Global Capacity Completes Acquisition Funding for Vanco Direct USA, LLC

CHICAGO--(BUSINESS WIRE)--Global Capacity (parent: Capital Growth Systems, Inc.) (OTCBB: CGSY.OB), the telecommunications industry's first logistics company, today announced the financial closing for its acquisition of Vanco Direct USA, LLC (VDUL) for $15 million. The acquisition contract was recently announced and this closing follows the receipt of a grant of special temporary authority by the Federal Communications Commission (FCC) for Global Capacity to operate the VDUL business. Global Capacity has fully funded the acquisition and has assumed operation of the business (and corresponding financial benefits and burdens), with the formal transfer of the ownership expected to occur upon the grant of formal approval by state and federal regulators for the change in control, expected within the next 90 days. Global Capacity also outlined the revenue and earnings goals for the combined businesses.

The addition of the VDUL business significantly strengthens Global Capacity’s leadership position as the first global telecom logistics provider. The integration of the two companies results in the following direct synergies:

• Global Capacity’s proprietary tools and intellectual property – the core of the Company’s business model – are significantly strengthened by VDUL’s software and intellectual property
• Global Capacity’s Strategic Sourcing business will immediately benefit from the strong base of recurring revenue customers that VDUL contributes
• Global Capacity’s Software as a Service (SaaS) business will add VDUL’s software capabilities and customers, adding scale and revenue to the Company’s base of predictable revenue

“We are extremely thankful to our banker, Capstone Investments, and to all of our investors who helped us secure the financing for this acquisition. In this extraordinarily challenging credit market, it would have been impossible to get this transaction closed without their perseverance and commitment. Their support is a strong endorsement of the unique value we have in the market, and this transaction is a testament to their professionalism,” said Patrick Shutt, Chief Executives Officer of Global Capacity.

Global Capacity helps companies manage the cost and complexity associated with access networks globally. At the core of Global Capacity’s logistics business model is a unique asset – a robust database of global supply and pricing data, coupled with systems and tools that leverage that data to design, price, and optimize access networks. Global Capacity’s logistics business model leverages this asset across multiple products (Software as a Service, Strategic Sourcing, Optimization) while complementing it with additional capabilities (Engineering Services, Remote Management Services) to provide a set of solutions that address the entire supply chain for global access networks.

The completion of the funding for the acquisition provides Global Capacity with the opportunity to recap performance metrics of VDUL, as well as outline some of the financial metrics of the combined companies going forward. VDUL generated trailing twelve-month revenues of approximately $50 million, with gross margins of 25%, and adjusted EBITDA of $3 million for that period. Consolidated annualized predictable revenues for the combined companies should total roughly $72 million on a forward twelve-month basis. Global Capacity expects that execution of its integration plan will increase adjusted EBITDA to a twelve-month range of $10 to $12 million for the predictable revenue business. The Company also expects non-predictable revenue from its Optimization business to grow to 30% of total annualized revenue. This business, while difficult to predict due to the complexity and challenges clients face in implementing identified savings, is operating on a large back-log of identified savings, as well as a robust pipeline of network spend. Consolidated EBITDA for both predictable and non-predictable revenue is expected to be 22% of gross revenues on a forward twelve-month basis.

“In the current economic climate, reducing network costs is critically important for our clients. The addition of VDUL strengthens our product portfolio and further extends our ability to help clients drive cost out of their network spend,” said Mr. Shutt. “In addition, our strengthened base of predictable revenue provides us with a strong platform for growth, and gives us the ability to focus on realizing the tremendous upside potential of our non-recurring Optimization Solutions business.”

The contract to acquire VDUL was first announced November 14, and was subject to review by Federal regulatory authorities. With that special temporary authority for Global Capacity to assume control of VDUL now obtained, Global Capacity will immediately execute a 120-day integration plan designed to maximize the synergies between the companies, optimize the sourcing contracts that the acquisition contributes, and align the combined senior management team. That 120-day integration period will also result in the filing of the retrospective financial statements for VDUL, as required by the Securities and Exchange Commission.

About Global Capacity

Capital Growth Systems, Inc. dba Global Capacity provides a fully-integrated telecommunications supply chain management system that streamlines and accelerates the process of designing, building, and managing customized communications networks. It offers a comprehensive suite of services to enterprises, systems integrators, and carrier customers worldwide. Global Capacity has operational centers in Waltham, MA; Manchester, England; and Houston, TX; with offices in Chicago, IL; New York, NY; Austin, TX; London, England; and Lisbon, Portugal. For more information, please visit www.globalcapacity.com or contact the Company at +1 (312) 673-2400.

Forward-Looking Statements

Certain information discussed in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Federal securities laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, it can give no assurance that its expectations will be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements.

Forward-looking statements are inherently subject to unpredictable and unanticipated risks, trends, and uncertainties such as the Company's ability to accurately forecast its operating results; the Company's ability to successfully integrate the VDUL business; the ability of the Company to obtain the necessary state and federal regulatory approvals for the permanent change in control of VDUL (necessary for the transfer of ownership of the VDUL limited liability company interests to the Company), the ability to predict the volume of business or level of profitability of network optimization contracts; the ability to achieve profitability or generate positive cash flow; the availability of financing and ability to meet the covenants necessary to avoid default with respect to such financing; the ability to procure a listing of its securities on one or more public stock markets; and other risks associated with the Company's business. For further information on factors which could impact the Company and its subsidiaries, and the statements contained herein, reference should be made to the Company's filings with the Securities and Exchange Commission, including annual reports on Form 10-KSB, quarterly reports on Form 10-Q, and current reports on Form 8-K. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Customers, Partners:
Global Capacity
Jack Lodge
Chief Operating Officer
+1 781-902-5196
jlodge@globalcapacity.com
or
Media, Analysts:
FD Ashton Partners
Patrick Van de Wille
+1 312-553-6704
patrick.vandewille@fdashtonpartners.com
or
Investors:
Salzwedel Financial Communications, Inc.
Jeff Salzwedel
+1 503-722-7300
jeff@sfcinc.com