But first, a closer look at its Q4 results. RMBS reported EPS of $0.19, inline with expectations, and up 19% year.year. Operating margin improved by two percentage points to 33%. On the topline, total revenue was up a modest 4% to $101.9 million, slightly edging out the $101.3 million Capital IQ Consensus.
The 4% revenue growth is a significant slow down from its recent performance. Last quarter, revenue was up 10%, following 24% growth in Q2 and 34% growth in Q1. The sluggish growth is mainly attributable to its Security Division, which was up only 3% for the quarter. Overall, the trend clearly is not pointing in the right direction, playing a big role in today's notable weakness.
Turing to its outlook, RMBS issued inline Q1 EPS guidance, forecasting EPS of $0.17-$0.23 vs. the $0.18 consensus. However, its revenue outlook came up light at $94-$100 million vs. the $100.4 million consensus. At the mid-point of that guidance, its revenue would basically be flat year/year in 1Q18, compounding those concerns about a topline slowdown.
Muddying the waters is the fact that RMBS is adopting new accounting standards called "ASC 606", superseding revenue recognition requirements in ASC 605. The bottom line here is, the timing of RMBS' revenue recognition for its IP licensing agreements will be pushed back. In its earnings press release, RMBS provided a detailed look at how this will impact Q1 results. The aforementioned guidance was based on the prior accounting standards, which compares to consensus. But, if RMBS were to use the new method, its revenue would be $41-$47 million and it would have a net loss of ($0.19)-($0.12). So, the impact is quite dramatic, from a timing standpoint.
It is important to note that the changes do not reflect a loss of business, and, the changes will not impact its other revenue streams or cash flow. Still, as the new method is implemented, the impact on its financials will be material, causing some distress among investors. And those concerns come on top of the already slowing revenue growth rate.