The maker of industrial fasteners reported its revenue grew 30% last year, as international markets grew to account for about a third of its business from 14% in 2023

Key Takeaways:

• ZJK's revenue rose 30% to $37.8 million last year, accelerating from 17% growth the previous year, as the company aggressively expanded its global footprint
• The company looks well positioned to benefit from the AI boom by supplying its high-precision fasteners to an A-list of clients that includes Nvidia and Foxconn

After briefly flirting with global fame – and the volatility that comes with it – industrial fastener maker ZJK Industrial Co. Ltd. (ZJK.US) seems to have learned its lesson and is sticking with the nuts-and-bolts these days, based on our reading of the company's maiden annual earnings announcement released last week.

While the report contained lots of details about ZJK's business making the various types of screws and other fasteners that are its mainstay, one thing notably absent was any mention of AI chip superstar Nvidia. ZJK was far more willing to invoke the Nvidia name last December, when it revealed that it had been invited to create fasteners for potential use in the chipmaker's new high-tech cooling systems.

That lit a brief fire under ZJK's stock, which nearly tripled in a single day after the announcement. But the stock has given back all those gains and more since then, and at its latest close of $4.54, it now trades about 10% lower than the $5 it sold shares for in its Nasdaq IPO last September.

ZJK already counted Nvidia as one of its customers prior to the announcement, and its all-star client list that also includes the likes of electric vehicle (EV) giant BYD, global drone leader DJI and iPhone maker Foxconn was one of its biggest selling points during the IPO. But rather than hype up the potential of the new Nvidia partnership, and risk more volatility in its stock, ZJK chose to focus on its business basics in its latest report.

That report looks quite solid, showing the company's top-line revenue growth accelerated sharply last year, even as its profit fell sharply under the weight of a falling gross margin and soaring marketing and administrative costs. But a closer look at the numbers shows the big rise in expenses owed to the company's ongoing geographic diversification drive, as it tries to wean itself from reliance on China for the big majority of both its sales and production.

The company is also emerging as a low-profile play into the huge potential of artificial intelligence (AI), since many of its big-name clients like to use its high-quality screws and other products in the high-tech chipsets and other hardware needed to power such applications. While prices are sagging for fasteners in other applications due to intense competition, ZJK reported that prices actually rose for its AI-related products that require higher precision and thus can be made by fewer suppliers.

Despite the broadly positive signals, investors weren't too impressed with ZJK's latest report, at least not initially. The stock lost 10% of its value in the three trading days after the announcement, even though it gained most of that back in the next two days. That probably reflects the relatively thin trading volume in the stock due to the small size of its float.

The company raised a relatively modest sum of nearly $7 million in its IPO, and last month announced plans to sell another 614,000 shares, which would bring its fundraising total to around $10 million. Still, the company has only sold about 2 million shares into its publicly traded float so far, or just over 3% of its total shares.

We've previously said ZJK could sell more shares to raise additional cash, especially as it spends more heavily on its global expansion. Such sales would have the added benefit of bringing more stability to its stock price by raising the size of its float.

Global expansion

Next, we'll take a closer look at the latest financial report that shows how the company is rapidly diversifying its global footprint, which looks smart in the face of a slowdown in China's economy and growing hostility towards Chinese exports from other countries.

ZJK's revenue rose 30% last year to $37.8 million from $29.1 million in 2023, accelerating from 17% growth the previous year. Its China revenue was roughly unchanged last year, rising just slightly from $25.1 million in 2023 to $25.2 million in 2024, according to its annual report filed around the same time as its latest earnings announcement.

Instead, all of the revenue growth came from foreign markets, notably Taiwan and Singapore, which are home to some of the world's largest chip foundries and contract manufacturers. Taiwan saw the biggest gains, with revenue from that market nearly quadrupling to $7.63 million last year, boosting the market to 20% of ZJK's revenue from just 8.3% a year earlier. Revenue from Singapore grew to $3.2 million from nil in 2023, accounting for 13% of the total.

Revenue from the Americas actually fell to $546,000 last year from $790,000 in 2023, though that's probably a good thing due to all the recent U.S.-China trade frictions. Finally, revenue from ZJK's "other" global markets rose 15% year-on-year to $1.27 million. As a result of those gains, global markets rose to account for about a third of the company's revenue last year, more than double the 14% they accounted for in 2023.

That expansion came on the back of relatively big jumps in sales and marketing and administrative costs, which both rose by about 165%, as the company added headcount and overseas offices to aid in its overseas sales efforts. ZJK also launched a new factory in Vietnam in April last year, which added more costs. We'd generally view such added expenses as a positive, since such global diversification will ultimately protect the company from any slowdowns in China and should provide more longer-term growth potential.

The company's gross margin slipped by 2 percentage points to 35.9% last year from 37.9% in 2024, as it blamed pricing pressures. But as we've previously noted, the company pointed out that its average selling prices for many AI-related products increased, reflecting less competition in that part of the market and the fact that these products were less price sensitive due to the big premiums companies can charge for AI-related products.

On its bottom line, ZJK's profit fell by about half to $3.66 million from $7.69 million in 2024. But its overall cash grew to $12.3 million at the end of last year from $2.8 million a year earlier, boosted by the IPO and strong positive cash flow. At the end of the day, this company looks quite well positioned to benefit from the coming AI boom, and is taking the necessary steps to capitalize on that. Equally important, it's realized the importance of focusing on the present and not hyping the future too much, even though it's still possible that last year's new Nvidia initiative could ultimately still become an important new revenue source.