us, which could expose us to significant
expense, legal liability, and harm to our reputation, which might result in loss of business.



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Our security measures, and those of our third-party service providers, may not detect or prevent
all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our sites, networks and
systems or that we or our third-party service providers otherwise maintain, including payment card systems which may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. Because techniques used
to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we and our hosting service providers might not be able to detect or prevent these techniques or to implement
adequate preventive measures until after the techniques or other attacks have already been launched. If an actual or perceived breach of our security or that of our hosting service providers occurs, the market perception of the effectiveness of our
security measures could be harmed and we could lose sales and customers. In addition, our customers might authorize or enable third parties to access their information and data that is stored on our systems. Because we do not control such access, we
cannot ensure the complete integrity or security of such data in our systems.

For a more detailed discussion of the risks associated with
a failure by us to comply with any of the federal and state standards regarding patient privacy, identity theft prevention and detection and data security, see the risk factor below under Risks Related to RegulationThe healthcare
and health insurance industries are heavily regulated. Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business.

Our substantial level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react
to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting obligations on our indebtedness.

We have a substantial amount of indebtedness. As of March 31, 2015, our total indebtedness was $49.5 million. Our substantial level
of indebtedness could adversely affect our financial condition and increase the possibility that we may be unable to generate cash sufficient to pay, when due, the principal, interest or other amounts due in respect of our indebtedness. Our
substantial indebtedness, combined with our other existing and any future financial obligations and contractual commitments, could have important adverse consequences. For example, it could:



| |  |  | make it more difficult for us to satisfy our obligations with respect to our indebtedness, including making interest payments on our debt obligations, and any failure to comply with the obligations under any of our debt
instruments, including restrictive covenants, could result in an event of default under the agreements governing such indebtedness;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, selling and marketing efforts,
research and development and other purposes;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | cause us to incur substantial fees from time to time in connection with debt amendments or refinancing;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | place us at a disadvantage compared to our competitors that have less debt;
| | - |  | ---------------------------------------------------------------------------



| |  |  | limit our ability to pursue acquisitions;
| | - |  | -----------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business and the health insurance industry;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, selling and marketing efforts, research and development and other
corporate purposes; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See the section titled Liquidity and Capital ResourcesSenior Credit Facility for a description of our bank credit facility.

We might require additional capital to support business growth, and this capital might not be available.

We intend to continue to make investments to support our business growth and might require additional funds to respond to business challenges
or opportunities, including the need to develop new products and services or enhance our existing services,



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enhance our operating infrastructure, and acquire complementary businesses and technologies. Accordingly, we might need to engage in equity or debt financings to secure additional funds. If we
raise additional funds through new issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to
those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for
us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we might not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate
financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

Because we recognize revenue and expense relating to delivery of software, transaction fees and professional services over varying periods, downturns or
upturns in sales are not immediately reflected in full in our operating results.

We recognize recurring revenue monthly over the
term of our contracts and recognize the majority of our professional services revenue ratably over the contract term or the estimated expected life of the customer relationship, whichever is longer. As a result, a portion of the revenue we report
each quarter is the recognition of deferred revenue from contracts we entered into during previous quarters. Consequently, a shortfall in demand for our software solutions and professional services or a decline in new or renewed contracts in any one
quarter might not significantly reduce our revenue for that quarter, but could negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in new or renewed sales of our products and services is not reflected
in full in our results of operations until future periods. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, because revenue from new customers must be recognized
over the applicable term of the contracts or the estimated expected life of the customer relationship period, whichever is longer. In addition, we recognize professional services expenses as incurred, which could cause professional services gross
margin to be negative.

We have recorded a significant amount of goodwill, intangible assets and deferred implementation costs. We may need to
record write-downs from future impairments of these assets, which could adversely affect our costs and business operations.

Our
consolidated balance sheet includes significant goodwill, intangible assets and deferred implementation costs, including $26.8 million in goodwill, $14.4 million in other intangible assets and $25.2 million of deferred implementation costs, together
representing approximately 69% of our total assets as of March 31, 2015. The determination of related estimated useful lives and whether these assets are impaired involves significant judgments and our ability to accurately predict future cash
flows related to these intangible assets may not be accurate. We test our goodwill for impairment each fiscal year, but we also test goodwill, other intangible assets and deferred implementation costs for impairment at any time when there is a
change in circumstances that indicates that the carrying value of these assets may be impaired. Any future determination that these assets are carried at greater than their fair value could result in substantial non-cash impairment charges, which
could significantly impact our reported operating results.

If we are required to collect sales and use taxes in additional jurisdictions, we might
be subject to liability for additional sales and use taxes and our future sales may decrease.

We might incur significant
expenses, and, as a result, lose sales, if states successfully impose broader guidelines on state sales and use taxes or successfully argue that current guidelines apply to us. We currently collect sales and use tax in a limited number of states. A
successful assertion by one or more states requiring us to collect sales or other taxes on the licensing of our software or sale of our services could result in substantial tax liabilities for past transactions and otherwise harm our business. Each
state has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time. We review these rules and regulations periodically and, when we believe we are
subject to sales and use taxes in a particular state, voluntarily engage with state tax authorities in order to determine how to comply with their rules and regulations. We cannot assure you that we will not be subject to sales and use taxes or
related interest and penalties for past sales or use taxes in states where we currently believe no such taxes are required.

Vendors of
services, like us, are typically held responsible by taxing authorities for the collection and payment of any applicable sales and similar taxes. If one or more taxing authorities determines that taxes should have, but have not, been paid with
respect to our services, we might be liable for past taxes in addition to taxes going forward. Liability for past taxes might also include substantial interest and penalty charges. Our customer contracts typically provide that our customers must pay
all applicable sales and similar taxes. Nevertheless, our customers might be reluctant to pay back taxes and might refuse responsibility for interest or penalties associated with those taxes. If we are required to collect and pay back taxes and the
associated interest and penalties, and if our customers fail or refuse to reimburse us for all or a portion of these amounts (or if we decline to seek reimbursement from our clients), we will incur unplanned expenses that may be substantial.
Moreover, imposition of such taxes on us going forward will effectively increase the cost of our software and services to our customers and might adversely affect our ability to retain existing customers or to gain new customers in the areas in
which such taxes are imposed.



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We might not be able to utilize a significant portion of our net operating loss or other tax credit
carryforwards, which could adversely affect our future operating cash flows.

As of March 31, 2015, we had federal and state
net operating loss carryforwards due to prior period losses, which if not utilized, will begin to expire in 2020. These carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our
future operating cash flows.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize
net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an ownership change. A Section 382 ownership change generally occurs if one or more stockholders or groups of
stockholders who own at least 5% of our stock increase their collective ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules might apply under state tax laws. As a
result of prior equity issuances and other transactions in our stock, we have previously experienced ownership changes under Section 382 which limit the amount of net operating losses available to us. Future issuances and other
transactions in our stock may cause an additional ownership change. Accordingly, the application of Section 382 could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could
adversely affect our future operating cash flows.

As of March 31, 2015 and December 31, 2014, we have recorded a full valuation
allowance against net operating loss carryforwards, because we believe it is more likely than not that some portion or all of these deferred tax assets will not be realized.

Failure to adequately expand our direct sales force will impede our growth.

We believe that our future growth will depend on the continued expansion of our direct sales force and its ability to obtain new customers and
sell additional products and services to existing customers. Identifying and recruiting qualified personnel and training them in the use of our software requires significant time, expense, and attention. It can take up to six months or longer before
a new sales representative is fully trained and productive. Our business may be adversely affected if our efforts to expand and train our direct sales force do not generate a corresponding increase in revenue. In particular, if we are unable to hire
and develop sufficient numbers of productive direct sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, sales of our products and services will suffer and our growth will
be impeded.

Our government business relies on working effectively with the prime contractors that hold the contract with the government customers
and those contracts being renewed or extended, as applicable. To the extent those relationships are not positively maintained or such contracts, such as our subcontract in connection with the Centers for Medicare and Medicaid Services, or CMS,
contract, are not renewed or extended, it could have a material adverse effect on our business.

In our government business to
date, we have only worked as a subcontractor to prime contractors and systems integrators that contract directly with the federal government and state governments. In the scope of these relationships, we have provided specified components of the
applicable government entitys overall request, but have not assumed responsibility for the operation of the government websites. Based on our risk analysis of multiple factors, including the scope of the government entitys request, the
total potential contract value and the terms and conditions of the applicable contract, we have determined that operating in a subcontractor role has been most appropriate for our government business. It may or may not be more beneficial for us to
contract directly with the government due to various factors including insurance, risk and liability issues. In order to secure government business, it is important that we identify and market our capabilities to the prime contractor community,
participate on joint requests for proposals, and maintain effective working relationships throughout the term of the contract.

In many
cases, payment for our products and services is dependent upon the prime contractor getting paid by the government customer. As such, we may not be paid on a timely basis or at all if the prime contractor or other subcontractors have not completed
their work.



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We use staff contracting firms located internationally or that source their resources from outside the
United States to augment our employee base and assist in the development, distribution and delivery of our solutions. Future work with these firms might expose us to risks that could have a material adverse effect on our business.

We use staff contracting firms (both onshore and offshore) to scale up or down based on customer needs, work across various time zones to meet
speed to market requirements, and lower our total cost of delivery. For over nine years, we have used staff contracting firms with employees located internationally. Associated risks include:



| |  |  | operating in international markets requires significant resources and management attention and might subject us to regulatory, economic, and political risks that are different from those in the United States, including
data privacy and security considerations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ability of our vendor firms to continue to identify and staff local talent that meets our quality and turnaround requirements;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | currency fluctuations which raises the price of offshore labor and does not allow us to obtain cost efficiencies;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | difficulties in working with firms that staff and manage foreign operations;
| | - |  | ----------------------------------------------------------------------------



| |  |  | weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse tax consequences; and
| | - |  | -----------------------------



| |  |  | unstable regional economic and political conditions.
| | - |  | ----------------------------------------------------

In addition, our customers may require
us to staff projects with only employed or domestically-based staff. That requirement could increase our cost of delivery, which in turn could decrease our competiveness and lower our overall profitability.

Any future litigation against us could be costly and time-consuming to defend and could have a material adverse effect on our business, financial
condition and results of operations.

We may become subject, from time to time, to legal proceedings and claims that arise in the
ordinary course of business such as claims brought by our customers in connection with commercial disputes or employment claims made by our current or former employees. Litigation might result in substantial costs and may divert managements
attention and resources, which might seriously harm our business, overall financial condition, and operating results. We generally intend to defend ourselves vigorously; however, we cannot be certain of the ultimate outcomes of any claims that may
arise in the future. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us
that is uninsured or underinsured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance, which could reduce the trading price of our
stock. Additionally, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased
risks that would be uninsured and adversely impact our ability to attract officers and directors.

We might be unable to adequately protect our
intellectual property, and intellectual property claims against us could result in the loss of significant rights. Even if we are successful in enforcing our intellectual property rights, we may incur significant costs in doing so, which could have
a material adverse effect on our business.

Our success depends in part upon our ability to protect our core technology and
intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including trademark, copyright, trade secret and other intellectual property rights, as well as customary contractual protections. Our intellectual
property rights extend to our technologies and software applications. We also rely on intellectual property licensed from third parties. Our attempts to protect our intellectual property might be challenged by others or invalidated through
administrative process or litigation. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties might gain access to our proprietary information, develop and market products or services
similar to ours, or use trademarks similar to ours, each of which could materially harm our business.

From time to time, third parties
have alleged, and may allege in the future that we have violated their intellectual property rights. If we are forced to defend ourselves against intellectual property infringement claims, regardless of the merit or ultimate result of such claims,
we may face costly litigation, diversion of technical and management personnel, limitations on our ability to market or provide our products and services. As a result of any such dispute, we may have to:



| |  |  | develop non-infringing technology;
| | - |  | ----------------------------------



| |  |  | pay damages or refund fees;
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| |  |  | enter into or modify royalty or licensing agreements;
| | - |  | -----------------------------------------------------



| |  |  | cease providing certain products or services; or
| | - |  | ------------------------------------------------



| |  |  | take other actions to resolve the claims.
| | - |  | -----------------------------------------

Moreover, if we are unable to implement one or more
of the remedial actions described above, we may be prevented from continuing to offer, and our customers may be prevented from continuing to use, any of our affected products or services.

The use of open source software in our products and solutions may expose us to additional risks and harm our intellectual property rights.

Some of our products and solutions use or incorporate software that is subject to one or more open source licenses. Open source software is
typically freely accessible, usable, and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as a component of the users software to disclose publicly part or all of the source
code to the users software. In addition, certain open source software licenses require the user of such software to make any derivative works of the open source code available to others on potentially unfavorable terms or at no cost.

The terms of many open source licenses to which we are subject have not been interpreted by United States or foreign courts. Accordingly,
there is a risk that those licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our solutions. In that event, we could be required to seek licenses from third parties in order
to continue offering our products or solutions, to re-develop our products or solutions, to discontinue sales of our products or solutions, or to release our proprietary software code under the terms of an open source license, any of which could
harm our business. Further, given the nature of open source software, it may be more likely that third parties might assert copyright and other intellectual property infringement claims against us based on our use of these open source software
programs.

While we monitor the use of all open source software in our products, solutions, processes, and technology and try to ensure
that no open source software is used in such a way as to require us to disclose the source code to the related product or solution when we do not wish to do so, it is possible that such use may have inadvertently occurred in deploying our
proprietary solutions. In addition, if a third-party software provider has incorporated certain types of open source software into software we license from such third party for our products and solutions without our knowledge, we could, under
certain circumstances, be required to disclose the source code to our products and solutions. This could harm our intellectual property position and our business, results of operations, and financial condition.

Our confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information, and
any such disclosure could have a material adverse effect on our business.

We have devoted substantial resources to the
development of our technology, business operations and business plans. In order to protect our trade secrets and proprietary information, we rely in significant part on confidentiality arrangements with our employees, independent contractors,
advisers and customers. These arrangements may not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
In addition, others may independently discover trade secrets and proprietary information, and in such cases we would not be able to assert trade secret rights against such parties. The loss of trade secret protection could make it easier for third
parties to compete with our products and services by copying functionality. In addition, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws may compromise our ability to enforce our trade secret
and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could have a material adverse effect on
our business.

If we acquire companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute
stockholder value, and adversely affect our operating results and the value of our common stock.

As part of our business
strategy, we might acquire, enter into joint ventures with, or make investments in complementary companies, services, and technologies in the future. For example, in 2013, we acquired DestinationRx, Inc., or DRX. We spent considerable time, effort,
and money acquiring this company and integrating it into our business. Acquisitions and investments involve numerous risks, including:



| |  |  | difficulties in identifying and acquiring products, technologies or businesses that will help our business;
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| |  |  | difficulties in integrating operations, technologies, services and personnel;
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| |  |  | diversion of financial and managerial resources from existing operations;
| | - |  | -------------------------------------------------------------------------



| |  |  | risk of entering new markets in which we have little to no experience; and
| | - |  | --------------------------------------------------------------------------



| |  |  | delays in customer purchases due to uncertainty and the inability to maintain relationships with customers of the acquired businesses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

If we fail to properly evaluate acquisitions or investments, we might not achieve the anticipated benefits of any such acquisitions, we might
incur costs in excess of what we anticipate, and management resources and attention might be diverted from other necessary or valuable activities, which would have a material adverse effect on our business and results of operations.

Consolidation in the health insurance industry in which our customers operate could cause us to lose customers or could reduce the volume of services
purchased by consolidated customers following an acquisition or merger, which could have a material adverse effect on our business.

Consolidation in the health insurance industry has accelerated in recent years, and this trend could continue. We may lose customers due to
industry consolidation, and we may not be able to expand sales of our solutions and services to new customers to replace lost customers. In addition, new companies or organizations that result from such consolidation may decide that our solutions
are no longer needed because of their own internal processes or the use of alternative solutions. As these entities consolidate, competition to provide solutions and services to industry participants will become more intense and the importance of
establishing relationships with large industry participants will become greater. These industry participants may try to use their market power to negotiate price reductions for our solutions. Also, if consolidation of larger current customers
occurs, the combined company may represent a larger percentage of business for us and, as a result, we are likely to rely more significantly on the combined companys revenue to continue to achieve growth. As a result, industry consolidation or
consolidation among current customers or potential customers could adversely affect our business.

We depend on our senior management team and other
key employees, and the loss of one or more key personnel or an inability to attract hire, integrate and retain highly skilled personnel could adversely affect our business.

Our success depends largely upon the continued services of key personnel. We also rely on our leadership team in the areas of research and
development, marketing, services, and general and administrative functions, and on mission-critical individual contributors in research and development. From time to time, there may be changes in our executive management team resulting from the
hiring or departure of executives, which could disrupt our business. The loss of one or more of our executive officers or other key employees could have a serious adverse effect on our business. The replacement of one or more of our executive
officers or other key employees would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

To continue to execute our growth strategy, we also must identify, hire and retain highly skilled personnel. Competition is intense for
engineers with high levels of experience in designing and developing software and Internet-related services. We might not be successful in maintaining our unique culture and continuing to attract and retain qualified personnel. We have from time to
time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled personnel with appropriate qualifications. The pool of qualified personnel is limited overall and specifically in
the geographic regions in which our principal offices are located. Failure to identify, hire and retain necessary key personnel could have a material adverse effect on our business, financial condition and results of operations.

Consumers of health insurance are increasingly relying on mobile devices as part of their decision-making process. If we are unsuccessful in expanding
the capabilities of our shopping tools for mobile platforms, it could adversely affect our business.

We believe that consumers of
health insurance are increasingly relying on mobile devices, such as smartphones and tablets, in connection with their health insurance purchasing decisions. Traditionally, our solutions have been designed for desktop platforms, and we must develop
new capabilities to deliver compelling user experiences via mobile devices. To deliver high quality mobile offerings, it is important that our solutions integrate with a wide range of other mobile technologies, systems, networks and standards that
we do not control. We may not be successful in developing products that operate effectively with these technologies, systems, networks or standards. Further, our success on mobile platforms will be dependent on our interoperability with popular
mobile operating systems that we do not control, such as Android, iOS and Windows Mobile, and any change in such systems that degrade our functionality or give preferential treatment to competitive products could adversely affect usage of our
solutions through mobile devices. If we fail to achieve success with our mobile offerings, our ability to deliver compelling user experiences to consumers as they increasingly rely on mobile devices in connection with their health insurance
purchasing decisions will be constrained and our business could be adversely affected.



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If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion and
focus on execution that we believe contribute to our success, which could have a material adverse effect on our business.

We
believe that a critical component to our success has been our corporate culture. We have invested substantial time and resources in building our team. As we continue to grow, we may find it difficult to maintain the innovation, teamwork, passion and
focus on execution that we believe are important aspects of our corporate culture. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and
pursue our corporate objectives.

Failure by our customers to obtain proper permissions and waivers might result in claims against us or may limit
or prevent our use of data, which could have a material adverse effect on our business.

We require our customers to provide
necessary notices and to obtain necessary permissions and waivers for use and disclosure of information on our platform, and we require contractual assurances from them that they have done so and will do so. If, however, despite these requirements
and contractual obligations, our customers do not obtain necessary permissions and waivers, then our use and disclosure of information that we receive from them or on their behalf might be limited or prohibited by state or federal privacy laws or
other laws. This could impair our functions, processes and databases that reflect, contain, or are based upon such data and might prevent use of such data. In addition, this could interfere with, or prevent creation or use of, rules, analyses, or
other data-driven activities that benefit us and our business. Moreover, we might be subject to claims or liability for use or disclosure of information by reason of lack of valid notices, agreements, permissions or waivers. These claims or
liabilities could subject us to unexpected costs and adversely affect our operating results.

Risks Related to Regulation

The healthcare and health insurance industries are heavily regulated. Our failure to comply with regulatory requirements could create liability for us,
result in adverse publicity and negatively affect our business.

The healthcare and health insurance industries are highly
regulated and are subject to changing political, legislative, regulatory, and other influences. Existing and new laws and regulations could create unexpected liabilities for us, cause us to incur additional costs and restrict our operations. These
laws and regulations are complex and their application to specific services and relationships are not clear. In particular, many existing laws and regulations affecting healthcare and health insurance and related benefits or products when enacted,
did not anticipate the services that we provide, and these laws and regulations might be applied to our services in ways that we do not anticipate. Our failure to accurately anticipate the application of these laws and regulations, or our failure to
comply, could require us to change our operations or cease using certain datasets, create liability for us, result in adverse publicity, and negatively affect our business. Some of the risks we face from the regulation of healthcare and health
insurance are as follows:



| |  |  | Patient Protection and Affordable Care Act.Numerous lawsuits have challenged and continue to challenge the constitutionality and other aspects of PPACA, and regulations and regulatory guidance continue to
be issued on various aspects of PPACA that may affect our business. While many of the provisions of PPACA are not directly applicable to us, PPACA, as enacted, affects the business of many of our customers. Our customers might experience changes in
the numbers of individuals they insure as a result of Medicaid expansion and the creation of state and national exchanges. Although we are unable to predict with any reasonable certainty or otherwise quantify the likely impact of PPACA on our
business model, financial condition, or results of operations, changes in the business of our customers and the number of individuals they insure may negatively impact our business.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | False or Fraudulent Claim Laws.There are numerous federal and state laws that forbid submission of false information or the failure to disclose information in connection with submission and payment of
claims for reimbursement from the government. In some cases, these laws also forbid abuse of existing systems for such submission and payment. Any contract we have with a government entity or in support of a government entity requires us to comply
with these laws and regulations. Any failure of our services to comply with these laws and regulations could result in substantial liability, including but not limited to criminal liability, could adversely affect demand for our services, and could
force us to expend significant capital, research and development, and other resources to address the failure. Any determination by a court or regulatory agency that our services with government customers violate these laws and regulations could
subject us to civil or criminal penalties, invalidate all or portions of some of our government customer contracts, require us to change or terminate some portions of our business, require us to refund portions of our services fees, cause us to be
disqualified from serving not only government customers but also all customers doing business with government payers, and have an adverse effect on our business.
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| |  |  | HIPAA and Other Privacy and Security Requirements. There are numerous federal and state laws and regulations related to the privacy and security of personal health information. In particular, regulations
promulgated pursuant to the Health Insurance Portability and Accountability Act of 1996, or HIPAA, established privacy and security standards, or Privacy Standards and Security Standards, that limit the use and disclosure of individually
identifiable health information, and require the implementation of administrative, physical, and technological safeguards to ensure the confidentiality, integrity, and availability of individually identifiable health information in electronic form.
Health plans, healthcare clearinghouses, and most providers are considered by the HIPAA regulations to be Covered Entities. With respect to our operations, we are a Business Associate of our health plan customers and we are directly
subject to the privacy and security regulations established under HIPAA. We enter into written Business Associate Agreements with our health plan customers, under which we are required to safeguard individually identifiable health information and
comply with restrictions how we may use and disclose such information. Effective February 2010, the American Recovery and Reinvestment Act of 2009, or ARRA, and effective March 2013, the HIPAA Omnibus Final Rules extended the direct application of
certain provisions of the Privacy Standards and Security Standards to us when we are functioning as a Business Associate of our health plan customers. ARRA and the HIPAA Omnibus Final Rule also subject Business Associates to direct oversight and
audit by the HHS.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Violations of the Privacy Standards and Security Standards might result in civil and criminal penalties,
and ARRA increased the penalties for HIPAA violations and strengthened the enforcement provisions of HIPAA. For example, ARRA authorizes state attorneys general to bring civil actions seeking either injunctions or damages in response to violations
of Privacy Standards and Security Standards that threaten the privacy of state residents. Additionally, some health plans interpret HIPAA requirements differently than we do, and as our customers are the Covered Entity under HIPAA we may be required
to comply with their interpretations.

We might not be able to adequately address the business risks created by HIPAA implementation.
Furthermore, we are unable to predict what changes to HIPAA or other laws or regulations might be made in the future or how those changes could affect our business or the costs of compliance.

In addition to the Privacy Standards and Security Standards, most states have enacted patient confidentiality laws that protect against the
disclosure of confidential medical and/or health information, and many states have adopted or are considering further legislation in this area, including privacy safeguards, security standards, and data security breach notification requirements.
Such state laws, if more stringent than HIPAA requirements, are not preempted by the federal requirements and we are required to comply with them. Additionally, other laws or standards may apply to our operations, including requirements related to
handling certain financial information, federal tax information, or FTI, and payment card association operating rules with respect to credit card data.

Failure by us to comply with any state standards regarding patient privacy may subject us to penalties, including civil monetary penalties
and, in some circumstances, criminal penalties. Such failure may injure our reputation and adversely affect our ability to retain customers and attract new customers.



| |  |  | Medicare and Medicaid Regulatory Requirements. We have contracts with health plans that offer Medicare Managed Care (also known as Medicare Advantage or Medicare Part C). We also have contracts with health
plans that offer Medicare prescription drug benefits (also known as Medicare Part D) plans. The activities of the Medicare plans are regulated by CMS. Though our health plan customers remain responsible to comply with CMS requirements, we
operate as a First Tier, Downstream & Related Entity, or FDR, in support of our customers. Some of the activities that we might perform, such as the enrollment of beneficiaries, may be subject to CMS and/or state regulation, and such
regulations may force us to change the way we do business or otherwise restrict our ability to provide services to such plans. Moreover, the regulatory environment with respect to these programs has become, and will likely continue to become,
increasingly complex.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Financial Services-Related Laws and Rules. Financial services and electronic payment processing services are subject to numerous laws, regulations and industry standards, some of which might impact our
operations and subject us, our vendors, and our customers to liability as a result of the payment distribution and processing solutions we offer. In addition, payment distribution and processing solutions might be impacted by payment card
association operating rules, certification requirements, and rules governing electronic funds transfers. If we fail to comply with applicable payment processing rules or requirements, we might be subject to fines and changes in transaction fees and
may lose our ability to process credit and debit card transactions or facilitate other types of billing and payment solutions. Moreover, payment transactions processed using the Automated Clearing House Network, or ACH, are subject to network
operating rules promulgated by the National Automated Clearing House Association and to various federal laws regarding such operations, including laws pertaining to electronic funds transfers, and these rules and laws might impact our billing and
payment solutions. Further, our solutions might impact the ability of our payer customers to comply with state prompt payment laws. These laws require payers to pay healthcare claims meeting the statutory or regulatory definition of a clean
claim within a specified time frame.
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| |  |  | Insurance Broker Laws. Insurance laws in the United States are often complex, and states have broad authority to adopt regulations regarding brokerage activities. These regulations typically include the
licensing of insurance brokers and agents and govern the handling and investment of customer funds held in a fiduciary capacity. We and our broker/agency customers may be subject to some of these regulations, and may not be able to fully comply.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ERISA. The Employee Retirement Income Security Act of 1974, as amended, or ERISA, regulates how employee benefits are provided to or through certain types of employer-sponsored health benefits plans. ERISA
is a set of laws and regulations that is subject to periodic interpretation by the United States Department of Labor as well as the federal courts. In some circumstances, and under certain customer contracts, we might be deemed to have assumed
duties that make us an ERISA fiduciary, and thus be required to carry out our operations in a manner that complies with ERISA in all material respects. We believe that our current operations do not render us subject to ERISA fiduciary obligations,
and therefore that we are in material compliance with ERISA and that any such compliance does not currently have a material adverse effect on our operations. However, there can be no assurance that continuing ERISA compliance efforts or any future
changes to ERISA will not have a material adverse effect on us.
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| |  |  | Third-Party Administrator Laws. Numerous states in which we do business have adopted regulations governing entities engaged in third-party administrator, or TPA, activities. TPA regulations typically impose
requirements regarding enrollment into benefits plans, claims processing and payments, and the handling of customer funds. Although we do not believe we are currently acting as a TPA, changes in state regulations could result in us being obligated
to comply with such regulations, which might require us to obtain licenses to provide TPA services in such states.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The growth in the
Medicare plan market is important to the overall growth rate of our business. The marketing and sale of Medicare plans are subject to numerous, complex and frequently changing laws and regulations, and the impact of changes in laws related to
Medicare or any failure to comply with them could harm our business, results of operations and financial condition.

The number of
people eligible for Medicare is one of the most significant drivers in the growth of Medicare plans. Any changes in the eligibility requirements for Medicare such as raising the age of eligibility would decrease the available pool of recipients and
lower our growth expectations.

The marketing and sale of Medicare plans are subject to numerous laws, regulations and guidelines at both
the Federal and state level. The marketing and sale of Medicare Advantage and Medicare Part D prescription drug plans are principally regulated by CMS, which is a division of the United States Department of Health and Human Services, and the
marketing and sale of Medicare supplement plans is principally regulated on a state- by- state basis by state departments of insurance. The laws and regulations applicable to the marketing and sale of Medicare plans lack clarity, are numerous and
complex, were not drafted to contemplate health insurance exchanges, and change frequently, particularly with respect to regulations and guidance issued by CMS for Medicare Advantage and Medicare Part D prescription drug plans and by the various
state departments of insurance for Medicare supplement plans.

As a result of these laws, regulations and guidelines, we have altered, and
will need to continue to alter, our business operations and procedures, including without limitation, to comply with these changing requirements. Though our health plan customers remain responsible to comply with CMS requirements, we operate as an
FDR, in support of our customers. Changes to the laws, regulations and guidelines relating to Medicare plans, the scope of their application to our business, their interpretation by regulators or our health plan customers, or the manner in which
they are enforced could be incompatible with our business model. As a result, our business could be slowed or we could be prevented from operating portions of our business altogether, either of which would materially harm our results of operations
and financial condition, particularly if this occurred during the Medicare annual enrollment period, which is when the vast majority of Medicare plans are sold.

Health plans may adjust their commission rates to comply with regulatory guidelines, such as those published by CMS with respect to the
marketing of Medicare Advantage and Medicare Part D prescription drug plans. If these contractual changes result in reduced commissions, our revenue may decline. Because insurance rates may vary between health plans, plans and enrollment dates,
changes in enrollment mix may impact our commission revenue. Future changes in health plan pricing practices could harm our business, results of operations and financial condition.

In March 2010, the Federal government enacted significant reforms to healthcare legislation through the PPACA and the HCERA, which we refer to
collectively as Healthcare Reform. In addition, one of the elements of the recently passed Budget Control Act of 2011 is the creation of a joint select committee on deficit reduction to develop recommendations, including changes to



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entitlement programs such as Medicare, to reduce the national debt by at least $1.5 trillion over 10 years. In connection with the United Sates Congresss failure to agree on a proposal to
lower the national deficit, the Budget Control Act mandates automatic cuts to domestic and defense spending, including a significant reduction in Medicare spending. The impact that Healthcare Reform and the Budget Control Act will have on the market
for Medicare plans could change the demand for Medicare plans, the way these plans are delivered, or the commissions that health plans pay to us in connection with their sale or otherwise adversely impact us.

In the event that these laws and regulations or changes in these laws and regulations, or other laws and regulations that impact the marketing
and sale of Medicare plans, adversely impact our ability or our customers ability to market any type of Medicare plan on an exchange platform or the commissions that we receive for selling these plans, our business, results of operations and
financial condition would be harmed.

Additional regulatory requirements placed on our software, services, and content could impose increased costs
on us, delay or prevent our introduction of new service types, and impair the function or value of our existing service types.

Our products and services are and are likely to continue to be subject to increasing regulatory requirements in a number of ways. As these
requirements proliferate, we must change or adapt our products and services to comply. Changing regulatory requirements might render our services obsolete or might prevent us from pursuing our business objective or developing new services. This
might in turn impose additional costs upon us to comply or to further develop our products and services. It might also make introduction of new product or service types more costly or more time-consuming than we currently anticipate. It might even
prevent introduction by us of new products or services or cause the continuation of our existing products or services to become unprofitable or impossible.

Potential government subsidy of services similar to ours, or creation of a single-payer system, might reduce customer demand.

Recently, entities including brokers and United States federal and state governments have offered to subsidize adoption of online benefits
platforms or clearinghouses. In addition, prior proposals regarding healthcare reform have included the concept of creation of a single payer for health insurance. This kind of consolidation of critical benefits activity could negatively impact the
demand for our services.

Risk Related to Ownership of our Common Stock

Our stock price may be volatile.

The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors,
including the risk factors described in this Risk Factors section and elsewhere in this Quarterly Report on Form 10-Q and other factors which are beyond our control. These factors include:



| |  |  | our operating performance and the operating performance of similar companies;
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| |  |  | the overall performance of the equity markets;
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| |  |  | announcements by us or our competitors of acquisitions, business plans, or commercial relationships;
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| |  |  | threatened or actual litigation;
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| |  |  | changes in laws or regulations relating to the sale of health insurance;
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| |  |  | any major change in our board of directors or management;
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| |  |  | publication of research reports or news stories about us, our competitors, or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
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| |  |  | large volumes of sales of our shares of common stock by existing stockholders; and
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| |  |  | general political and economic conditions.
| | - |  | ------------------------------------------

In addition, the stock market in general, and the
market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often
been instituted against companies following periods of volatility in the overall market and in the market price of a companys securities. This litigation, if instituted against us, could result in substantial costs, divert our
managements attention and resources, and harm our business, operating results, and financial condition.



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Our management team had no prior experience managing a public company prior to our initial public offering,
and regulatory compliance may divert its attention from day-to-day management of our business, which could have a material adverse effect on our business.

The individuals who now constitute our management team had no prior experience managing a publicly-traded company or complying with the
increasingly complex laws pertaining to public companies prior to our initial public offering. Our management team may not successfully or efficiently manage our continued transition to a public company that will be subject to significant regulatory
oversight and reporting obligations under the federal securities laws and the regulations imposed by the NASDAQ Global Market. In particular, these new obligations require substantial attention from our senior management and could divert their
attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.

A limited
number of stockholders have the ability to influence the outcome of director elections and other matters requiring stockholder approval.

As of April 30, 2015, our directors, executive officers, and their affiliated entities beneficially owned approximately 22% of our
outstanding common stock. In addition, a limited number of stockholders beneficially own more than a majority of our outstanding common stock. These stockholders, if they act together, could exert substantial influence over matters requiring
approval by our stockholders, including the amendment of our amended and restated certificate of incorporation and amended and restated bylaws, and the approval of mergers or other business combination transactions.

This concentration of ownership might discourage, delay, or prevent a change in control of our company, which could deprive our stockholders
of an opportunity to receive a premium for their stock as part of a sale of our company and might reduce our stock price. These actions may be taken even if they are opposed by other stockholders.

Future sales of shares of our common stock by existing stockholders could depress the market value of our common stock.

As of April 30, 2015, we had 21,703,244 shares of common stock outstanding. The 7,630,250 shares sold in our initial public offering were
freely tradable immediately after the offering and of the remaining 14,072,994 shares outstanding as of April 30, 2015, 13,890,967 shares are currently restricted as a result of lock-up agreements executed in connection with our initial public
offering. These shares will be available for sale into the public market on June 10, 2015, subject in some cases to volume and other limitations. The representatives of the underwriters in our initial public offering may, in their sole
discretion and at any time without notice, release all or any portion of the securities subject to the lock-up agreements. A large portion of these shares are held by a small number of persons and investment funds. Sales by these stockholders of a
substantial number of shares could significantly reduce the market price of our common stock. Moreover, some holders of shares of common stock will have rights, subject to some conditions, to require us to file registration statements covering the
shares they currently hold, or to include these shares in registration statements that we might file for ourselves or other stockholders.

On December 19, 2014, we registered an aggregate of 3,114,990 shares of our common stock that we have issued or may issue under our
equity incentive plans, which shares can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above, various vesting agreements and in some cases, to volume and other restrictions. As of April 30,
2015, there were stock options to purchase 2,343,461 shares of our common stock and unvested restricted stock units representing 504,250 shares of our common stock outstanding. If a large number of these shares are sold in the public market, the
sales could reduce the trading price of our common stock.

If securities or industry analysts do not continue to publish research or reports about
our business, or publish inaccurate or unfavorable research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock, to some extent, depends on the research and reports that securities or industry analysts publish
about us and our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our stock price would likely decline. If one or more of
these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

We have incurred and will continue to incur significant increased expenses and administrative burdens as a public company, which could have a material
adverse effect on our operations and financial results.

We face increased legal, accounting, administrative and other costs and
expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the
Securities and Exchange Commission, or SEC, the Public Company



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Accounting Oversight Board and the NASDAQ Global Market, impose additional reporting and other obligations on public companies. Compliance with public company requirements has increased our costs
and made some activities more time-consuming. A number of those requirements require us to carry out activities we have not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls
and procedures. In addition, we have incurred and will continue to incur additional expenses associated with our SEC reporting requirements. Furthermore, if we identify any issues in complying with those requirements (for example, if we or our
auditors identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect us, our reputation
or investor perceptions of us. Risks associated with our status as a public company may make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We expect that the additional
reporting and other obligations imposed on us by these rules and regulations will increase our legal and financial compliance costs and the costs of our related legal, accounting and administrative activities by approximately $1.5 million per year.
These increased costs will require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional
changes in governance and reporting requirements, which could further increase our costs.

We do not currently intend to pay dividends on our common
stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We
currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future, and the success of an investment in shares of our common stock will
depend upon future appreciation in its value, if any. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders purchased their shares.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay, or prevent
a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay,
or prevent a merger, acquisition, or other change in control that stockholders consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions might also prevent or
frustrate attempts by our stockholders to replace or remove our management. These provisions include:



| |  |  | limitations on the removal of directors;
| | - |  | ----------------------------------------



| |  |  | advance notice requirements for stockholder proposals and nominations;
| | - |  | ----------------------------------------------------------------------



| |  |  | limitations on the ability of stockholders to call special meetings;
| | - |  | --------------------------------------------------------------------



| |  |  | the inability of stockholders to cumulate votes at any election of directors;
| | - |  | -----------------------------------------------------------------------------



| |  |  | the classification of our board of directors into three classes with only one class, representing approximately one-third of our directors, standing for election at each annual meeting; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of our board of directors to make, alter or repeal our amended and restated bylaws.
| | - |  | -----------------------------------------------------------------------------------------------

Our board of directors has the ability to designate the terms of and issue new series of preferred stock without stockholder approval. In
addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or
within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors are willing to pay in the
future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.



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We currently qualify as an emerging growth company under the JOBS Act and we cannot be certain if the
reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

The JOBS Act permits emerging growth companies like us to take advantage of certain exemptions from various reporting requirements
applicable to other public companies that are not emerging growth companies.

In addition, Section 107 of the JOBS Act also provides
that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth
company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

For as long as we continue to be an emerging growth company, we intend to take advantage of certain other exemptions from various reporting
requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved, and exemptions from the requirements of auditor attestation reports on the effectiveness of our internal control
over financial reporting. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards under Section 102(B)(1), which will allow us to delay the adoption of new or revised accounting
standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public
company effective dates.

We cannot predict if investors will find our common stock less attractive because we will rely on these
exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) ending December 31,
2019, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the
market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in
non-convertible debt during the prior three-year period.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds

(a) Sales of Unregistered Securities

None

(b) Use of Proceeds

On December 17, 2014, we completed our initial public offering of 7,630,250 shares of common stock, at a price of $8.00 per
share, before underwriting discounts and commissions. We issued and sold 6,635,000 of such shares and existing stockholders sold an aggregate of 995,250 of such shares as a result of the underwriters exercise of their over-allotment option to
purchase additional shares. The offer and sale of all of the shares in our initial public offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-199484), which was
declared effective by the SEC on December 11, 2014. Following the sale of the shares in connection with the closing of our initial public offering, the offering terminated. Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Wells
Fargo Securities, LLC, Raymond James & Associates, Inc. and William Blair & Company, L.L.C. acted as the underwriters. Our initial public offering generated net proceeds to us of approximately $45.2 million, after deducting
underwriting discounts and direct offering expenses. Direct offering expenses incurred by us for our initial public offering were approximately $4.2 million and were recorded against the proceeds received from our initial public offering. No
payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than (i) payments of dividends and (ii) payments in the ordinary course of
business to officers for salaries and bonuses and to non-employee directors as compensation for board or board committee service. We did not receive any proceeds from the sale of shares by the selling stockholders in our initial public offering.

With the net proceeds of our initial public offering, we (i) paid in full accumulated dividends on our previously outstanding shares
of preferred stock, which totaled approximately $9.0 million, (ii) repaid, in first quarter of 2015, the outstanding principal and interest on outstanding promissory notes, which totaled approximately $3.5 million and (iii) repaid the
outstanding principal and interest on outstanding promissory notes held by investors affiliated with members of our board of directors at the time of our initial public offering, which totaled approximately $1.3 million.



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There have been no material changes in the planned use of proceeds from our initial public
offering from that described in the final prospectus filed with the SEC pursuant to Rule 424(b) on December 
12, 2014.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None

Item 6.
Exhibits

See the Index to Exhibits immediately following the signature pages of this Quarterly Report on Form 10-Q, which is
incorporated herein by reference.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.



|                   |  |  |  |                  |  |                                                                     
|------------------ |  |  |  | ---------------- |  | --------------------------------------------------------------------
|                   |  |  |  | CONNECTURE, INC.
|                   |  |  | 
|Date: May 15, 2015 |  |  |  | By:              |  | /s/ James P. Purko                                                  
|                   |  |  |  |                  |  | James P. Purko                                                      
|                   |  |  |  |                  |  | Chief Financial Officer (Principal Financial
and Accounting Officer)



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INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                                   |  |                           |  |            |  |         |  |                  
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ---------- |  | ------- |  | -----------------
|              |  |                                                                                                                                                                                                                                   |  | Incorporated by Reference
|ExhibitNumber |  | Description                                                                                                                                                                                                                       |  | Form                      |  | File No.   |  | Exhibit |  | Filing Date      
|              |  |                                                                                                                                                                                                                                   |  |                           | 
|3.1           |  | Sixth Amended and Restated Certificate of Incorporation, dated December 16, 2014                                                                                                                                                  |  | 10-K                      |  | 001-36778  |  | 3.1     |  | March 25, 2015   
|              |  |                                                                                                                                                                                                                                   |  |                           | 
|3.2           |  | Amended and Restated Bylaws of the Registrant                                                                                                                                                                                     |  | S-1/A                     |  | 333-199484 |  | 3.4     |  | November 10, 2014
|              |  |                                                                                                                                                                                                                                   |  |                           | 
|31.1*         |  | Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended                                                                                       |  |                           |  |            |  |         |  |                  
|              |  |                                                                                                                                                                                                                                   |  |                           | 
|31.2*         |  | Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended                                                                                       |  |                           |  |            |  |         |  |                  
|              |  |                                                                                                                                                                                                                                   |  |                           | 
|32.1**        |  | Certification of Chief Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 |  |                           |  |            |  |         |  |                  
|              |  |                                                                                                                                                                                                                                   |  |                           | 
|32.2**        |  | Certification of Chief Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |  |                           |  |            |  |         |  |                  
|              |  |                                                                                                                                                                                                                                   | 
|101.INS***    |  | XBRL Instance Document                                                                                                                                                                                                            |  |                           |  |           
|              |  |                                                                                                                                                                                                                                   | 
|101.SCH***    |  | XBRL Taxonomy Extension Schema Document                                                                                                                                                                                           |  |                           |  |           
|              |  |                                                                                                                                                                                                                                   | 
|101.CAL***    |  | XBRL Taxonomy Extension Calculation Linkbase Document                                                                                                                                                                             |  |                           |  |           
|              |  |                                                                                                                                                                                                                                   | 
|101.DEF***    |  | XBRL Taxonomy Extension Definition Linkbase Document                                                                                                                                                                              |  |                           |  |           
|              |  |                                                                                                                                                                                                                                   | 
|101.LAB***    |  | XBRL Taxonomy Extension Label Linkbase Document                                                                                                                                                                                   |  |                           |  |           
|              |  |                                                                                                                                                                                                                                   | 
|101.PRE***    |  | XBRL Taxonomy Extension Presentation Linkbase Document                                                                                                                                                                            |  |                           |  |           



|* | Filed herewith
|- | --------------

|** | Furnished herewith
|-- | ------------------

|*** | To be filed by amendment within the 30-day grace period provided by Rule 405(a)(2)(ii) of Regulation S-T
|--- | --------------------------------------------------------------------------------------------------------



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