A €“ Mark Begor: I’ll let John jump in. As you might imagine, refi is virtually gone, right? Refi really disappeared from the mortgage market, I don’t know, six months ago as rates started increasing. We don’t anticipate refi coming back until there’s a change in interest rates, meaning that there’s some interest rate decline. What’s really very unusual, and we’ve never seen before is the meaningful decline in purchase volume at this level. I think as John pointed out, our outlook for 2023 as mortgage inquiries 30% below the 10-year average. And that’s really — the 10-year average includes purchase and refi. So you’ve got purchase down dramatically. So at some point, purchase volume should improve. There’s no question. If it’s 30% below a 10-year average.
Now we’re assuming that doesn’t happen in the second half. Should it improve in 2024, I think it’s part of it’s tied to what’s happening in the economy. Are we stabilized around inflation and interest rates, if the interest rate increase has flattened out and consumers that are thinking about a home can have some confidence around where the economy is going. That should help purchase volume. But at some point, whether it’s in 2024 or 2025, the mortgage market should move up on the purchase side as the economy stabilizes to get back to that, call it, 10-year average. It’s never had this kind of an impact. Of course, we’ve never seen interest rate increases at this pace ever before. Add, John?
John Gamble: I think you covered it quite well, yes.
Kevin McVeigh: Great. And then just real quick, as you think about kind of — you mentioned the gig and pension workers a couple of times. Is that aggregation process similar to the traditional kind of record aggregation, or is it — how does that process occur? And is it at the same price point, or is it kind of less profitable?
Mark Begor: Yes, no, they’re very attractive records. We want them all. First, let me just make the point. We’ve got a long runway in traditional non-farm payroll. And I think as you saw a 12% growth last year in TWN records, was very, very strong. We signed, I think, 10 new partners that will come online in 2023. I think we said before that in our existing partners, think about payroll partners, there’s meaningful records that we still haven’t brought onboard with them. And there’s a lot of incentives to do that. So that’s kind of the base records. And over the last couple of years, we’ve scaled up resources that are going after pension records. I think it was in the third quarter last year, we signed our first pension partner to bring pension records into our data set.
And we’ve got a pipeline of those. And process-wise, that’s quite similar. If you think about pension records, they’re probably in three different places, it’s more than that, but three principal places. One is there are companies that are much like payroll processors that process defined benefit pensions for legacy companies that have those. So, going to those companies and developing those partnerships is strategy number one. Number two is large legacy companies process their own pension payroll, lots of them. So we’re already collecting their employee payroll, so going in and collecting their pension payroll as a part of that strategy. So we know how to do that in just a matter of executing it. And then the third is in federal, state and local governments.
Many of them have their own pension processing operations, so going to collect those records. So that’s where we’re going on the pension side. And then on the gig side, there’s a lot of different strategies, individual companies, as you might imagine, going to get that and other entities that will have those gig records. And as we’ve talked before, it’s the 114 million uniques that we have. There’s about 220 million working Americans between non-farm payroll, gig and pension. So over the long-term, we’ve got the ability to double the scale of our records going forward. So that’s a big lever for growth from workforce. I think as you know, the day we add a new record, we’re able to monetize it instantly, because we’re already getting inquiries for the record we don’t have, right?
With our 50-plus percent hit rates, as we add that 51st, 52nd set of data records, we’re able to monetize instantly. So it’s a very powerful part of the revenue engine and margin engine for Workforce Solutions, which is why we have such a dedicated team focusing on it. And if you think about the scale of our records, if you go back four years ago versus the 114 million uniques, we had something like 70 million and 300,000 companies. We ended last year with 2.6 million companies contributing their data to us. So the cloud has allowed us to really scale that, and there’s a long runway for future growth.
Q €“ Kevin McVeigh: Thank you.
Operator: Thank you. Our next question is coming from the line of Kelsey Zhu with Autonomous Research. Please proceed with your questions.
Q €“ Kelsey Zhu: Hey, guys. On EWS margin, just kind of playing devil’s advocate here. I want to understand a little bit better what’s the biggest risk factors for margins to drop below your guide at 52%. Is this just mortgage market down more than 30%? Is it fields overachieving their targets again in maybe government the verticals? Just wanted to understand it a little better?
A €“ Mark Begor: John, this was on EWS margins. And the question was, we’ve said that we expect them to be 50-plus percent in 2023. What are the risks of that?
A €“ John Gamble: Yeah. Let me talk about what’s driving the margins to be at those levels, right? And it is heavily driven by what Mark talked about in terms of the record growth and therefore the outperformance relative to mortgage and the very, very strong non-mortgage growth. And then the cost actions that they’re taking in order to not only maintain but enhance their margins as they go through the year, right? So EWS has been executing extremely well. Obviously, if the mortgage market was to be substantially weaker, that’s very high revenue and high margin — very high-margin revenue, that would be a risk. To the extent that there is risk to revenue in general, obviously, that can be risk to margins. But overall, we think we’ve taken a very reasonable view in terms of what 2023 looks like for EWS.
Their execution has been very strong. The record growth has been very good. They’ve already executed their pricing actions. Their performance in new product has been outstanding, as Mark said, growing at twice the rate of our 10% goal for Vitality Index. So we feel like we’ve given a very balanced view of EWS as we look into 2022.
A €“ Mark Begor: Maybe I just add to that, John. I think John mentioned, we rolled out our pricing actions late in the year in effective 1/1. So we know what those are. So that’s kind of baked in. So that gives you a lot of confidence. As I mentioned earlier, and John did too, we already know some meaningful record additions that we’ve signed agreements for that will come in, in 2023. That’s revenue and margin. We’ve got new products in workforce that were rolled out in 2022 that gets full year benefit in 2023. And we know our pipeline of new products we’re expecting to roll out in the first quarter and second quarter from workforce going forward. So we think there’s a — we have a lot to give us confidence in our outlook there.
And I think as John pointed out, to me, the factor would be if the economy is worse than we factored into this or if the mortgage market is significantly worse than we factored into this outlook, that would put pressure on that. And then we would take actions to respond to it.
