13D Filing: Great Point Partners and Connecture Inc (CNXR)

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The below table illustrates Connecture’s
performance on a quarterly basis versus Wall Street11 estimates since the Company went public.

Financial Performance vs. Estimates
Q4 ’14 Q1 ’15 Q2 ’15 Q3 ’15 Q4 ’15 Q1 ’16 Q2 ’16 Q3 ’16
Reported
Financials
Revenue $27.8 $20.6 $23.4 $22.7 $29.1 $17.6 $18.7 $24.7
Adj. EBITDA $6.3 ($1.7 ) ($0.6 ) $1.8 $8.6 ($3.9 ) ($5.5 ) ($0.6 )
Median
Consensus Estimates
Revenue N/A $19.7 $23.2 $22.0 $31.0 $20.7 $20.3 $21.3
Adj. EBITDA N/A ($1.8 ) ($0.8 ) $1.3 $10.1 ($1.2 ) ($1.9 ) ($1.9 )
Variance
Revenue
Dollars N/A $0.9 $0.2 $0.7 ($1.9 ) ($3.1 ) ($1.5 ) $3.5
Percent N/A 4.7% 0.8% 3.1% -6.1% -15.2% -7.6% 16.4%
Adj. EBITDA
Dollars N/A $0.1 $0.2 $0.5 ($1.5 ) ($2.7 ) ($3.6 ) $1.2
Percent N/A NM NM 37.1% -14.6% NM NM NM
                                               

Examples of Poor Executive
Decisions and Operational Execution

1. Push Into “Consumer Health Care”. Management’s proposed consumer
health care strategy not only lies far afield from the Company’s core strengths and operating capabilities, but also the
articulated strategy has been largely opaque and incoherent. Based on the market’s reaction, it does not appear that the
strategy is viewed as either well-conceived or planned. We advised management against this strategy when it was first explained
to us. The energies and resources committed to this strategic folly have failed to contribute any positive financial performance
and clearly diluted the time and attention that the management team has to focus on core operations and clients.
2. Filing Shelf Registration in January 2016. Despite the plethora of examples of the
negative impact on stock prices of small cap companies filing sizeable shelfs, and the input against a large equity capital raise
provided by us and other shareholders, the Company still proceeded to file a $50M shelf registration on January 8, 2016 (representing
approximately 65% of market cap) without disclosing the purpose of the shelf or the expected use of proceeds. This error in strategy,
and even worse, in judgment, was, in our view, the major causal factor in the already depressed share price plummeting further
by 22.7% in one day, from $3.52 to $2.72. Since the announcement, Connecture’s share price has failed to ever again broach
the $3.52 level, an indication that investor confidence in the judgment of management continued to deteriorate. Additionally, in
the eventual financing that the Company did pursue, management purposefully fashioned a very limited process despite our input
to broaden it. This poorly constructed financing led management to choose to issue preferred stock with an accruing dividend. We
advised you to solicit an investor that would agree to acquire common stock with warrants without the liquidation preference, and
referred at least one such

11 Estimates based on equity research published by Morgan Stanley, JP Morgan, Raymond James, First Analysis, Wells Fargo and William
Blair.

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