NASDAQ: HILL

DOT HILL 2014 FINANCIAL RECAP (NON-GAAP)
April 2015
2014 Key Financial Metrics
Total Revenue ($M)
Vertical Markets
Server OEM
Gross Margin (%)
Operating Expenses ($M)
Operating Margin (%)
Operating Profit ($M)
Operating Leverage (%)
EPS ($)
Net Working Capital ($M)
Net Working Capital = Current Assets – Current Liabilities
Operating Leverage = Change in Operating Profit / Change in Revenue
2014
217.5
102.1
115.4
33.6%
60.3
5.9%
12.8
25.0%
$0.20
53.5
YoY Change
+ 4%
+ 42%
- 16%
+ 80 bps
+ 2.4M (4%)
+ 80 bps
+2.2M (21%) n/a
+ $0.02 (11%)
+9.7M (18%)
NASDAQ: HILL 2

FINANCIAL PROGRESS 2012-2014 (NON-GAAP)
April 2015 NASDAQ: HILL 3

FINANCIAL PROGRESS 2012-2014 (NON-GAAP)
April 2015 NASDAQ: HILL 4

FINANCIAL PROGRESS SUMMARY 2012-2014
April 2015 NASDAQ: HILL 5

GUIDANCE Q1’15 AND 2015
Q1’15 Updated Non-GAAP Guidance
Total Revenue ($M)
Vertical Markets
Server OEM
EPS
Q1 ’15E
60.0 – 60.5
≈ $0.06
YoY Change
(at Midpoint)
+ 23%
+ 60%
- 8%
+ $0.04 (+ 200%)
2015 Non-GAAP Guidance Reiteration
Total Revenue ($M)
Vertical Markets
Server OEM
Gross Margin
Operating Expenses ($M)
EPS
2015E
230 – 270
120 – 150
110 – 120
33 – 34%
61 – 64
$0.25 - $0.35
YoY Change
(at Midpoint)
+ 15%
+ 32%
Flat
Flat
+ 4%
+ 50%
Q1’15E based on guidance issued April 16, 2015 and 2015E based on guidance issued March 5, 2015
April 2015 NASDAQ: HILL
6

HISTORICAL AND PROJECTED DIVERSIFICATION
April 2015 NASDAQ: HILL 7

HISTORICAL AND PROJECTED GROSS MARGIN
April 2015 NASDAQ: HILL 8

HISTORICAL AND PROJECTED OPERATING EXPENSES (NON -GAAP)
April 2015 NASDAQ: HILL 9

OPERATING LEVERAGE & MARGINS
April 2015 NASDAQ: HILL 10

NEW CUSTOMER ECONOMICS
Target New Customer Margin Model by Annual Revenue Potential
<$3M $3-20M $20-50M $50M+
Vertical Markets
Gross Margin %
Opex %
Contribution Margin %
Server OEMs
Gross Margin %
Opex %
Contribution Margin %
45%
25%
20%
40%
18%
22%
40%
12%
28%
35%
10%
25%
35%
10%
25%
30%
6%
24%
30%
8%
22%
25%
4%
21%
April 2015 NASDAQ: HILL 11

NEW CUSTOMER ECONOMICS
Target New Customer Margin Model by Annual Revenue Potential
<$3M $3-20M $20-50M $50M+
Vertical Markets
Gross Margin %
Opex %
Contribution Margin %
Server OEMs
Gross Margin %
Opex %
Contribution Margin %
45%
25%
20%
40%
18%
22%
40%
12%
28%
35%
10%
25%
35%
10%
25%
30%
6%
24%
30%
8%
22%
25%
4%
21%
April 2015 NASDAQ: HILL
Achieve $100M of growth beyond 2015 over two years, from 1 or 2 Vertical Markets customers
12

NEW CUSTOMER ECONOMICS
Target New Customer Margin Model by Annual Revenue Potential
<$3M $3-20M $20-50M $50M+
Vertical Markets
Gross Margin %
Opex %
Contribution Margin %
Server OEMs
Gross Margin %
Opex %
Contribution Margin %
45%
25%
20%
40%
18%
22%
40%
12%
28%
35%
10%
25%
35%
10%
25%
30%
6%
24%
30%
8%
22%
25%
4%
21%
April 2015 NASDAQ: HILL
Achieve $100M of growth beyond 2015 over two years, from potentially 50-100 Vertical
Markets customers
13

NEW CUSTOMER ECONOMICS
Target New Customer Margin Model by Annual Revenue Potential
<$3M $3-20M $20-50M $50M+
Vertical Markets
Gross Margin %
Opex %
Contribution Margin %
Server OEMs
Gross Margin %
Opex %
Contribution Margin %
45%
25%
20%
40%
18%
22%
40%
12%
28%
35%
10%
25%
35%
10%
25%
30%
6%
24%
30%
8%
22%
25%
4%
21%
April 2015 NASDAQ: HILL
Achieve $100M of growth in Vertical
Markets beyond 2015 over two years, with $50M from one customer, $30M from one customer and $20M from two customers
14

SENSITIVITY OF $100M IN INCREMENTAL REVENUE
Revenue ($M)
Gross Margin %
Business Model Sensitivity Analysis
2015
Midpoint
Guide
Scenario #1 Scenario #2 Scenario #3
250 350 350 350
Operating Expenses ($M)
33.0%
62.5
32.5%
73.5
36.8%
90.5
33.5%
74.9
Operating Expense %
Operating Profit ($M)
Operating Margin (%)
25.0%
21.3
8.0%
21.0%
40.3
11.5%
25.9%
38.3
10.9%
21.4%
42.4
12.1%
Assumes 2.5% annual increase in base operating expense or $3M over 2 years, plus incremental new customer related spend
April 2015 NASDAQ: HILL
Scenario #3 achieves balance between operating margin, revenue diversification and execution risk.
15

TARGET BUSINESS MODEL
Revenue Growth vs. 2014 Baseline (CAGR)
Vertical Markets Growth vs. 2014 Baseline (CAGR)
Server OEM Growth vs. 2014 Baseline (CAGR)
Gross Margin %
Operating Expense Goal as % of Revenue
Operating Margin %
Business Model
2015 Midpoint
Midpoint
15%
32%
Flat
33%
25%
8.0%
2017
Operating Model Framework
Low High
14%
25%
-10%
18%
35%
10%
33%
23.0%
10%
34%
21.0%
13%
Our target business model remains fundamentally unchanged with 14-18% growth rates in total revenue, but we have increased our operating margin goals from 8-12% to 10-13%
April 2015 NASDAQ: HILL 16

GROWTH THROUGH INNOVATION
April 2015 NASDAQ: HILL 17

NASDAQ: HILL

Reconciliation of GAAP to Non-GAAP Financial Measures

2011-2014 GAAP TO NON-GAAP REVENUE RECONCILIATION ($K)
GAAP net revenue from continuing operations
GAAP revenue from discontinued operations
GAAP net revenue from continuing and discontinued operations
AssuredUVS revenue
Long-term software contract royalties
Issuance of warrant to customer
Non-GAAP net revenue
2011
$ 195,827
1,634
$ 197,461
(1,634)
-
1,007
$ 196,834
2012
$ 194,548
360
$ 194,908
(360)
2,141
-
$ 196,689
2013
$ 206,565
50
$ 206,615
(50)
2,179
-
$ 208,744
2014
$ 217,665
-
$ 217,665
-
(186)
-
$ 217,479
Note: Totals may not aggregate due to rounding
April 2015 NASDAQ: HILL 22

2011-2014 GAAP TO NON-GAAP GROSS PROFIT RECONCILIATION ($K, EXCE PT %)
GAAP gross profit from continuing operations
GAAP gross margin % from continuing operations
GAAP gross profit (loss) from discontinued operations
GAAP gross profit from continuing and discontinued operations
GAAP gross margin % from continuing
and discontinued operations
Stock-based compensation
Severance costs
Issuance of warrant to customer
Gain from insurance recovery
Power supply component failures
AssuredUVS cost of goods sold, less AssuredUVS revenue
Long-term software contract royalties
Long-term software contract costs
Long-lived asset impairment
Intangible asset impairment
Intangible asset amortization
Non-GAAP gross profit
Non-GAAP gross margin %
Note: Totals may not aggregate due to rounding
April 2015 NASDAQ: HILL
2011
$ 45,283
23.1%
(3,650)
$ 41,633
21.1%
828
13
1,007
(555)
4,270
(216)
-
-
2,928
-
2,054
$ 51,962
26.4%
2012
$ 48,371
24.9%
(2,141)
$ 46,230
23.7%
618
71
-
-
-
313
2,141
2,885
-
1,647
952
$ 54,857
27.9%
2013
$ 66,070
32.0%
(92)
$ 65,978
31.9%
334
40
-
-
(707)
90
2,179
523
-
-
-
$ 68,437
32.8%
2014
$ 72,575
33.3%
-
$ 72,575
33.3%
350
74
-
-
(100)
-
(186)
340
-
-
-
$ 73,053
33.6%
23

2011-2014 GAAP TO NON-GAAP OPERATING EXPENSES RECONCILIATION ($K )
2011
GAAP operating expenses from continuing operations $ 53,595
GAAP operating expenses from discontinued operations 9,908
GAAP operating expenses from continuing and $ 63,503
Currency (loss) gain 254
Stock-based compensation
AssuredUVS expenses
Contingent consideration adjustment
Goodwill impairment
Legal fees related to power supply component failure
Long-term software contract deferred costs
Restructuring (charge) recoveries
Legal settlement
Severance costs
Non-GAAP operating expenses $
(4,557)
(5,429)
-
-
-
(21)
(4,140)
(668)
(113)
48,829
2012
$ 58,027
2,406
$ 60,433
(555)
(3,105)
(1,585)
5
-
(49)
3,562
(639)
-
(257)
$ 57,810
2013
$ 60,440
383
$ 60,823
(517)
(2,356)
(366)
-
-
(2)
394
(36)
-
(97)
$ 57,843
2014
$ 64,272
-
$ 64,272
(86)
(2,796)
-
-
-
-
-
-
(1,000)
(113)
$ 60,277
April 2015 NASDAQ: HILL 24

2011-2014 GAAP TO NON-GAAP NET INCOME (LOSS) RECONCILIATION ($K)
GAAP operating income (loss) from continuing ops
GAAP operating loss from discontinued operations
GAAP operating income (loss) from continuing and discontinued operations
Currency loss (gain)
Stock-based compensation
Issuance of warrant to customer
Restructuring charge (recoveries)
Intangible asset amortization
Contingent consideration adjustment
Gain from insurance recovery
Power supply component failures
AssuredUVS expenses, less AssuredUVS revenue
Long-term software contract royalties
Long-term software contract costs
Long-term software contract deferred costs
Intangible asset impairment
Goodwill impairment
Legal settlement
Severance costs
Other adjustments
Non-GAAP operating income (loss)
Note: Totals may not aggregate due to rounding
April 2015
2011
$ (8,312)
(13,558)
$ (21,870)
(254)
5,385
1,007
668
2,054
21
(555)
4,270
5,213
-
-
-
2,928
4,140
-
126
-
$ 3,133
NASDAQ: HILL
2012
$ (9,656)
(4,547)
$ (14,203)
555
3,725
-
639
952
(5)
-
49
1,951
2,141
2,885
(3,562)
1,600
-
-
327
(6)
$ (2,952)
2013
$ 5,630
(474)
$ 5,156
517
2,690
-
36
-
-
-
(705)
456
2,179
523
(394)
-
-
-
137
-
$ 10,595
2014
$ 8,303
-
$ 8,303
86
3,145
-
-
-
-
-
(100)
-
(186)
340
-
-
-
1,000
188
-
$ 12,776
25

2011-2014 GAAP TO NON-GAAP EPS (LPS) RECONCILIATION
April 2015
2011
GAAP income (loss) per share from continuing operations $ (0.16)
GAAP loss per share from discontinued operations (0.24)
GAAP income (loss) per share from continuing and discontinued operations
Currency loss (gain)
Intangible asset amortization
Stock-based compensation
AssuredUVS expenses less AssuredUVS revenue
Long-term software contract royalties
Long-term software contract costs
Long-term software contract deferred costs
Restructuring charge (recoveries)
Intangible impairment
Goodwill impairment
Power supply component failures
Legal settlement
Other adjustments
Non-GAAP income (loss) per share
$ (0.40)
(0.01)
0.04
0.10
0.09
-
-
-
0.01
0.05
0.07
0.08
-
0.02
$ 0.05
Weighted average shares used to calculate income
(loss) per share:
Basic
Diluted
Note: Totals may not aggregate due to rounding
54,908
55,488
NASDAQ: HILL
2012
$ (0.18)
(0.08)
$ (0.26)
0.01
0.02
0.06
0.03
0.04
0.05
(0.06)
0.01
0.03
-
-
-
0.01
$ (0.06)
56,954
56,954
2013
$ 0.09
(0.01)
$ 0.09
0.01
-
0.05
0.01
0.04
0.01
(0.01)
-
-
-
(0.01)
-
(0.01)
$ 0.18
58,521
59,247
2014
$ 0.13
-
$ 0.13
-
-
0.05
-
-
0.01
-
-
-
-
-
0.02
(0.01)
$ 0.20
60,171
63,898
26

2011-2014 GAAP TO NON-GAAP SERVER OEM RECONCILIATION ($K)
Server OEM GAAP net revenue from continuing operations
Long-term software contract royalties
Issuance of warrant to customer
Server OEM non-GAAP net revenue
Server OEM GAAP gross profit from continuing operations
Server OEM GAAP gross margin % from continuing operations
Stock-based compensation
Severance costs
Power supply component failures
Long-term software contract royalties
Long-term software contract costs
Intangible asset amortization
Issuance of warrant to customer
Other COGS adjustment
Server OEM non-GAAP gross profit
Server OEM non-GAAP gross margin %
Note: Totals may not aggregate due to rounding
2011
$ 158,037
-
1,007
$ 159,044
$ 30,829
19.5%
700
11
4,270
-
-
1,116
1,007
455
$ 38,388
24.1%
2012
$ 143,353
2,141
-
$ 145,494
$ 30,683
21.4%
462
54
-
2,141
2,885
777
-
6
$ 37,008
25.4%
2013
$ 134,798
2,179
-
$ 136,977
$ 35,534
26.4%
244
26
(707)
2,179
523
-
-
-
$ 37,799
27.6%
2014
$ 115,580
(186)
-
$ 115,394
$ 29,211
25.3%
214
48
(100)
(186)
340
-
-
-
$ 29,527
25.6%
April 2015 NASDAQ: HILL 27

2011-2014 GAAP to Non-GAAP Server OEM Reconciliation ($K) (continued)
2011
Server OEM GAAP sales and marketing expenses from continuing ops
Server OEM GAAP contribution margin from continuing operations
Server OEM GAAP contribution % from continuing operations
Stock-based compensation
Severance costs
Other marketing adjustment
Server OEM non-GAAP sales and marketing expenses
Server OEM non-GAAP contribution margin
Server OEM non-GAAP contribution margin %
Server OEM GAAP operating income from continuing operations
Stock-based compensation
Severance costs
Power supply component failures
Long-term software contract royalties
Long-term software contract costs
Intangible asset amortization
Issuance of warrant to customer
Other adjustment
Server OEM non-GAAP operating income
Note: Totals may not aggregate due to rounding
April 2015 NASDAQ: HILL
$ 1,866
$ 28,963
18.3%
(112)
(13)
117
1,858
$ 36,530
23.0%
$ 28,963
812
24
4,270
-
-
1,116
1,007
338
$ 36,530
2012
$ 1,965
$ 28,718
20.0%
(88)
(3)
(39)
1,835
$ 35,173
24.2%
$ 28,718
550
57
-
2,141
2,885
777
-
45
$ 35,173
2013
$ 2,070
$ 33,464
24.8%
(58)
(2)
-
2,010
$ 35,789
26.1%
$ 33,464
302
28
(707)
2,179
523
-
-
-
$ 35,789 $ 27,484
2014
$ 2,120
$ 27,091
23.4%
(68)
(9)
-
2,043
$ 27,484
23.8%
$ 27,091
282
57
(100)
(186)
340
28

2012-2014 GAAP TO NON-GAAP VERTICAL MARKETS RECONCILIATION ($K)
Vertical Markets GAAP net revenue from continuing operations
GAAP revenue from discontinued operations
Vertical Markets GAAP net revenue from continuing and discontinued operations
AssuredUVS revenue
Vertical Markets non-GAAP net revenue
Vertical Markets GAAP gross profit from continuing operations
Vertical Markets GAAP gross margin % from continuing operations
Vertical Markets GAAP gross profit (loss) from discontinued operations
Vertical Markets GAAP gross profit from continuing and discontinued operations
Vertical Markets GAAP gross margin % from continuing and discontinued opes
Stock-based compensation
Severance costs
AssuredUVS revenue
AssuredUVS expenses
Intangible asset impairment
Intangible asset amortization
Gain from insurance recovery
Long-lived asset impairment
Other COGS adjustment
Vertical Markets non-GAAP gross profit
Vertical Markets non-GAAP gross margin %
Note: Totals may not aggregate due to rounding
April 2015 NASDAQ: HILL
2011
$ 37,790
1,634
$ 39,424
(1,634)
$ 37,790
$ 14,454
38.2%
(3,650)
$ 10,804
27.4%
128
2
(1,634)
1,418
-
938
(555)
2,928
(455)
$ 13,574
35.9%
2012
$ 51,195
360
$ 51,555
(360)
$ 51,195
$ 17,688
34.6%
(2,141)
$ 15,547
30.2%
157
14
(360)
673
1,600
175
-
-
42
$ 17,848
34.9%
2013
$ 71,767
50
$ 71,817
(50)
$ 71,767
$ 30,536
42.5%
(92)
$ 30,444
42.4%
90
14
(50)
140
-
-
-
-
-
$ 30,638
42.7%
2014
$ 102,085
-
$ 102,085
-
$ 102,085
$ 43,364
42.5%
-
$ 43,364
42.5%
136
26
-
-
-
-
-
-
-
$ 43,526
42.6%
29

2012-2014 GAAP TO NON-GAAP VERTICAL MARKETS RECONCILIATION ($K) (CONTINUED)
April 2015
Vertical Markets GAAP sales and marketing expenses from continuing operations
Vertical Markets GAAP contribution margin from continuing operations
Vertical Markets GAAP contribution margin % from continuing operations
Vertical Markets GAAP sales and marketing expenses from discontinued ops
Vertical Markets GAAP sales and marketing expenses from continuing and discontinued operations
Stock-based compensation
Severance costs
Other marketing adjustment
AssuredUVS expenses
Vertical Markets non-GAAP sales and marketing expenses
Vertical Markets non-GAAP contribution margin
Vertical Markets non-GAAP contribution margin %
Vertical Markets GAAP operating income from continuing operations
Vertical Markets GAAP operating income (loss) from discontinued operations
Vertical Markets GAAP operating income (loss) from continuing and discontinued operations
Stock-based compensation
Severance costs
AssuredUVS revenue
AssuredUVS expenses
Intangible asset impairment
Intangible asset amortization
Gain from insurance recovery
Long-lived asset impairment
Other adjustment
Vertical Markets non-GAAP operating income
NASDAQ: HILL
$ 5,235
(4,301)
$ 934
377
30
(1,634)
2,069
-
938
(555)
2,928
(257)
$ 4,850
2011
$ 9,219
$ 5,235
13.9%
651
$ 9,870
(249)
(28)
(218)
(651)
$ 8,724
$ 4,850
12.8%
$ 21,781
(92)
$ 21,689
215
18
(50)
140
-
-
-
-
-
$ 22,012
2013
$ 8,755
$ 21,781
30.3%
-
$ 8,755
(125)
(4)
-
-
$ 8,626
$ 22,012
30.7%
$ 7,858
(2,197)
$ 5,661
349
23
(360)
782
1,600
175
-
-
(13)
$ 8,217
2012
$ 9,830
$ 7,858
15.3%
103
$ 9,933
(192)
(7)
-
(103)
$ 9,631
$ 8,217
16.1%
$ 33,587
-
$ 33,587
306
46
-
-
-
-
-
-
-
$ 33,939
2014
$ 9,777
$ 33,587
32.9%
-
$ 9,777
(170)
(20)
-
-
$ 9,587
$ 33,939
33.2%
30