Temenos’ “Independent Examination” Strikes Us As A Tacit Confirmation Of Accounting Manipulation And Disclosure Violations, Spun With Lawyer-Speak And Gaslighting


Earlier this week, Temenos disclosed the outcome of a months-long investigation, commissioned by a Special Committee of its board, in response to our February 2024 report that highlighted, among other things, major accounting irregularities and suspect business practices at the company.

Our report was the result of a 4-month investigation that included extensive document review and interviews with 25 former employees, including former senior leaders at the company.

The company’s own examination report, compiled by lawyers and accountants from Schellenberg Wittmer, Sullivan & Cromwell, and Alvarez & Marsal Switzerland who were retained by four members of Temenos’ board, including its Chairman, said “over 150 attorneys and forensic accounting professionals have spent over 22,000 hours” examining our report.

And while the examination leads by saying we made “inaccurate and misleading allegations,” the content of the examination’s findings indicates the opposite – a tacit confirmation of accounting manipulation and disclosure violations at Temenos, spun with lawyer-speak and gaslighting.

Former Temenos Executives And Sales Leaders Told Us How Contracts Were Backdated To Manipulate Earnings

The Examination Confirmed This Practice: It Found 7 Instances Of Backdating Contracts, 4 Instances Where Revenue Was Pulled Into The Previous Quarter, And Discussion Among Employees About Backdating A Client Signature

In our February 2024 report, we highlighted former Temenos executives and sales leaders who described how Temenos would manipulate earnings through contract backdating. In many jurisdictions, backdating contracts is prohibited.

Temenos’ examiners described how they looked “for any reference to backdating” between 2019 and 2023. It is unclear what this means, whether it was a search limited to keywords such as “backdate”, an actual review of all sales contracts and related communications, or another approach.

Despite the vaguely described parameters of the review, the examination nonetheless found evidence of backdating: it confirmed 7 instances of backdating where, in 4 of those cases, revenue was pulled back into the previous quarter.

The report provided no justification as to why revenue was booked in previous quarters.

(Source: Independent Examination Report [Pg. 4])

The investigation also found internal discussion between Temenos sales personnel about “the potential for backdating of a client signature.”

(Source: Independent Examination Report [Pg. 4])

We view this as a tacit admission that Temenos has previously failed to prevent accounting manipulation via backdating. [Pg. 4]

Temenos further validated our concerns by telling the committee it “plans to take additional measures to enhance its procedures with respect to contract signatures.” [Pg. 4] If the procedures were effective in the first place, there would be no need to change them.

The examination then tried to exonerate the current and former CEO and legal teams by saying it “found no evidence” that they “were aware of backdating of sales contracts.” [Pg. 4]

Given that we were able to ascertain information about backdating during our investigation, with multiple former employees specifically explaining how the practice was encouraged, this is likely false, and senior executives at best were negligent in not knowing or wilfully ignorant.

Our Report Uncovered That Temenos Funded The Purchase Of Its Own Software Through An “Undisclosed Investment” Into Mbanq, Per A Former Executive

The Independent Examination Confirmed Our Findings, Showing That Temenos Made Sales Deals “At The Time Of These Investments” And Never Disclosed It To Investors

Despite Confirming Every Key Element Of Our Report’s Findings On The Mbanq Deals, The Examination Merely Took Issue With Our Characterization Of This Apparent Roundtripping Scheme As A Roundtripping Scheme

In our report, we highlighted evidence indicating Temenos had secretly funded the purchase of its own software, effectively engaging in a roundtripping scheme by making an undisclosed ~$20 million investment into Mbanq at the same time Mbanq signed a deal committing to purchasing ~$20 million in software services from Temenos, per a former Temenos executive we spoke with.

The independent examination essentially confirmed the entirety of these allegations, and presented new evidence indicating the issue was worse than we had uncovered.

The review highlighted, as we alleged, that in June 2021 and September 2022, Temenos made investments in Mbanq, and confirmed that Mbanq acquired software licenses from Temenos “at the time of these [June 2021 and September 2022] investments.” [Pg. 5]

(Source: Independent Examination Report [Pg. 5])

Note that the review said that software “licenses”, plural, were sold at the time of the “investments”, also plural, indicating that 2 such simultaneous investment and software sales deals took place.

The examination is conspicuously silent on why Temenos did not disclose any of this to investors at the time, or why it did not even disclose its investment in Mbanq months later in October 2021 when it first announced a partnership. Instead, Temenos only mentioned a “minority investment” in an announcement over a year later in December 2022.

Further evidencing that the sale was ultimately a sham, the examination stated that Temenos had received only $13.3 million in revenue (22% of the total investment) from Mbanq. Per the CFO’s statements in February 2024, Temenos will receive no further revenue. [Pg. 10] The review was silent on why.

Not only do these findings obviously support our conclusion of roundtripping, but they also seem to highlight material losses incurred by Temenos shareholders as a result. Nonetheless, the review took issue not with the facts, but with our characterization that this represented evidence of a roundtripping scheme.

In light of the above, we think CEO Andreas Andreades should immediately resign.

Our Report Highlighted That Temenos’ “Game-Changing” Partnership With DXC Had Failed

The Independent Examination Revealed For The First Time To Shareholders That Temenos’ Partnership With DXC Had Indeed Failed

The Exact Date The Partnership Failed Was Not Disclosed

In our report, we also highlighted the failure of Temenos’ partnership with DXC to offer software to its US customer base, described as “game-changing” by former CEO Max Chuard.[1] [24:40]

Note that from our report,

“A former DXC executive told us the deal was ‘rushed through’ on the last day of the year to ‘help Temenos make their yearly number’. They said of the deal: ‘This isn’t a partnership. You used us for a license sale.’”

The deal was announced in February 2021 and the former executive told us that DXC was “left at the altar” from the beginning and that the partnership had been written off roughly 1.5 years after signing.

Despite this, Temenos consistently tried to convince investors that the deal was on solid footing. As late as July 2022, then CEO Max Chuard claimed that continued discussion with DXC “has not changed” on its Q2 2022 earnings call. [Pg. 24]

The independent examination confirmed our findings and for the first time acknowledged the failure of the DXC partnership. In delicately worded legal speak, it stated that “the partnership’s goal was not met” without specifying exactly when the partnership fell apart:

“Temenos and DXC continued to work together into 2022 to advance the complex project, but the partnership’s goal was not met, including because of the parties’ shifting business strategies and priorities.” [Pg. 6]

The review acknowledged the deal was signed in “December 2020”, but avoided our question about the actual date and whether the deal was made around the last day of the year, helping Temenos make its yearly number. [Pg. 5] This was an easy question to answer, but it was ignored.

In brief, the examination confirmed our findings about the failure of the DXC partnership —information that was withheld from Temenos shareholders until this week and only as a result of our pressing for disclosure.

Former Executives Told Us That Temenos’ R&D Spend Was “Non-Existent” And A “Mystery”

The Independent Examination Avoided Our Questions About R&D Spending And Failed To Disclose Where The Majority Of Temenos’ $279.8 Million R&D Spend Has Gone

In our report, we questioned where most of Temenos’ $279.8 million in R&D was being spent. Former executives told us Temenos’ R&D spend was virtually “non-existent” and a “mystery”. We highlighted that “Temenos’ principal R&D centers are in India, but its primary Indian subsidiary reported just INR 6.33 billion (~$76 million USD) in total expenses in 2022”.

The independent examination failed to address our question and instead changed the subject, wrongly stating that our report “misstates the amount of Temenos’ reported expenses in India by taking into account only one of the Company’s two subsidiaries in that country.” [Pg. 6]

This attempt at misdirection falls flat. The company reports 2 other group companies in India per both its 2022 and 2023 annual report. [Pg. 224 & Pg. 235] In 2022, compared to the primary subsidiary, the two other India subsidiaries reported much lower total expenses of just 16,506 lakh rupees (~U.S. $22 million at the time) and 22.7 million rupees (~U.S. $300,000 at the time).[2]

(Source: 2023 Annual Report, List of Group Companies [Pg. 235])
(Source: Kony India and Kony Services India, Annual Reports from India’s MCA)

Our report highlighted suspicions that Temenos was booking client-specific implementation expenses as R&D. The review ignored this, simply regurgitating Temenos’ justification for capitalizing individual client-specific costs as R&D, vaguely arguing that these contribute to the “value of Temenos’ intellectual property”. [Pg. 6]

Overall, the independent examination deftly avoided the issues we raised about the company’s mysterious R&D spend and failed to provide further details on the source of at least 64% of its claimed R&D expenditures.[3] At this point, we view this as another tacit admission.

We Alleged That Temenos’ Digital Bank Product “Infinity” Was A Failed Rollup

The Independent Examination Showed That Reported Digital Clients May Have Fallen As Much As 29%-41% Since November 2022, Raising New Questions Of Whether Temenos Had Previously Overstated Its Client Count

In our report, we showed how Temenos’ digital bank product “Infinity” (renamed “Temenos Digital”) was a failed $840 million roll-up, suggesting the $1.07 billion in goodwill should be tested for impairment. [Pg. 47]

The review seemed to validate these concerns, providing a long explanation for Infinity’s challenges, ranging from early integration issues to the pandemic before saying that after considerable time and attention, Infinity implementations eventually “improved”. [Pg. 9]

Rather than providing normal financial metrics to help investors quantify these struggles, the review opted to lump 2020-2023 revenue metrics together, saying Infinity collectively generated $548 million total revenue in that period, leaving investors with no ability to assess basic annual revenue trends. It was even more vague on profitability, saying “profitability has increased”, providing no sense of what that profitability was or is. [Pg. 9]

This information, which the company and examination review has clearly chosen to withhold, is vital for investors to gauge the true state of Infinity given that Temenos has also incurred significant R&D spend in addition to its acquisitions. In February 2022, the current CFO told investors:

“We have made considerable R&D investments into our, as Max explained, composable banking services architecture, and also Infinity.” [Pg. 17]

Following our report, other former employees and individuals reached out with additional stories corroborating many of the practices we had written about. One new issue that was brought to our attention in multiple instances was the question of whether Temenos’ client count was accurate.

Refreshingly, the review raised new questions about Temenos’ client counts, albeit without openly saying so. In November 2022, Temenos announced it had passed 850 customers using Temenos Infinity. The CEO at the time, Max Chuard, implied these were live users, stating that 850 customers “leverage Temenos Infinity”.

(Source: Temenos Press Release)

Yet per the examination report, Temenos Digital now has only “more than 500 [live] clients”, a potential 41% drop from earlier reported metrics. [Pg. 9] The company’s 2023 annual report, released on the same day as the examination report, states the company has over 600 digital clients in total, a potential 29% drop from earlier reported metrics. [Pg. 4]

This revelation seems to show that earlier Temenos digital banking customer counts were inflated. [4]

The company has attempted to explain away the large discrepancy by saying it has a new methodology for counting customers. [5] [Pg. 4]

This makes little sense. A mere count of unique customers isn’t the type of metric subject to a complicated methodology, and certainly not one that would result in such a wide discrepancy. We think the company should answer whether the independent review performed a client count and exactly how it changed its ‘process’ for calculating this basic, but key metric.

The described problems with Infinity, the vague or non-existent financial disclosures, and the apparent exodus or inflation of disclosed clients underscores Infinity’s struggles, yet the company has thus far taken no write-down. We expect it will.

A Hodgepodge of Wordsmithing

Other findings seemed to take issue with our characterization of issues without expressly denying the supporting evidence. For example, the review took issue with our characterization of pulling licensing renewals forward at a “deep” discount, while acknowledging that such early renewals took place, which risk cannibalizing future overall revenue. [Pg. 7]

The review also simply ignored questions. It acknowledged that 34 Powers of Attorney were issue to execute sales contracts, denied this played a role in the backdating, but didn’t elaborate on the reason for this unusual sales practice. [Pg. 3-4]

We also flagged in our report how the company’s stock buybacks often coincided with executive stock grants and sales. In response, the review asserted that the company’s stock buybacks were “administered by independent broker-dealers”, valiantly defending against an allegation no one ever made. [Pg. 3]


“Independent reviews”, are an interesting feature of the market. A report commissioned by a company, paid for by the company, with the word “independent” ironically slapped on the cover.

As is often the case, these carefully prepared reviews are cloaked in distractions, gaslighting, diversions, key omissions and positively-spun-sounding conclusions that interested parties rush to hail as an exoneration. But a peek under the surface shows how much of the review confirms our findings, which we fully stand by to this day. It also raises brand new questions about client counts and other key metrics the company is clearly choosing to withhold from investors.

Further Discussion

Sometimes, interested parties such as long investors, after apparently failing to read a 10-page examination report past the first page and believing any positive sounding conclusions, like to make grandiose calls for litigation and regulatory intervention against research firms like Hindenburg.

To be clear, we would welcome the opportunity to review all of the documents, interviews and materials underpinning the review. If the reviewers hired by the company have been forced to admit to the findings in the examination, we can only imagine what else we would find upon our own thorough examination.

Interestingly, following our initial report in February, the long investor we are referencing, Petrus Advisers, reported that it had spoken with many of the same former employees as us, apparently heard some of the same allegations, but dismissed this evidence as just being part of an inexplicable “revenge mission” by “many” former employees.

We recognize that as an investment manager, it must be humiliating to have uncovered evidence of accounting manipulation in one’s own due-diligence process, only to inexcusably ignore it, then later be faced with the reality that the allegations had merit. We regularly see this dynamic on the other side of our reports—long investors that refuse to acknowledge negative information staring them in the face, preferring instead to believe their initial positive conclusions. Sometimes managers are more inclined to protect their own egos than their investor capital.

Regardless, none of that justifies making wildly false allegations about our research process (accusing us of having “willingly misconstrued and misrepresented facts” or “most likely knowingly made numerous grave mistakes,” for example).

For this, Hindenburg Research is actively considering our own litigation options.

Disclosure: We Are Short Shares of Temenos AG (SWX: TEMN)

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[1] On Temenos’ “2021 Capital Markets Day Webcast” webpage, navigate to “Strategy and Vision” tab to view embedded video.

[2] We note the mismatch in accounting year in India which runs from April 1st to March 31st, hence present 2023 financials alongside. Exchange rate 1 USD to INR = 75.7862 on March 31st, 2022. The primary Indian subsidiary we refer to is Temenos India Pvt Ltd. Lakh = 100,000 in Indian numbering system.

[3] That is, net of totals at all 3 Indian group entities, presuming the entirety of these expenditures are considered R&D expenditures.

[4] The November 2022 press release discloses 850 clients using Temenos Infinity. The 2023 annual report discloses over 600 digital clients.

[5] The 2023 report also contains a footnote to try to explain away this change. “In this report and in the future, Temenos will focus its client number disclosure on those clients generating the significant majority of Temenos’ annual revenue, as well as client numbers across its core banking and front office platform, in an effort to better reflect the relevance of Temenos’ client base to its business performance. Previously disclosed total client numbers included a range of clients acquired as a result of M&A transactions contributing less to Temenos’ annual revenue.”


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