Attached files
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| 8-K - FORM 8-K - PENSON WORLDWIDE INC | d353757d8k.htm |
Exhibit 99.1
| Penson Worldwide, Inc. 1700 Pacific Avenue, Suite 1400 Dallas, Texas 75201 www.penson.com |
| |
| PRESS RELEASE |
Penson Reports Advanced Strategic Discussions and 1Q12 Results
DALLAS, TX, May 15, 2012 — Penson Worldwide, Inc. (NASDAQ: PNSN) reported today that it is actively engaged in advanced discussions regarding strategic transactions and will provide further information when appropriate. The Company also reported results from continuing operations for the first quarter ended March 31, 2012 and the filing of its related Form 10-Q.
Penson noted that it has not reached a final agreement with its note holders to exchange their notes for new securities under the proposed exchange offer previously announced, but is continuing with its efforts to restructure its balance sheet. Meanwhile, Penson announced that it made its scheduled interest payment today of $12.5 million on its 12.5% Senior Secured Second Lien Notes due 2017.
1Q12 Results from Continuing Operations
Continuing operations include the Company’s US subsidiary, Penson Financial Services, Inc. (PFSI), including its Penson Futures division, and Nexa Technologies, Inc. The Company’s Canadian subsidiary, Penson Financial Services Canada Inc., and UK subsidiary, Penson Financial Services Ltd, are treated as discontinued operations and are excluded.
| • | Net revenues were $29.3 million, which included in “other revenue” a non-cash $8.8 million write-down of Retama Development Corporation (RDC) related assets. As previously announced, subsequent to the quarter Penson sold substantially all of its RDC related assets. The Company recorded a write-down to fair value of $8.8 million as of March 31, 2012 in respect of these assets and will record a further write-down of $6.3 million that will be reflected in the second quarter of 2012 in respect of the sale. Excluding the first quarter write-down, net revenues from continuing operations were $38.1 million as compared to $42.7 million for the fourth quarter ended December 31, 2011 (4Q11). |
| • | Expenses were $72.3 million, which included $7.9 million in non-recurring items, primarily related to Penson’s strategic initiatives. Excluding non-recurring items from both periods, expenses from continuing operations were $64.4 million as compared to $66.1 million in 4Q11, reflecting progress with the Company’s cost savings plan. |
| • | Pre-tax operating loss was $43.0 million. Excluding the above mentioned write-down and non-recurring expense items from both periods, pre-tax operating loss from continuing operations was $26.3 million compared to a loss of $23.4 million in 4Q11. On the same basis, and excluding non-cash items for both periods, pre-tax operating loss was $20.3 million as compared to a loss of $14.3 million in 4Q11. |
| • | Net loss was $43.1 million, or ($1.54) per share, compared to a net loss of $184.7 million, or ($6.68) per share, in 4Q11, which included a $137.4 million non-cash goodwill impairment charge. Excluding the previously noted write-down and non-recurring expense items from both periods, net loss from operations was $26.4 million, or ($0.94) per share, compared to a net loss of $25.6 million, or ($0.93) per share, in 4Q11. |
1Q12 Additional Information (Continuing Operations)
| • | Non-interest revenues, excluding the above mentioned RDC write-down, were $30.3 million compared to $32.9 million in 4Q11. This reflects the continued slowdown in trading volumes, which saw average daily volumes for the industry decline approximately 8% in equities compared to 4Q11. |
| • | Net interest revenues were $7.8 million compared to $9.8 million in 4Q11. The change reflected (i) lower yield on excess cash balances in FDIC insured bank accounts, where virtually all customer segregated balances are held, and (ii) lower volumes in securities lending. |
| • | Regulatory capital: At March 31, 2012, PFSI’s net capital totaled $119.1 million, approximately four times the minimum regulatory requirement of $30.9 million. |
| • | Correspondent count: At March 31, 2012, PFSI had 305 revenue-generating correspondents, comprised of 237 in securities clearing and 68 in futures operations. Due principally to its technology conversion, which was completed during the quarter, PFSI refrained from on boarding new correspondents. At March 31, 2012, Penson had a signed “pipeline” of 35 new correspondents. |
Non-GAAP Financial Measures
The Company uses certain non-GAAP measures of financial performance to supplement the unaudited financial statements presented in accordance with GAAP. The Company presents non-GAAP measures when we believe that the additional information is useful and meaningful to investors. Non-GAAP measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP.
EBITDAS (earnings before interest, taxes, depreciation, amortization and stock-based compensation) is considered a non-GAAP financial measure as defined by SEC Regulation G. The Company considers EBITDAS an important measure of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDAS eliminates the non-cash effect of tangible asset depreciation and amortization, intangible asset amortization and stock-based compensation.
The Company also considers “Adjusted EBITDA” (another non-GAAP financial measure as defined by SEC Regulation G) an important measure of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. “Adjusted EBITDA” eliminates the effect in the first quarter ended March 31, 2012 of certain litigation, severance and restructuring costs; the RDC write-down; and certain bad debt expense. EBITDAS and “Adjusted EBITDA” should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.
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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., and Nexa Technologies, Inc., among other companies. Headquartered in Dallas, Texas, Penson has served the clearing needs of the global financial services industry since 1995.
Penson Financial Services, Inc. is a member of FINRA, New York Stock Exchange, NYSE Arca Exchange, NYSE Amex Equities, NYSE Amex Options, BATS Exchange, Direct Edge Exchanges (EDGA and EDGX), Chicago Board Options Exchange, Chicago Stock Exchange, International Securities Exchange, NASDAQ OMX BX, NASDAQ OMX PHLX, NASDAQ Stock Market, NASDAQ LIFFE, LLC, National Stock Exchange, Options Clearing Corp., Fixed Income Clearing Corp., MSRB, National Securities Clearing Corp., DTC, Euroclear, and SIPC. Penson Financial Services, Inc. is also a registered Futures Commission Merchant and clearing member at the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, Comex, Kansas City Board of Trade, Minneapolis Grain Exchange, NYSE Liffe US, NYSE Euronext LIFFE, ONEChicago, ICE CLEAR Europe and ICE Futures USA.
Penson Financial Services Canada Inc. is a participating organization with the Toronto Stock Exchange, the Montreal Exchange, the CNSX 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 Alternative Trading Systems.
Penson Financial Services Ltd. is a member of the London Stock Exchange, Chi-X Europe, BATS Europe, NYSE Arca, NYSE Euronext, and SmartPool, and is authorized and regulated by the Financial Services Authority.
Forward-Looking Statements: Statements contained in this news release that are not based on current or historical fact are forward-looking in nature. 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. 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.
Contacts: Gary Fishman (gary.fishman@anreder.com), Steven Anreder (steven.anreder@anreder.com), or Michael Shallo (michael.shallo@anreder.com), of Anreder & Company, at +1-212-532-3232
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PENSON 1Q12 RESULTS
Penson Worldwide, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2012 | 2011 | 2011 | ||||||||||
| Revenues |
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| Clearing and commission fees |
$ | 19,223 | $ | 20,492 | $ | 30,374 | ||||||
| Technology |
5,252 | 5,086 | 6,020 | |||||||||
| Interest, gross |
12,271 | 13,268 | 23,916 | |||||||||
| Other |
(2,985 | ) | 7,296 | 9,193 | ||||||||
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| Total revenues |
33,761 | 46,142 | 69,503 | |||||||||
| Interest expense from securities operations |
4,481 | 3,431 | 6,210 | |||||||||
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| Net revenues |
29,280 | 42,711 | 63,293 | |||||||||
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| Expenses |
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| Employee compensation and benefits |
19,996 | 17,468 | 20,260 | |||||||||
| Floor brokerage, exchange and clearance fees |
7,966 | 7,816 | 9,183 | |||||||||
| Communications and data processing |
16,893 | 16,144 | 14,664 | |||||||||
| Occupancy and equipment |
4,590 | 6,381 | 5,792 | |||||||||
| Bad debt expense |
2,692 | 7,038 | 194 | |||||||||
| Goodwill and intangible asset impairment |
— | 137,421 | — | |||||||||
| Other expenses |
10,595 | 6,546 | 6,744 | |||||||||
| Interest expense on long-term debt |
9,538 | 11,415 | 9,711 | |||||||||
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| 72,270 | 210,229 | 66,548 | ||||||||||
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| Loss from continuing operations before income taxes |
(42,990 | ) | (167,518 | ) | (3,255 | ) | ||||||
| Income tax expense (benefit) |
97 | 17,173 | (1,811 | ) | ||||||||
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| Loss from continuing operations |
(43,087 | ) | (184,691 | ) | (1,444 | ) | ||||||
| Income (loss) from discontinued operations, net of tax |
(5,387 | ) | 4,345 | (1,417 | ) | |||||||
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| Net loss |
$ | (48,474 | ) | $ | (180,346 | ) | $ | (2,861 | ) | |||
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| Income (loss) per share — basic and diluted: |
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| Loss per share from continuing operations |
$ | (1.54 | ) | $ | (6.68 | ) | $ | (0.05 | ) | |||
| Income (loss) per share from discontinued operations |
$ | (0.19 | ) | $ | 0.16 | $ | (0.05 | ) | ||||
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| Loss per share |
$ | (1.73 | ) | $ | (6.52 | ) | $ | (0.10 | ) | |||
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| Weighted average common shares outstanding — basic and diluted |
27,975 | 27,672 | 28,478 | |||||||||
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PENSON 1Q12 RESULTS
Penson Worldwide, Inc.
Condensed Consolidated Statements of Financial Condition
(In thousands)
| March 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (unaudited) | ||||||||
| ASSETS |
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| Cash and cash equivalents |
$ | 22,599 | $ | 43,509 | ||||
| Cash and securities — segregated under federal and other regulations |
2,719,217 | 2,529,301 | ||||||
| Receivable from broker-dealers and clearing organizations |
395,381 | 146,313 | ||||||
| Receivable from customers, net |
1,012,107 | 983,420 | ||||||
| Receivable from correspondents |
82,108 | 74,521 | ||||||
| Securities borrowed |
363,104 | 544,109 | ||||||
| Securities owned, at fair value |
32,201 | 34,686 | ||||||
| Deposits with clearing organizations |
555,629 | 496,775 | ||||||
| Property and equipment, net |
20,246 | 22,452 | ||||||
| Other assets |
76,318 | 71,374 | ||||||
| Assets held-for-sale |
1,683,918 | 1,250,946 | ||||||
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| Total assets |
$ | 6,962,828 | $ | 6,197,406 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Liabilities |
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| Payable to broker-dealers and clearing organizations |
$ | 354,847 | $ | 133,110 | ||||
| Payable to customers |
3,806,637 | 3,692,140 | ||||||
| Payable to correspondents |
129,546 | 124,863 | ||||||
| Short-term bank loans |
88,500 | 80,800 | ||||||
| Notes payable |
265,454 | 271,302 | ||||||
| Securities loaned |
577,353 | 549,166 | ||||||
| Securities sold, not yet purchased, at fair value |
571 | 499 | ||||||
| Accounts payable, accrued and other liabilities |
74,955 | 70,579 | ||||||
| Liabilities associated with assets held-for-sale |
1,636,415 | 1,199,362 | ||||||
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| Total liabilities |
6,934,278 | 6,121,821 | ||||||
| Stockholders’ Equity |
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| Total stockholders’ equity |
28,550 | 75,585 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 6,962,828 | $ | 6,197,406 | ||||
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PENSON 1Q12 RESULTS
Penson Worldwide, Inc.
Supplemental Data
(unaudited)
| Three Months Ended | ||||||||||||||||||||
| (in thousands) | March 31, 2011 |
June 30, 2011 |
September 30, 2011 |
December 31, 2011 |
March 31, 2012 |
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| Interest revenue |
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| Interest on asset based balances |
$ | 21,144 | $ | 21,918 | $ | 17,917 | $ | 11,375 | $ | 9,933 | ||||||||||
| Interest on conduit borrows |
1,713 | 1,887 | 1,472 | 1,351 | 1,515 | |||||||||||||||
| Money market |
1,059 | 731 | 432 | 542 | 823 | |||||||||||||||
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| 23,916 | 24,536 | 19,821 | 13,268 | 12,271 | ||||||||||||||||
| Interest expense |
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| Interest expense on liability based balances |
5,075 | 5,308 | 4,514 | 2,545 | 3,454 | |||||||||||||||
| Interest on conduit loans |
1,135 | 1,177 | 836 | 886 | 1,027 | |||||||||||||||
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| 6,210 | 6,485 | 5,350 | 3,431 | 4,481 | ||||||||||||||||
| Net interest revenue |
$ | 17,706 | $ | 18,051 | $ | 14,471 | $ | 9,837 | $ | 7,790 | ||||||||||
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| Average daily balance (1) |
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| Interest earning average daily balance |
$ | 7,887,490 | $ | 8,165,664 | $ | 5,841,380 | $ | 3,977,480 | $ | 4,383,208 | ||||||||||
| Interest paying average daily balance |
6,996,801 | 7,369,544 | 5,432,994 | 3,703,470 | 3,742,194 | |||||||||||||||
| Conduit borrow |
652,845 | 661,567 | 451,351 | 386,653 | 282,943 | |||||||||||||||
| Conduit loan |
652,402 | 660,906 | 450,280 | 385,878 | 282,366 | |||||||||||||||
| Average interest rate on balances (1) |
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| Interest earning average daily balance |
1.07 | % | 1.07 | % | 1.23 | % | 1.14 | % | 0.91 | % | ||||||||||
| Interest paying average daily balance |
0.29 | % | 0.29 | % | 0.33 | % | 0.27 | % | 0.37 | % | ||||||||||
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| 0.78 | % | 0.78 | % | 0.90 | % | 0.87 | % | 0.54 | % | |||||||||||
| Conduit borrow |
1.05 | % | 1.14 | % | 1.30 | % | 1.40 | % | 2.14 | % | ||||||||||
| Conduit loan |
0.70 | % | 0.71 | % | 0.74 | % | 0.92 | % | 1.45 | % | ||||||||||
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| Spread |
0.35 | % | 0.43 | % | 0.56 | % | 0.48 | % | 0.69 | % | ||||||||||
| (1) Excludes money market revenues and balances. Money market balances are not recorded on the PWI balance sheet. |
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| Fed rate |
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| Average |
0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | ||||||||||
| Ending |
0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | ||||||||||
Page 6 of 8
PENSON 1Q12 RESULTS
Penson Worldwide, Inc.
Non-GAAP Disclosure
(Unaudited)
(In thousands, except per share data)
| Three Months Ended March 31, 2012 |
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| Net revenues, GAAP basis |
$ | 29,280 | ||
| Non-GAAP adjustments |
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| Retama write-down to fair value |
8,799 | |||
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| Net revenues, as adjusted |
$ | 38,079 | ||
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| Loss from continuing operations, GAAP basis |
$ | (43,087 | ) | |
| Non-GAAP adjustments, net of tax: |
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| Litigation costs |
927 | |||
| Severance costs |
1,345 | |||
| Restructuring costs |
2,925 | |||
| Retama write-down (including bad debt) |
9,363 | |||
| Bad debt |
2,151 | |||
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| Loss from continuing operations, as adjusted |
$ | (26,376 | ) | |
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| Loss per share from continuing operations — basic and diluted, GAAP basis |
$ | (1.54 | ) | |
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| Loss per share from continuing operations — basic and diluted, as adjusted |
$ | (0.94 | ) | |
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| Weighted average common shares outstanding — basic and diluted |
27,975 | |||
Page 7 of 8
PENSON 1Q12 RESULTS
Penson Worldwide, Inc.
Reconciliation of loss from continuing operations to EBITDAS
(Unaudited)
(In thousands)
| Three Months | ||||
| Ended | ||||
| March 31, | ||||
| 2012 | ||||
| Loss from continuing operations |
$ | (43,087 | ) | |
| Income tax expense |
97 | |||
| Depreciation |
2,637 | |||
| Amortization |
906 | |||
| Interest expense on long-term debt : |
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| Cash interest expense |
7,986 | |||
| Noncash interest expense |
1,552 | |||
| Stock-based compensation |
905 | |||
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| EBITDAS (1) |
$ | (29,004 | ) | |
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| Litigation costs |
925 | |||
| Severance costs |
1,342 | |||
| Restructuring costs |
2,919 | |||
| Retama write-down (including bad debt) |
9,344 | |||
| Bad debt |
2,147 | |||
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| Adjusted EBITDA |
$ | (12,327 | ) | |
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| (1) | Defined as earnings before interest, income taxes, depreciation, amortization and stock-based compensation. |
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