Transcript
Speaker: How does the CEO of a rapidly growing middle market manufacturing firm think about growth, culture, and the use of digital technologies to grow their business? Come hear the story of PDC machines in Philadelphia, Pennsylvania.
Speaker: Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid -sized companies and help you take advantage of new opportunities. Welcome to The Market That Moves America. I'm Doug Farin, managing director of the National Center for the Middle Market at the Ohio State University Fisher College of Business.
Speaker: We're the nation's leading research organization studying mid -sized companies, which account for a third of private sector employment and GDP, the lion's share of economic growth. It truly is the market that moves America. The National Center for the Middle Market is a partnership between Ohio State and Chubb. Today, I'm very happy to welcome Kareem Afzal, the CEO of PDC Machines, a middle market company located outside of Philadelphia, Pennsylvania. Welcome Kareem.
Speaker: Good morning, Doug. Pleasure to be here. Thanks for having me. So we had a chance to meet each other through an event that the Philadelphia, the Greater Philadelphia Chamber of Commerce put on. We love participating with them as a partner. So maybe as a first thing you could do for our listeners, just tell us a little bit about your company, about PC Machine, some of its history, what you do, anything you'd like to share.
Speaker: That's great. Thanks, Doug, and pleasure to be here this morning. And PDC was founded by my father in his garage in suburban Philadelphia in the late 70s. And we started our company as a consultant to what we call the high pressure industrial gas industry. So folks at that time who were doing R &D and special chemicals and specialty chemicals
Speaker: Teflon's and those types of things. Our dad did this consulting research where people were working in very high pressure. So for those of you engineers in the audience, 150 ,000 PSI was some of the pressure vessel work that he was doing. So if you fast forward into the 80s and 90s, we developed a product called a diaphragm compressor.
Speaker: which pumps ultra -hypertory gas for people in the cylinder filling industry. So we were using these machines to pump industrial and specialty gases that are used in a variety of applications such as semiconductors,
Speaker: petrochemical applications and cylinder filling for welding gases and to produce things like iPhones and LED panels and lighting and these types of things. So in the late 90s and early 2000s,
Speaker: PDC started to become involved in the nascent hydrogen fuel cell industry. So our compressors were very well suited for technology platforms to fuel at that time the early market forklifts, cars, and buses for demonstration projects all over the world.
Speaker: And moving into today, this industry is starting to grow and become a commercial market throughout the world. And we are really beyond growth. We're starting to scale the business all over the world, filling anything from forklifts, cars and buses to delivery vehicles and trains and drones and even airplanes. So it's a really exciting time for a company.
Speaker: Wow, that's yeah, that's really interesting. Certainly have seen a lot of growth there. And it also sounds like you guys were maybe a little bit on the forefront of this. Do you feel like as a growing middle market company, I mean, is there is there a lot of competition out there or are you really pretty well differentiated in this area?
Speaker: So as the market grows, certainly there's competition, more and more competition that's coming into the marketplace. One of the real huge differentiators for us, one is experience. So we, having supported this hydrogen energy industry since the demonstration phase, there certainly is a lot of know -how and intellectual property
Speaker: and learnings that we have done for the last 20 years that we've supported this industry. So we have over half of the world's market share in these hydrogen compressor platforms for these refueling stations. And in certain markets, we have upwards of 75, 80 % of the market share
Speaker: for our product that's fueling trucks and public transportation buses in markets like China. And also we have a secret sauce of customer service. So we work with our customers as true partners. We don't look at it as a vendor and customer relationship. We work with them as a true partner. Their success is our success.
Speaker: And that has enabled our business to grow. And once we get customers, we generally don't lose them. Wow, that's great. So let me pick up on that a little bit, because we've done some research over the years that would indicate that a very small minority of the US middle market actually participates in international global opportunities. And it sounds like you've got a significant amount of your business happens outside of the US.
Speaker: Tell us about how you look at new markets. Basically, how would you enter into a new part of the world? Is it through your current customer relationships or do you do research or how does that happen? Because I think a lot of times we'll hear middle market leaders say, well, we just don't have the capability to do that. We wouldn't know how to go to China or into South America or Europe. So if you could tell us a little bit about that, that would be great.
Speaker: No, it's wonderful. So our trade accounts for about 50 % of our business. And it's been like that for the last seven years.
Speaker: And traditionally, if we go back, way back in our history, we really worked through distribution. So folks who were working in an adjacent market or a similar marketplace, they provided equipment or parts to this industrial and specialty gas industry that a diaphragm compressor from PDC would go well along with that product. That's traditionally how we had
Speaker: Sold our product overseas in the past so we had distributors and in Beijing and Shanghai Who really didn't overlap each other we had a distributor and in Tokyo and Seoul And we have also had in a number of European countries and in South Africa and so on
Speaker: So if we go back about six years ago, and at that time I was leading our worldwide sales team, we decided to do an experiment and we hired our first direct
Speaker: staff in China because we felt that our sales cycles tend to be long, longer. So they're anywhere from three to 18 months by the time you code something to the time it becomes a purchase order. And we felt that we would be well served by having a direct employee
Speaker: who was doing all of the business development work for our product in that local market. And by chance I met somebody at a trade show.
Speaker: And we desire to take a chance and hire that person. And the rest is history. And he has grown our business. And now we have a robust team in China with two offices, one in Shanghai, one in Beijing. And we have a really robust sales and service program.
Speaker: in mainland China, and we've never looked back. So we've very politely parted ways with our distribution. We will still sell them product, but we have taken ownership of our own destiny. And we've applied that same principle throughout the world. So we did the same in Japan. And frankly, we just hired a staffing agency. So we hired Ron Stott in Japan, who provided me
Speaker: three wonderful resumes of people who are working in the hydrogen industry and who wanted to leave, quote unquote, big business, working for a very large trading companies or large engineering companies and take a chance
Speaker: in a small scaling, not small, but small middle market scaling company and see what we can do in that region. So in Japan, we have a subsidiary company, PDC GK, it's based in Kyoto. We have five people there and we're selling our small hydrogen station that takes water and electricity and creates hydrogen fuel and dispenses it into forklifts and cars.
Speaker: And now we really have what our local office Masuda -san is calling a blue ocean strategy where we have a unique product without competition really in front of us and we're really taking full advantage and supporting that market in partnership with our customers. And really frankly, we've applied the same strategy. We don't see borders as
Speaker: barriers. We see them as challenges that can be overcome with with enough insight and forethought and I certainly you know PC has a very strong reputation throughout the world. So our name recognition is known as a hydrogen compressor company and we
Speaker: go to trade shows, we go to industry events, we speak at international conferences as an industry expert on hydrogen and compression and what's happening throughout the world. And that has helped us find wonderful talent to help us scale and grow our business in these regions. So today we have offices in Shanghai, Beijing, Kyoto, Japan,
Speaker: Seoul, we have a PDC Korea office. We're just about finished our incorporation in Europe. And we're certainly looking through South America and other places where we could be closer to the customer.
Speaker: hear the voice of the customer in the local markets, in the local language, and grow, and grow a lot. One thing that I would share, you know, due to the great work of our offices throughout the world, in 2019, we were awarded the Presidency Award for Exports, which is awarded by the Department of Commerce in DC. And that is an award that
Speaker: is awarded to manufacturers who contribute to four consecutive years of scaling exports in their particular industry. So it's a huge honor to be recognized when we went down to DC and received the award from the Secretary of Commerce. That's fantastic. Congratulations. It's really a fun event. Yeah. Appreciate it. Thank you. So having that local presence, I'm sure, has been
Speaker: very valuable given everything that's happened over the last year in 2020 with the pandemic. But can you tell us, cause you mentioned earlier, you view your customers as partners and how have you had to adapt to maintain those relationships? Because we keep hearing that from other mid market businesses in different industries that they've kind of figured a lot of the other issues out, but that customer engagement, customer connection,
Speaker: remains a really big challenge when trade shows aren't happening, when travel is still highly restricted. What are some of the things that you've done or changes you've made to keep that connection going? That's a great question. So everyone's had to adapt in this COVID situation where everyone's working from home and travel is simply mostly banned. International travelers, certainly not possible.
Speaker: So we really pivoted pretty early and we focused on meeting the customers where they're at. So one of the early things we did was one of our staff here is a multi -talented
Speaker: a Swiss army knife, if you will, in writing and copy and also digital production. So we produce our own PDC webinars with professionally done video talent to bring PDC to the world in a virtual context. So we bought a little drone, we flew it through the shop, we created virtual tours. We did, we created quick
Speaker: installation videos of our Simple Fuel product with our partner Ibis Energy Solutions in Somerville, Massachusetts to show the workings of the product. We produced these webinars which had folks from all over the world participating. And those webinars, frankly, led to purchase orders and projects for folks in Asia, South America, in different parts of Europe.
Speaker: So reaching out in sort of this own produced content, we found to be the best way to meet customers. We've participated in virtual expos that have sort of a mixed bag, if you will, in terms of really connecting on a personal level with people where they're at. So this produced video content and our own produced webinars
Speaker: where they're short. They were 30 to 35 minutes long.
Speaker: One was 35 minutes and the other two were 29 minutes and 45 seconds. The content changed every five minutes. We kept it short and sweet. We had a very robust round table discussion and question and answer where everything was on the table and it really led to terrific connections with the market. The other really key thing is meeting the customers where they're at on the communication platform that they use.
Speaker: So our customers, being a multinational network of people in China, people communicate on WeChat. In Korea, they communicate on a social media platform called Line. I'm sorry. In Korea, it's a cacao talk. In Japan, it's Line. WhatsApp is various other parts of the world.
Speaker: plain old text messages is different, certainly in the US and in Canada. So being very flexible to adapt to whatever our customers were using to communicate with each other and their local environment really helped show that PDC is willing to meet the customers where they're at.
Speaker: that we're willing to adapt to how they want to be communicated with, whatever's convenient for them, regardless if it's convenient for me or not, it doesn't matter. Our sales team is fluid to meet customers where they're at, and it's the biggest thing that I would say that helped us maintain and grow those relationships, frankly.
Speaker: We care about people, we care about their families, we care about how they're doing. And that comes through in everything we do.
Speaker: So how do you think the growing use of all these different types of technology platforms, whether it's communication, supply chain, even things like billing payments. I mean, there's so many areas that can be affected by the implementation of some of these platforms. How do you think that's going to continue to grow as we move forward?
Speaker: I think it will continue to grow and be interwoven into everyday business. Certain things probably will go away. I think the virtual expos probably won't survive and I hope
Speaker: I hope they don't survive because I want to meet people in person. But whether it's supply chain, I think one thing that is going to survive that we're getting ready to embark on is sort of AR factor acceptance test. So we make capital equipment that they're complex pieces of machinery.
Speaker: that we are working with technology providers to now move to virtual, if you will, virtual factory acceptance tests. So whether somebody's wearing Google glasses or wearing some sort of AR platform, there's something called real glasses.
Speaker: So and you can have a wand that does a 3D scan of your equipment and it can measure things and people can measure things and look at things in real time on our equipment. And we think that could be here to stay. So it saves on travel expenses, it saves on people's time, time is money, and it could help us be more efficient.
Speaker: in waiting for somebody to schedule travel to come here from, say, Korea, for example, that we could do these virtual type of factory acceptance tests for our customers.
Speaker: That kind of thing we think is here to stay. I don't think we're ever going to go back to where I'm traveling 40 % of my time, which is what I did do most of my time in pre -COVID times. And I think people will be more efficient. I would certainly say that virtual meetings, Zoom teams, WeChat meetings, whatever they are, are certainly more efficient from a work perspective. And I think a lot of those things are here to stay.
Speaker: but the internet of things being connected machinery and having those virtual FATs that I think is going to help transform the customer experience for us. Sure.
Speaker: Uh, and I want, wanted to pivot a little bit. One thing we haven't touched on is the culture at PDC machines. I mean, given the fact that you, you've been such a high growth company over the last few years and the fact that you have a global team, I'm sure that's both exciting, but can present some challenges. So can you describe kind of how your company culture is and maybe some of the things that you do to help foster it?
Speaker: Yeah, it's great. So from our founding and from our founding from our father through today, we are a business family and we treat all of our staff and employees as that, as a business family. And that is a culture that breathes and exudes itself from how we
Speaker: how we deal and behave with each other to how we work with customers and really that mentality really filters through in terms of our customers and our partners throughout the world where we really treat people, even our customers, we treat them as part of the PDC family so to speak.
Speaker: So that's a very important piece. And when we hire, we really make that clear that this is the culture at PDC, and it's either something you want to be a part of or it's not for you. And then we move on. So we're very, very careful at our hiring practices to make sure that folks we bring onto the team, they want to be a part of something like that. And that is something that excites them.
Speaker: You know, another part of the culture here is that everybody is really mission driven. So our vision here is to realize human potential through robust hydrogen infrastructure and industrial gases. And what that means here is through the use of our products, we really have the ability to make significant change in alleviating climate change through the electrification of vehicles throughout the world.
Speaker: And that is a really important piece to hiring culture. People want to have that passion to be able to change the world in that way. So everybody from the person cleaning our parts and packing them for spare parts to the technician supporting our product in the field,
Speaker: they had that passion to help realize a cleaner world for my kids, their kids, their grandkids, and the future to come.
Speaker: And that is really an important piece that helps drive the entire company to this visionary future that we think we have the opportunity here to help that. And as a small but mighty middle market company that's really growing and scaling, that attracts great talent. And that really exudes in everything we do. Sure.
Speaker: And as part of that scaling that you mentioned, I know you're getting ready to bring on a new partner, a new private equity partner. Can you tell us a little bit about that decision and some of the things that you're hoping to achieve out of that relationship?
Speaker: Yeah, it's great. So we were really excited to talk about and announce our partnership with ArcLine Investment Management. They're a niche growth -oriented private equity company that invests in growth, huge growth potential companies at the pivot point of growth and scale.
Speaker: And we couldn't be more thrilled to work with our client to help scale our business. We have seen in the high 30s percent compounded year -on -year growth for the last four years. And this year we were going to be upwards of 70 to 80 percent revenue growth in this fiscal year. And moving into the future, we expect that or double or two and a half times over the next three or four years.
Speaker: Hydrogen is a growing part of the world's energy mix and there are national and regional plans from the EU throughout Asia into Africa and South America and the United States. And we can be more pleased and excited to work with Arcline
Speaker: as we scale our operations here in the U .S., we're already considering capacity growth here in the U .S., as well as at our affiliates throughout the world, to be able to meet that demand tomorrow, which is what customers are asking us to do. They're asking us to scale with them. And we are super excited to work with Arc Line, who's fully aligned with us on realizing that scale.
Speaker: Well, that sounds like a great way for us to wrap up on a very energetic and positive note there. So Kareem, I want to thank you for joining us. This has been a wonderful discussion and certainly appreciate all the information that you've been able to share about the growth of PDC machines and a lot of the exciting things that you've got coming in the future. So again, thanks for being with us today. My pleasure, Doug. Thanks for having me.
Speaker: So if you want to learn more about the company, please go to their website, pdcmachines .com. You can see more about the types of products that Kareem described today and some of the things they're doing. And thanks again for listening to The Market That Moves America. Never miss a new episode. You can subscribe to the podcast on iTunes, Stitcher, Google Play, or wherever podcasts are found. You can also subscribe via the Middle Market Center website.
Speaker: which is www .middlemarketcenter .org. Thank you and have a great day.
