TIP822: QXO (QXO): Can One of the World's Best Consolidators Strike Lightning Again? w/ Kyle Grieve & Shawn O'Malley

**SPEAKER_1** (0:00)
You're listening to TIP.

**Kyle Grieve** (0:03)
He's done it multiple times before. United Waste Systems, a 55% kegger bet. XPO, a 50-bagger. Building multiple billion-dollar business has been nearly automatic for Brad Jacobs. And now, he has his site set on rolling up the fragmented roofing and building products industry with his newest business, QXO, with an audacious goal of 50 billion revenue in just a decade's time.

**Shawn O'Malley** (0:25)
A manager this skilled in capital allocation, finance, and integration across multiple industries only comes along a few times in a generation. But the real question is whether Jacobs can roll up a commoditized industry and defend margins that don't have obvious barriers to entry.

**Kyle Grieve** (0:42)
And that's totally fair, but here's the thing. With QXO now at 18 billion dollars in pro forma revenue after the top-bill deal closes, QXO's procurement advantages, cross-selling capabilities, and ability to leverage technology is set to really take off.
The scale benefits alone act as a weapon against small arrivals who just lack the volume to match QXO.

**Shawn O'Malley** (1:03)
Well, we'll dive more into that as well as how QXO is financing this flurry of deals and what it would take for QXO to reach its goal of 50 billion dollars in revenue with 15% EBITDA margins.

**SPEAKER_1** (1:19)
Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you.
This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Shawn O'Malley, and Kyle Grieve.

**Shawn O'Malley** (2:05)
Hey, folks, since we started the Intrinsic Value Podcast over a year ago, we have discussed a number of businesses run by incredible capital allocators. And today, we have many of them inside our portfolio, from Brian Chesky at Airbnb to Steve Huffman at Reddit, or even Sundar Pichai of Alphabet. We have some executives who are masters at value creation. But today, we are going to look at an executive who has one of the best track records of creating shareholder value that I have ever come across. And that's because he has done it multiple times.

**Kyle Grieve** (2:39)
That's right, Shawn. And the executive is a man named Brad Jacobs, who isn't quite the household name of Jeff Bezos, Bill Gates or Elon Musk. And that's simply because his businesses aren't particularly glamorous. But he has created half a dozen public companies, many of which were just enormous successes. Take United Waste Management Systems. This was a business that rolled up the fragmented waste management industry. And from its 1992 IPO to its eventual 1997 sale, shareholders achieved an incredible 55% compounded annual return. With that business being a clear success, Jacobs then decided to hit the repeat button. For shareholders who have held the business since its inception, they would have a 200-bagger on their hands.
The next time out, instead of waste management, he decided to tackle the logistics business. He once again rolled up a boring industry, which he felt he could improve margins on through reinvestment, simply that many in the industry were unwilling to make or lacked the financial backing to pursue even if they wanted to. The result of that was XPO, which was a 50-bagger between 2011 and 2024
Jacob scaled the revenue in that business from $175 million to $15 billion in only four years' time. Now, those are just two examples, but that doesn't even cover all of them, as Jacobs has led seven different billion-dollar companies before starting QXO, the business that we'll be diving into today.

**Shawn O'Malley** (3:52)
I've certainly studied my first-year credit capital allocators. You have two, Kyle, but it's so rare to see someone do it across several different industries and scale them to billions in sales in the ways that he has.
It really sounds like he almost should be included in a revised version of one of our favorite books, The Outsiders, based on these managers who have created extraordinary shareholder value to an extent that few others could rival, even when they were sometimes operating in challenging and competitive industries. And so the debate with great founders is always, okay, did they have one good idea that they rolled into a huge business, where there was a significant element of luck to their success, or do they truly have lasting insights into how to repeatedly build incredible businesses? And so Steve Jobs, for example, looked like he in some ways got lucky knowing the right people at the right time early in his career. But in his second time around at Apple, he really proved his chops as one of the great business visionaries in history. And maybe with the exception of Elon Musk, who went from PayPal to Tesla and SpaceX, and is now, of course, going to be the first person to ever have a trillion dollar net worth with the SpaceX IPO. There are only a handful of people where you can unequivocally say, yeah, there really is something special about their approach to launching and scaling businesses. And you could drop them anywhere in the world, it almost feels like, with no money. And they could probably still become a billionaire before they died. And like I said, there are very few people like that, but that does seem to be the case with Brad Jacobs.