Polypore International's CEO Presents At Needham 2012 Growth Conference (Transcript)

Polypore International, Inc. ( PPO)

Needham 2012 Growth Conference Call

January 11, 2012 4:50 PM ET


Robert Toth – President and CEO

Lynn Amos – CFO, Treasurer and Secretary



Okay let’s get started. The next presentation will be from Polypore International. We’re recommending PPO shares as we think this is company that’s well positioned to benefit from the evolution of the electric vehicle landscape. At this point in time I am pleased to introduce the COO of Polypore Bob Toth and CFO, Lynn Amos also to let everyone know we’re bringing more chairs too. So be patient, thanks.

Robert Toth

Okay, well thanks everyone for taking time to join us today, I appreciate it and I have a quicker here with no obvious button on it. So this will be interesting. I’ll guess which one moves it, good.

I’ll jump right into it. We’ll try to give you some time for Q&A afterwards. I’ll try to keep this at the right level for everyone whether you’re new or pretty familiar with the story. What we are is a leading global high technology filtration company with our core capability in microporous membranes. So as you think about filtration, what we do is we center our capability in microporous membranes. What’s a membrane?

Some of you probably know extremely well what a membrane is but let me kind of describe it right. Your skin is a membrane. There are not holes in the membrane. You get a whole in your skin blood would be squirting out but right now all that’s coming off is CO2 penetrating that membrane, right. So we make membranes not things with holes in it. And we’ll talk about how we apply that to four different businesses.

We talk about global because in fact we are. About 80% of our sales are outside the United States and we’ll talk about that. And we talk about filtration, high technology filtration because we manage the flow of things you can’t see, things that at the nano, micro or ultrafiltration level, things like ions and energy storage applications.

So if you can see it, it’s not anything we’ve been dealing with in terms of managing the flow in our portfolio. And again we’ll talk about that in each particular business.

If you look across our four businesses, the commonality is really on this page. So, in all of our businesses, the highly technical sales, highly technical selling relationships with the customer, so they’re basically oligopolies, relatively few good competitors in the space that have the technical capability and different competitors if you will or different participants by business no one that cuts across the universe or memories that we have.

We’ve got the broadest array of both proprietary process technology and product technology. And by process technology, I mean the way in which we put pores, we put pores into things all of the way as you can and by product technology I mean the things in which we put those pores. And the things in which we put those pores covers a very, very broad range but to keep it very simple couple of ways to think about it, many of them are flat sheet related meaning often thinner than a human hair, three layers thick in many cases could be 9 microns to kind of 20 microns maybe two different polymers in those three layers.

And we make things that are things like hollow fibers which could be if you looked at it a little larger than a human hair, more or like a thread but it would be tubular in structure, meaning hollow like a pipe, right but billions of microscopic pores upon the surface. And again we’ll talk about how we apply those things to our different businesses.

Our markets have a very attractive mix of both growth and stability, meaning about 70% of our portfolio is very high recurring revenue in nature. The other 30% somewhat tied to macroeconomic conditions but typically in the sense of if the macroeconomic conditions are very favorable or very poor, you could either delay or accelerate purchase as you don’t ever just kind of trade them out like you do in some let’s just say luxury item. So it’s a different mix that way.

And I’ve already mentioned that that we’re very global. Easy way to think about is Asia is the biggest region but each of the regions are pretty comparable in size. Asia is over 40%, the Americas and Europe are pretty equally split as the other two regions will have a slide that will show that.


Last but not least we’re really in a unique position. I mean, we’re – if you think about membrane companies, we’re a pretty unique asset, right. We’re probably the only one you can think of in the world that centers our business on microporous membranes. And we really are focused on capitalizing on two very long term trends and I joke about it but these are trends our kids and our grand kids are going to be talking about. The demand for mobile or portable energy, we all want to be more mobile.

We don’t want to be tied down with cords and we all want information at our fingertips. And the trend associated with purity as it relates to high performance filtration whether that’s water, whether that’s waste water, whether that’s the deionization of industrial waste water, whether that’s food and beverage or whether that’s raw materials to drive enhancements and yield and productivity and things like that. Virtually everything in the world needs to be pure and that trend will continue, it won’t go the other way.

Okay we have four businesses. Let’s talk about how we apply some of this technology. We have two operating segments. On the left side of the page is energy storage, on the right side of the page is separations media and we have four businesses, two within each of those.

In energy storage, we’re managing the flow of ions. Now what does that mean, when you’re looking at your tablet or your laptop or your blackberry or your – whatever electronic device you’re using, to use that, to power that, you’re pulling electrons and the ions are flowing between the anode and the cathode. They’re flowing through our membrane. Think of it again like CO2 coming through our skin right now. Ions are being managed in one direction. When you’re charging it, you’re putting electrons back. When you’re putting the electrons back, the ions have to flow the opposite way and that’s what we manage the flow of in energy storage applications. We do that in two different predominant chemistries.

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