Penson (PNSN) Looks to Cut Costs, May Sell PFSL Arm

Penson Worldwide, Inc. (Nasdaq: PNSN), announces plans for cost savings.

Key Initiatives

1. Sale of Penson Financial Services Ltd. (PFSL) in London. We are in discussions regarding the potential sale of PFSL and have received several other inquiries expressing interest in this business. Based upon the current expressions of interest, we believe that the sale of PFSL will result in a one-time gain. Selling PFSL should also result in approximately $6 million per year in annual earnings improvement. It is our goal to complete this divestiture before the end of the year. We anticipate that any sale will provide for continued access to U.K. and other European markets for Penson correspondents.
   
   
2. Expansion of the technology outsourcing agreement with Broadridge in partnership with IBM. Penson has signed a non-binding letter of intent with Broadridge Financial Solutions, Inc. (NYSE: BR) to (a) broaden the scope of the outsourcing to include Penson’s data centers that will be outsourced to Broadridge/IBM (excluding U.K. and Australia), and other additional outsourcing of functions and activities; (b) increase Penson’s annual cost savings under the Broadridge/IBM agreement to an anticipated $15-$18 million, from the original expected $7-$10 million cost savings previously announced; and (c) extend Penson’s existing technology outsourcing agreement to 15 years from 11. Penson anticipates converting the balance of its U.S. correspondents from the present vendor to Broadridge’s securities processing platform during the fourth quarter, after having successfully converted its correspondents in Canada earlier this year. Penson anticipates that additional savings will begin in the first quarter of 2012 following the Broadridge conversion.
   
   
3. Combine the Company’s U.S. futures and broker-dealer businesses. Following a path taken by other firms that own both a broker-dealer and futures commission merchant, Penson recently applied to U.S. regulators to combine the operations of Penson Financial Services, Inc. (PFSI) and Penson Futures into PFSI. This move is anticipated to free up $30 million in regulatory capital and reduce costs by up to $2 million annually. No change in management, marketing, resources or offices is contemplated. Subject to regulatory and certain other approvals, the combination is expected to occur in the third quarter of 2011.
   
   
4. Streamline operations. As a result of these initiatives, as well as additional steps Penson plans to take, the Company expects to realize increased efficiencies that should result in reducing internal costs an additional $6 million on an annualized basis. It is anticipated that these cost saving measures should be in place by the end of 2011.
   
   
5. Pay down debt. As the Company completes these initiatives, Penson will take the opportunity to repay amounts outstanding under its senior revolving credit agreement this year, reducing interest costs by approximately $2 million on an annual basis. The Company will continue to review its capital structure with the objective of reducing debt as these strategic initiatives are completed and operating results improve.
   
   
6. Maximize the value of Penson Financial Services Australia Pty Ltd (PFSA). PFSA began operations with its first correspondent in late 2009, rapidly building it into a leading, standalone technology-driven clearing and execution services broker that as of June 30, 2011, serves 72 correspondents. After receiving several inquiries, the Company has decided to explore opportunities for strategic initiatives for PFSA, through a strategic partnership with a third party or an outright sale.

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