Penson to Acquire Ridge Clearing Contracts from Broadridge; Enters into Outsourcing Arrangement with Broadridge for Technology Services and Selected Processing Functions; Both Companies to Offer Each Other`s Services

http://www.businesswire.com/news/home/20091102006519/en

Penson Will Become No. 2 Clearer in US by Correspondent Count, Significantly
Increase Revenues and Margins

Penson Reports Results for 3rd Quarter Ended Sept. 30, 2009

DALLAS--(Business Wire)--
Penson Worldwide, Inc. (NASDAQ: PNSN), a leading provider of execution,
clearing, settlement, custody and technology products and services to the global
financial services industry, announced it has entered into a global strategic
relationship with Broadridge Financial Solutions, Inc. (NYSE: BR) that is
expected to significantly expand revenues and margins of Penson`s securities
clearing and execution businesses.

The relationship is based on a series of agreements that involve: (1) Penson
acquiring the clearing contracts of Broadridge`s Ridge correspondent clearing
and execution business for consideration in the form of a promissory note and
stock; (2) if needed, Broadridge providing certain financing; (3) Broadridge
supplying technology and certain processing functions on an outsourced basis for
Penson`s US, Canadian and UK securities clearing brokers; and (4) the two
companies offering each other`s services to various customers and prospects on a
global basis.

"We see this as a `game changer` for Penson," said Penson co-founders, CEO
Philip A. Pendergraft and President Daniel P. Son. "We will add significantly to
our correspondent and revenue base, and improve our scale and operating
leverage, leading to higher overall margins. This is an important step towards
our vision of building the pre-eminent independent clearing and execution
services firm."

With over $2.1 billion in revenues in fiscal year 2009 and more than 40 years of
experience, Broadridge (www.broadridge.com) of Lake Success, NY is a leading
global provider of technology-based solutions to the financial services
industry.

AGREEMENT HIGHLIGHTS

Acquisition: Penson will acquire the clearing contracts of the Ridge clearing
business for approximately $60-70 million. This business, for the fiscal year
ended June 30, 2009, had approximately $75 million in annualized net revenues,
more than 100 correspondents, and approximately $1.0 billion in customer
balances, consisting of segregated cash, and margin and stock loans. The
transaction will make Penson the nation`s No. 2 securities clearing firm based
on a total of approximately 400 correspondents, and increase net revenues and
customer interest earning balances by 20-25% and 15-18%, respectively.

Payment & Financing: Penson will pay Broadridge a portion of the purchase price
in stock equal to the lesser of (i) the number of shares of common stock equal
to one third of the Purchase Price as determined at closing, (ii) the number of
shares of common stock equal to 9.9% of the issued and outstanding shares of
Penson immediately prior to the closing, or (iii) 2,517,451 shares of common
stock. Broadridge will provide financing for the balance in the form of a seller
note to be issued by Penson. In addition, Penson expects to raise additional
regulatory capital, currently estimated at approximately $50 million, to support
the Ridge business after closing. If Penson has not otherwise raised this
additional capital by closing, it may borrow this amount from Broadridge.

Outsourcing: Penson has entered into a 10-year contract with Broadridge, which
will take effect at closing, for the outsourcing of back office technology
services and certain securities processing functions. Broadridge will charge
Penson to service Ridge correspondents, based on their contractual revenue run
rate at the time of closing. Outsourcing these functions to Broadridge is
expected to enable Penson to save more than 20% on the technology and services
outsourced from Penson`s existing securities clearing operations in the US,
Canada and the UK.

The benefit of the larger scale provided by Broadridge is expected to enhance
margins post conversion and position Penson for further margin expansion as its
business continues to grow. In addition, Broadridge offers a unique bundle of
tightly integrated global services enabling Penson to offer more value to its
existing and future securities clearing correspondents. It is anticipated that
Penson`s existing operations will begin converting to the Broadridge solutions
in the third quarter of 2010, and be completed by the end of 2011.

Sales: Broadridge will enter into a joint selling agreement with Penson and
refer correspondents seeking securities clearing services to Penson. In turn,
Penson will refer to Broadridge prospects interested in key outsourcing services
provided by Broadridge.

Approvals & Closing: The transactions have been approved by the Boards of both
companies and Penson`s bank group; are subject to customary closing conditions,
including regulatory and other approvals; and are expected to close within six
months. At closing, the final purchase price will be adjusted based on the
accepted correspondents` contractual annualized revenue run rate at the time.

BENEFIT HIGHLIGHTS

The agreement is expected to provide Penson with significant financial and
strategic benefits, according to Messrs. Pendergraft and Son.

Increasingly Accretive to Earnings and Cash Flow: "Our plan is that this
transaction should be modestly accretive to EPS in the year following closing,
depending on the final cost of financing, with the impact increasing as the
conversion process is completed," said Mr. Pendergraft. "From a cash flow
perspective, we expect the transaction to be even more meaningful, providing an
estimated $6-10 million in incremental positive cash flow during the first year,
increasing to an estimated $15-20 million by the third year."

Diversifies Correspondent Base: "The majority of our correspondents serve
technology-enabled active retail and professional traders," said Mr. Son. "On
the other hand, Ridge correspondents are focused more in the traditional retail
and institutional arena."

Enhances Industry Offerings: "Outsourcing to Broadridge will enable Penson to
fully serve two major segments of the brokerage industry," Mr. Son added.
"Penson already has excellent products and services for execution and technology
oriented correspondents, while Broadridge will provide us with best of class
capabilities for asset gatherers, including wealth management tools for the
growing registered investment advisor (RIA) business."

Facilitates Expansion: "By outsourcing certain securities processing functions
to Broadridge, Penson will be able to focus more on customer-facing, value
added, internal and third party products and services," said Mr. Son. "All of
this, plus gaining a well-respected strategic partner and new stockholder,
should facilitate Penson`s expansion in both existing and new markets."

J.P. Morgan Securities Inc. is acting as financial advisor to Penson Worldwide,
Inc.

THIRD QUARTER 2009 RESULTS

Penson announced net revenues of $72.2 million, net income of $3.9 million and
diluted earnings per common share of $0.15 for the third quarter ended September
30, 2009.

"Net revenues declined $4.3 million from the second quarter largely due to
external factors, causing us to miss our third quarter financial targets," said
Mr. Pendergraft. "Net interest revenues from customer balances declined $2.6
million, primarily due to a change in mix and lower interest rates earned on
deposits in money market accounts. Clearing and commission fees declined $1.3
million due to lower trading volumes in equities and higher margin futures,
which were partially offset by strong options volumes."

"Even so, we continued to set the stage for future growth," added Mr.
Pendergraft. "Operating expenses (excluding interest expense on long term debt)
fell 6% year over year and 3% on a sequential quarter basis. We received
approval to launch our Australian clearing business, with our first
correspondent expected to convert shortly. Our new institutional FX offering for
correspondents is gaining traction, with the formal launch of our retail
platform scheduled for the fourth quarter. We continued to improve the quality
of our correspondent base without affecting revenues. Average interest earning
customer balances hit a record $5.4 billion, up 12.5% from the second quarter,
reflecting growth from existing correspondents, continued rebounds in margin and
stock lending, and new business."

Additional Analysis (on a sequential quarter basis)

* "Other" revenues of $12.6 million increased 6%, reflecting continued expansion
of Penson`s execution services business.
* Technology revenues of $6.3 million fell 3%, as a large license agreement
ended in August, as anticipated.
* Penson`s average balance of excess customer segregated funds in FDIC-insured
bank accounts increased 54%, to $2.0 billion.
* Contractually required minimum payments to certain correspondents exceeded
Penson`s earnings on end customer deposits in money market accounts late in the
quarter, resulting in an expense of $115,000, versus net interest revenue of
$1.0 million in the second quarter. Subsequent to the third quarter, Penson made
substantial progress renegotiating these contracts.
* Net interest revenue from conduit stock lending declined $0.9 million, to $1.3
million reflecting a lower spread of 0.75%, as demand for hard to borrow
securities subsided, as anticipated, partially offset by a 6.3% increase in
average balances.
* Interest expense was higher, reflecting increased long-term debt (from the
June 2009 convertible notes financing and bank credit agreement), supplying
capital to support future growth.

New Business

At September 30, 2009, Penson had 287 revenue generating correspondents compared
with 294 at the end of the June 2009 quarter and 300 at the end of the year ago
quarter. Due to Penson`s concentration on increasing the quality of the firms it
serves, the impact on revenues of this reduction was not meaningful. Securities
clearing operations in the US, Canada and UK totaled 244 correspondents,
compared to 258 in the year ago quarter. Penson GHCO futures operations served
43 introducing brokerage firms, compared to 42 in the year ago quarter.

Not reflected in the above numbers is a "pipeline" of 27 new correspondents that
are expected to begin contributing to revenue in the fourth quarter of 2009 and
the first quarter of 2010.

CONFERENCE CALL

Penson will host a conference call Tuesday, November 3, 2009, at 10:00 AM
Eastern Time (9:00 AM Central Time) to discuss the Broadridge transaction and
2009 third quarter results. The call will be accessible live via a webcast on
the Penson Investor Relations section of www.penson.com. A webcast replay will
be available shortly thereafter.

About Penson Worldwide: www.penson.com

The Penson Worldwide group of companies provides execution, clearing, custody,
settlement and technology infrastructure products and services to financial
services firms and others servicing the global financial services industry. The
Penson Worldwide group of companies includes Penson Financial Services, Inc.,
Penson Financial Services Canada Inc., Penson Financial Services Ltd., Nexa
Technologies, Inc., Penson GHCO, Penson Financial Services Australia Pty Ltd and
Penson Asia Limited, among other companies. Headquartered in Dallas, Texas,
Penson has served the clearing needs of the global financial services industry
since 1995. Penson Worldwide - Building the Best Clearing and Execution Services
Firm in the World.

Penson Financial Services, Inc. is a member of the New York Stock Exchange, NYSE
Alternext, Chicago Stock Exchange, FINRA, the Chicago Board Options Exchange
(CBOE), OneChicago, the International Securities Exchange (ISE), the NYSE Arca
Exchange, the Options Clearing Corp (OCC), the MSRB, NSCC, ICMA, DTC, Euroclear,
SIPC and is a participant of the Boston Options Exchange (BOX). Penson Financial
Services Canada Inc. is a participating organization with the Toronto Stock
Exchange, the Montreal Exchange, the CNQ Exchange and the TSX Venture Exchange,
is regulated by the Investment Industry Regulatory Organization of Canada, is a
member of the CIPF, CDCC and CDS and subscribes to various Canadian ATSs. Penson
Financial Services Ltd. is a member of the London Stock Exchange and is
authorized and regulated by the Financial Services Authority. Penson GHCO is a
registered Futures Commission Merchant and clearing member at the Chicago
Mercantile Exchange, Chicago Board of Trade, London International Financial
Futures Exchange, and ICE Futures.

Penson Forward-Looking Statements

The statements in this news release relating to matters that are not current or
historical facts are forward-looking statements. Such forward-looking statements
are based on current plans, estimates and expectations. Forward-looking
statements are based on known and unknown risks, assumptions, uncertainties and
other factors. Penson's actual results, performance, or achievements may differ
materially from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Penson undertakes no obligation to
publicly update or revise any forward-looking statement.

Penson Worldwide, Inc.

Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues
Clearing and commission fees $ 36,911 $ 40,215 $ 110,219 $ 114,076
Technology 6,266 6,190 18,383 16,089
Interest, gross 25,096 47,250 77,973 140,662
Other 12,551 11,267 35,837 32,344
Total revenues 80,824 104,922 242,412 303,171
Interest expense from securities operations 8,601 25,620 26,951 79,061
Net revenues 72,223 79,302 215,461 224,110

Expenses
Employee compensation and benefits 27,204 28,197 85,321 86,497
Floor brokerage, exchange and clearance fees 8,544 8,568 24,719 21,063
Communications and data processing 11,745 10,274 33,870 29,041
Occupancy and equipment 7,422 7,810 22,032 22,125
Other expenses 7,652 11,507 24,533 27,795
Interest expense on long-term debt 3,480 885 6,041 3,047
66,047 67,241 196,516 189,568
Income before income taxes 6,176 12,061 18,945 34,542
Income tax expense 2,309 4,583 7,275 13,085
Net income $ 3,867 $ 7,478 $ 11,670 $ 21,457

Earnings per share - basic $ 0.15 $ 0.30 $ 0.46 $ 0.85

Earnings per share - diluted $ 0.15 $ 0.29 $ 0.46 $ 0.84

Weighted average common shares outstanding - basic 25,411 25,108 25,334 25,227
Weighted average common shares outstanding - diluted 25,765 25,811 25,570 25,517

Penson Worldwide, Inc.

Condensed Consolidated Statements of Financial Condition
(In thousands)

September 30, December 31,
2009 2008
(unaudited)
ASSETS
Cash and cash equivalents $ 146,525 $ 38,825
Cash and securities - segregated under federal and other regulations 3,345,945 2,383,948
Receivable from broker-dealers and clearing organizations 435,864 318,278
Receivable from customers, net 1,418,348 687,194
Receivable from correspondents 109,344 135,092
Securities borrowed 1,299,345 964,080
Securities owned, at fair value 281,655 429,531
Deposits with clearing organizations 443,287 327,544
Property and equipment, net 34,776 28,428
Other assets 399,404 226,275
Total assets $ 7,914,493 $ 5,539,195

LIABILITIES AND STOCKHOLDERS` EQUITY
Liabilities
Payable to broker-dealers and clearing organizations $ 415,573 $ 345,094
Payable to customers 5,396,852 3,575,401
Payable to correspondents 276,120 161,422
Short-term bank loans 363,406 130,846
Notes payable 113,605 75,000
Securities loaned 885,120 842,034
Securities sold, not yet purchased, at fair value 71,245 48,383
Accounts payable, accrued and other liabilities 99,949 96,548
Total liabilities 7,621,870 5,274,728

Stockholders' Equity
Total stockholders` equity 292,623 264,467
Total liabilities and stockholders` equity $ 7,914,493 $ 5,539,195

Penson Worldwide, Inc.
Supplemental Data
Nine Months
Three Months Ended Ended
September 30, December 31, March 31, June 30, September 30, September 30,
(in thousands) 2008 2008 2009 2009 2009 2009

Interest revenue

Interest on asset based balances $ 28,662 $ 17,335 $ 15,766 $ 20,414 $ 18,656 $ 54,836
Interest on conduit borrows 16,921 6,296 4,891 9,388 6,555 20,834
Money market 1,667 1,464 1,379 1,039 (115 ) 2,303
Total interest revenue 47,250 25,095 22,036 30,841 25,096 77,973

Interest expense

Interest expense on liability based balances 11,860 7,129 4,099 3,690 3,366 11,155
Interest on conduit loans 13,760 4,509 3,447 7,114 5,235 15,796
Total interest expense 25,620 11,638 7,546 10,804 8,601 26,951

Net interest revenue $ 21,630 $ 13,457 $ 14,490 $ 20,037 $ 16,495 $ 51,022

Average daily balance (1)

Interest earning average daily balance $ 4,953,260 $ 4,296,705 $ 4,450,567 $ 4,796,250 $ 5,395,192 $ 4,880,670
Interest paying average daily balance 4,110,895 3,744,894 4,063,743 4,350,120 4,760,552 4,391,472

Conduit borrow 2,180,813 773,694 617,165 656,539 697,698 657,134
Conduit loan 2,171,518 762,266 614,609 655,171 695,567 655,116

Average interest rate on balances (1)

Interest earning average daily balance 2.31 % 1.61 % 1.42 % 1.70 % 1.38 % 1.50 %
Interest paying average daily balance 1.15 % 0.76 % 0.40 % 0.34 % 0.28 % 0.34 %
Spread 1.16 % 0.85 % 1.02 % 1.36 % 1.10 % 1.16 %

Conduit borrow 3.10 % 3.26 % 3.17 % 5.72 % 3.76 % 4.23 %
Conduit loan 2.53 % 2.37 % 2.24 % 4.34 % 3.01 % 3.21 %
Spread 0.57 % 0.89 % 0.93 % 1.38 % 0.75 % 1.02 %

(1) Excludes money market revenues and balances. Money market balances are not recorded on the PWI balance sheet.

Fed rate
Average 2.00 % 1.06 % 0.25 % 0.25 % 0.25 % 0.25 %
Ending 2.00 % 0.25 % 0.25 % 0.25 % 0.25 % 0.25 %

Penson Public Relations:
Intermarket Communications
Andy Yemma, 212-754-5450
ayemma@intermarket.com
or
Erica Fidel, 212-754-5448
efidel@intermarket.com
or
Penson Investor Relations:
Anreder & Company
Gary Fishman, 212-532-3232
gary.fishman@anreder.com
or
Steven Anreder, 212-532-3232
steven.anreder@anreder.com

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