Temenos: Where There's Smoke...
I never spent time with Temenos during my FinTech I-Banking days because Temenos had a reputation for being a sleepy company. I have not read Hidenburg’s short report, but understand that Hindenburg mentioned Temenos’ use of capitalized development costs in its financial results. This raises a red flag in my view. My understanding is that Software companies should only capitalize development costs (rather than expense them) when the Software in question is developed for internal use.
Temenos capitalized $78 million of development costs in the 12 months-ended September 2023 and $95 million in the 12 months-ended September 2022 (below). These are very large amounts considering Temenos only generated revenue of $980 million and $962 million over the same periods.
Further, I don’t like Temenos’ IR response (below). Why would Hindenburg want to subject itself to Temenos’ spin by contacting the firm? If as a short you believe management is dirty, why contact management?
