2021 Powersports Outlook – Interview with Sportech CEO Jim Glomstad
Sportech is a leading designer, manufacturer and assembler of cab components and assemblies for a wide range of OEM customers. The company sells door assemblies, windshields, roofs and other cab components to customers across the powersport, golf & turf, industrial and agriculture end markets. Sportech’s products are highly engineered and customized to meet specific applications and end-uses.
Overall, how has Sportech rebounded from the impact of COVID-19, and how has the business performed in the first half of 2021?
Sportech enjoyed a solid start to 2021 with a considerable backlog we are working hard to fulfill in the back half of the year. Industry bookings began to emerge with strength in the first part of the third quarter of 2020, and we have not felt any slowdown to that momentum at the 2021 mid-year point.
Coming out of COVID, are there any lasting trends that will impact the powersports market going forward?
The optimist in me, and several industry pundits, believe that the overall market has grown as people have developed or renewed interest in outdoor products. Some analysts who follow the space are stating that the market is likely 15%-20% larger than pre-pandemic levels and that those customers will hopefully remain. As a biased enthusiast, I believe that this robust market increase will be a positive and sustained part of the longer Powersports horizon.
Have you felt any tailing impacts to your supply chain coming out of COVID?
The supply chain challenges broadly hitting most (if not all) manufacturing sectors impact our business daily. We had some stabilization at the beginning of the Q2, but that has unraveled some for us, our suppliers and our customers. It did not take long in this cycle to understand the interconnectedness and fragility of the entire value chain. In addition, it requires daily over management to respond to unexpected disruptions and unanticipated schedule changes. As a result, I have great empathy and respect for the supply chain professionals at Sportech and our great OEM customers managing the brunt of this turbulent uncertainty as they try and deliver for their companies.
Have you seen a shift in demand for the types of UTVs/ATVs customers are buying?
We see significant demand across all classes of vehicles in the Off-Road segment, driven in part by the lack of inventory available at retail. Consumers who desire to purchase a unit in stock or with a short lead-time from a dealer will likely have to be flexible in what they buy due to current supply dynamics. In addition, we have received orders for some of our accessory components that have had no velocity for years as traditional high-volume platforms are sold out and on backorder. As consumers continue to gravitate towards off-road vehicles and prioritize outdoor activities, it has made it harder for dealers to restore inventory to desired levels. As a result, the visibility and forward momentum in our business has never been stronger.
Has Sportech experienced labor shortages or constraints?
We have always been proud of the work environment, our commitment to our customers and our continued growth over several years. This allowed us to be an employer of choice in the area, but starting in Q3 of 2020, as demand began to return for other manufacturing companies and us, we found ourselves competing with other companies in the area for a smaller labor pool of workers due to the aggressive unemployment benefits that were now in place.
As a result, we made upward wage adjustments for our production teammates and our temporary staff rates to retain and attract talent. We also expanded our shift structures to provide more flexibility for our current employees and hopefully connect with new employees who could not participate in a traditional shift structure framework. This has enabled us to bring on many talented new associates as full-time employees and attract the best temps in the area.
What does Sportech’s backlog look like for the next 6-12 months?
Sportech has significantly benefitted, as has the entire Powersports industry, from a post-COVID interest in outdoor activities. We are working hard to deliver on a backlog that is considerably larger than traditional up-market cycles by a magnitude of 40%+. We are adding manufacturing space and commissioning new equipment to meet tremendous demand from our customers.
We have confidence that these are great investments for our business to support near-term demand and what is likely to be a prolonged channel restocking cycle into a market that is growing.
What are you most excited about for the future of Sportech?
Externally, I think we are most excited about being well-positioned to provide great value and innovation to this next growth wave in the industry. Through some of the challenges of COVID and the turbulence of trying to run a manufacturing company in our current environment, we have gotten closer to our customers, who understand better than ever the value of trusted and committed partners like Sportech to help them win in the marketplace.
Internally, growth cycles like this give our people a chance to shine, grow and create value at new levels. So far in 2021, we have had over 75 internal promotions for our excellent staff and added some tremendous outside talent to our bench. That opportunity enhances our culture and helps our people win, which is a big part of why we show up every day and is foundational to our company’s purpose.
About Monomoy
Monomoy Capital Partners is a private investment firm with $2.7 billion in committed capital across a family of five investment funds. Monomoy invests in the debt and equity of middle market businesses that can benefit from operational and financial improvement with a focus on manufacturing, distribution and consumer product businesses in North America and Europe.
