What happened
Shares of Ribbon Communications (RBBN 26.46%) were up 21.6% as of 11:49 a.m. ET on Thursday after the company reported better-than-expected earnings results. Revenue came in above management's guidance, and the 2023 outlook points to another year of growth.
After the post-earnings surge, the stock is up 65% year to date.
So what
Ribbon is a leading supplier of communications technology and IP optical solutions to telecom providers and other enterprises. Verizon Communications accounted for 16% of its total revenue in 2021.
Ribbon continues to benefit as telecom services invest in cloud-communications technologies to lower costs.
In the fourth quarter, revenue and earnings came in ahead of analysts' estimates. The top line advanced 13% over the previous quarter, as the company experienced improved results from its IP optical business, in addition to strong performance from its cloud and edge segment.
Management said revenue would have been about 4% higher if not for limited availability of specific microcontroller parts in its IP router business.
Now what
A strong finish to the year should set the tone for 2023. Ribbon is targeting further expansion in North America. Management is seeing progress in gaining new business from major mobile and telecom providers. Moreover, the company continues to experience tremendous growth in cloud communications products.
The stock is mostly responding to management's upbeat outlook for 2023. For the full year, guidance calls for revenue between $840 million and $870 million, or an increase of 4% over 2022 at the midpoint.
Most importantly, improving margins are expected to drive a 60% year-over-year increase in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) at the midpoint of the guidance range.
