ConnectWise Ltd - Limited company accounts 20.1

REGISTERED NUMBER: 06517178 (England and Wales)

Report of the Director and

Financial Statements for the Year Ended 31 December 2020

for

ConnectWise Ltd

Page

Company Information

1

Report of the Director

2

Report of the Independent Auditors

3

Income Statement

6

Balance Sheet

7

Notes to the Financial Statements

8

DIRECTOR:

J Magee

SECRETARY:

J Poe

REGISTERED OFFICE:

10c Peckingham Street

Halesowen

West Midlands

B63 3AW

REGISTERED NUMBER:

06517178 (England and Wales)

AUDITORS:

Michael Dufty Partnership Ltd

Statutory Auditors

The Counting House

59-61 Charlotte Street

St Paul's Square

Birmingham

West Midlands

B3 1PX

The director presents his report with the financial statements of the company for the year ended 31 December 2020.

DIRECTOR

J Magee held office during the whole of the period from 1 January 2020 to the date of this report.

DIRECTOR'S RESPONSIBILITIES STATEMENT

The director is responsible for preparing the Report of the Director and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the director is required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable him to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

DISCLOSURE OF COVID-19 EFFECTS

COVID-19 is not expected to have a significant impact on the entity. Management has determined that there is no material uncertainty that casts doubt on the entity’s ability to continue as a going concern. It expects that COVID-19 might have some impact, though not significant, for example, in relation to expected future performance, or the effects on some future asset valuations.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the director is aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Michael Dufty Partnership Ltd, will be proposed for re-appointment at the forthcoming Annual General Meeting.

This report has been prepared in accordance with the provisions of Part 15 of the Companies Act 2006 relating to small companies.

ON BEHALF OF THE BOARD:

J Magee - Director

27 January 2021

Qualified Opinion

We have audited the financial statements of ConnectWise Ltd (the 'company') for the year ended 31 December 2020 which comprise the Income Statement, Balance Sheet and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion, except for the possible effects of the matters described in the basis for qualified opinion section of our report, the financial statements:

- give a true and fair view of the state of the company's affairs at 31 December 2020 and of its profit for the year then ended;

- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

- have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for qualified opinion

We have been unable to satisfy ourselves that the sales figure of £18,730,988 recorded in the accounts is complete and free from material error.

ConnectWise Ltd is a UK subsidiary of an American parent company. The books and records for the group which includes ConnectWise Ltd are held and maintained in the US. The group auditors have expressed an unqualified opinion for the group and this has provided certain comfort that books and records maintained as a group are materially accurate.

The groups UK accountant provides us with statutory accounts, the information having been extracted from group’s accounting records, and we have endeavoured to audit these accounting statements.

Included within the accounts are material debtor and creditor provisions for unbilled and deferred income. Whilst we have received certain information and explanations surrounding these provisions we are of the opinion that we haven’t received sufficient information to determine whether these provisions are complete or free from material misstatement.

Consequently we have not been able to determine whether any adjustments to sales are necessary.

The group company applies a transfer pricing charge based on a 2.5% total operating margin. The applicable rate was determined by Ernst & Young LLP, Tampa, Florida and consequently reduces the overall effect of any material misstatement to the annual profitability by 97.5%.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.

Key audit matters

Except for the matter described in the basis for qualified opinion section, we have determined that there are no key audit matters to be communicated in our report.

Other information

The director is responsible for the other information. The other information comprises the information in the Report of the Director, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

- the information given in the Report of the Director for the financial year for which the financial statements are prepared is consistent with

the financial statements; and

- the Report of the Director has been prepared in accordance with applicable legal requirements.

Except for the possible effects of the matter described in the basis for qualified opinion section of our report, in our opinion, based on the work undertaken in the course of the audit:

- the information given in the Report of the Director for the financial year for which the financial statements are prepared is consistent with the financial statements; and

- the Report of the Director has been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

Except for the matter described in the basis for qualified opinion section of our report, in light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Report of the Director.

Arising solely from the limitation in scope of our work relating to unbilled and deferred income, referred to above;

- we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and

- we were unable to determine whether adequate accounting records have been kept.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if in our opinion:

- returns adequate for our audit have not been received from branches not visited by us; or

- the financial statements are not in agreement with the accounting records and returns; or

- certain disclosures of director's remuneration specified by law are not made; or

- the director was not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption from the requirement to prepare a Strategic Report or in preparing the Report of the Director.

Responsibilities of director

As explained more fully in the Director's Responsibilities Statement set out on page two, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the director is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations relating to employment and tax legislation, data protection rules, anti-bribery, environmental law and the Health and Safety Executive legislation. We considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and the UK Corporate Governance Code. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to fraudulent financial reporting and management bias in accounting estimate. Audit procedures performed by the engagement team included, but were not limited to:

Discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;

Reading key correspondence with external legal advisors;

Challenging assumptions and judgements made by management in their significant accounting estimates;

Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations, unusual words and unusual users.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional omissions, misrepresentations, collusion or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Robert MacLaren (Senior Statutory Auditor)

for and on behalf of Michael Dufty Partnership Ltd

Statutory Auditors

The Counting House

59-61 Charlotte Street

St Paul's Square

Birmingham

West Midlands

B3 1PX

31 January 2022

TURNOVER

18,730,988

14,880,032

Cost of sales

10,008,922

6,247,289

GROSS PROFIT

8,722,066

8,632,743

Administrative expenses

8,253,736

8,260,568

OPERATING PROFIT

5

468,330

372,175

Interest receivable and similar income

15

-

PROFIT BEFORE TAXATION

468,345

372,175

Tax on profit

6

88,445

109,723

PROFIT FOR THE FINANCIAL YEAR

379,900

262,452

FIXED ASSETS

Tangible assets

7

263,129

301,206

CURRENT ASSETS

Debtors

8

6,866,976

4,535,350

Cash at bank

4,682,607

9,481,143

11,549,583

14,016,493

CREDITORS

Amounts falling due within one year

9

9,585,809

12,007,138

NET CURRENT ASSETS

1,963,774

2,009,355

TOTAL ASSETS LESS CURRENT LIABILITIES

2,226,903

2,310,561

CREDITORS

Amounts falling due after more than one year

10

(324,815

)

(789,143

)

PROVISIONS FOR LIABILITIES

11

(45,132

)

(44,362

)

NET ASSETS

1,856,956

1,477,056

CAPITAL AND RESERVES

Called up share capital

12

100

100

Retained earnings

13

1,856,856

1,476,956

SHAREHOLDERS' FUNDS

1,856,956

1,477,056

The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the director and authorised for issue on 27 January 2021 and were signed by:

J Magee - Director

1.	STATUTORY INFORMATION

ConnectWise Ltd is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" including the provisions of Section 1A "Small Entities" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Plant and machinery etc

-

at varying rates on cost

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Costs capitalised to obtain revenue contracts

The company capitalises incremental costs of obtaining a non-cancellable subscription and support revenue contracts.The company recognises an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The company has determined that certain sales incentive programs meet the requirements to be capitalised. The capitalised amounts consist primarily of sales commissions paid to the company's direct sales force. Capitalised amounts also include (1) amounts paid to employees other than direct sales force who earn incentive pay-outs under annual compensation plans that are tied to the value of contracts acquired, (2) commissions paid to employees upon renewals of subscription and support contracts, and (3) the associated payroll taxes and fringe benefit costs associated with the payments to the company's employees. Capitalised costs to obtain a contract are amortised on a straight-line basis over the expected period of benefit, which the company has estimated, based on historical experience and other analysis, to be three years. The capitalised amounts are recovered through future revenue streams under all non-cancellable customer contracts.

3.	CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Accounts receivable

A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers. The company's standard billing terms are monthly in advance or in arrears or quarterly or annually in advance depending on the product.

The company reviews outstanding receivable balances on a regular basis to assess their collectability and maintains an allowance for doubtful accounts which reflects its best estimate of potentially uncollectable accounts receivable.

Unbilled accounts receivable

Unbilled accounts receivable is a contract asset related to the delivery of the company's subscription services and professional services for which the related billings will occur in a future period. Unbilled accounts receivable consists of revenue recognised for services performed but not yet billed and is included in accounts receivable, net in the balance sheet.

Deferred revenue

Deferred revenue primarily consists of billings in advance of revenue recognition from subscription services, including non-cancellable and non- refundable committed funds and deposits. Deferred revenue is recognised as revenue recognition criteria is met. Customers are typically invoiced for these agreements in regular monthly or annual instalments and revenue is recognised rateably over the contractual subscription period. The deferred revenue balance is influenced by several factors, including contract duration, the compounding effects of renewals, invoice timing, size and pricing terms. Deferred revenue that will be recognised during the succeeding twelve month period are recorded as deferred revenue, amounts falling due within one year, and the remaining portion is recorded as deferred revenue, amounts falling due after more than one year.

4.	EMPLOYEES AND DIRECTORS

The average number of employees during the year was 60 (2019 - 48 ) .

5.	OPERATING PROFIT

The operating profit is stated after charging:

31.12.20

31.12.19

£

£

Depreciation - owned assets

54,671

35,393

6.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

31.12.20

31.12.19

£

£

Current tax:

UK corporation tax

87,675

95,569

Deferred tax

770

14,154

Tax on profit

88,445

109,723

7.	TANGIBLE FIXED ASSETS

Plant and

Land and

machinery

buildings

etc

Totals

£

£

£

COST

At 1 January 2020

74,891

326,916

401,807

Additions

-

153,551

153,551

Disposals

-

(141,680

)

(141,680

)

At 31 December 2020

74,891

338,787

413,678

DEPRECIATION

At 1 January 2020

1,872

98,729

100,601

Charge for year

7,489

47,182

54,671

Eliminated on disposal

-

(4,723

)

(4,723

)

At 31 December 2020

9,361

141,188

150,549

NET BOOK VALUE

At 31 December 2020

65,530

197,599

263,129

At 31 December 2019

73,019

228,187

301,206

8.

DEBTORS

31.12.20

31.12.19

£

£

Amounts falling due within one year:

Trade debtors

5,446,057

3,250,215

Other debtors

529,493

914,072

Prepayments

193,592

18,159

6,169,142

4,182,446

Amounts falling due after more than one year:

Other debtors

697,834

352,904

Aggregate amounts

6,866,976

4,535,350

9.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

31.12.20

31.12.19

£

£

Trade creditors

105,144

240,048

Tax

196,984

95,569

VAT

430,075

427,263

Other creditors

7,708,740

9,583,548

Accruals and deferred income

803,500

1,017,781

Accrued expenses

341,366

642,929

9,585,809

12,007,138

10.

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

31.12.20

31.12.19

£

£

Accruals and deferred income

324,815

789,143

11.	PROVISIONS FOR LIABILITIES

31.12.20

31.12.19

£

£

Deferred tax

45,132

44,362

Deferred

tax

£

Balance at 1 January 2020

44,362

Provided during year

770

Balance at 31 December 2020

45,132

12.	CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number:

Class:

Nominal

31.12.20

31.12.19

value:

£

£

100

Ordinary

1

100

100

13.

RESERVES

Retained

earnings

£

At 1 January 2020

1,476,956

Profit for the year

379,900

At 31 December 2020

1,856,856

14.	ULTIMATE CONTROLLING PARTY

The company is a wholly owned subsidiary of Connectwise LLC, a company registered in the United States. It's registered office is Suite 200, 4110 George Road, Tampa, Florida, United States, FL 33634.

The ultimate parent company is Thoma Bravo, L.P.