Analysts are buzzing about Equifax's strong Q1 2024 performance, focusing on mortgage market resilience and the fading impact of pandemic-era programs like ERC. But hidden within the transcript lies a far more intriguing story: a government data gold rush that could reshape Equifax's future.

While the $1.2 billion CMS contract extension grabbed headlines, a smaller, seemingly unremarkable deal slipped under the radar: the $190 million, five-year contract with USDA for SNAP and TANF benefit verification. At first glance, it pales in comparison to the CMS behemoth. But within this contract lies the seed of a transformative trend.

Equifax's government vertical is exploding. Revenue surged a staggering 35% in Q1 2024, significantly outpacing even the most optimistic expectations. This growth isn't just fueled by redeterminations, price increases, or even the CMS extension. It's driven by a fundamental shift in how governments access and utilize data.

Equifax's 'Work Number' database, a treasure trove of income and employment data, has become a powerful tool for program integrity and efficient benefits delivery. Federal agencies, once reliant on slow, paper-based processes, are embracing Equifax's instant, digital verifications. The CMS and USDA contracts are merely the tip of the iceberg.

Equifax's management has been quietly, yet strategically, building a government juggernaut. They've doubled down on state-level penetration, recognizing the vast untapped potential within individual agencies responsible for social services delivery. This laser focus on granular agency-level engagement is paying off in spades, contributing significantly to the vertical's explosive growth.

This is a trend that most analysts seem to have missed. They're focused on the cyclical swings of the mortgage market, missing the tectonic shift happening beneath their feet. Equifax isn't just riding a mortgage recovery wave; they're leading a data revolution within the government sector.

Consider these numbers: Equifax estimates the government vertical's total addressable market (TAM) at a staggering $5 billion. Their current annual run rate in this sector sits around $600 million. That's less than 15% penetration, leaving an enormous runway for future growth.

While mortgage may be the sleeping giant, the government vertical is the hidden dragon, poised to unleash its full potential. This isn't just about replacing manual verification processes; it's about becoming the go-to data partner for a vast ecosystem of government agencies, fundamentally changing how they operate and deliver services.

Hypothesis: Equifax's Government Data Domination

If Equifax maintains its current trajectory of state-level penetration and continues to innovate with products like incarceration data integration, they could realistically capture a significant portion of the remaining $4.4 billion TAM within the next 5-7 years. This would translate into billions of dollars in additional revenue, generating substantial profit given the high variable margins of the business.

EWS Non-Mortgage Revenue Growth

Here is the growth of EWS non-mortgage revenue over the past two quarters, as mentioned in the Q4 2023 and Q1 2024 transcripts. Notice the significant acceleration in growth, particularly in the government sector.

The implications are profound. The government vertical could become Equifax's most significant growth engine, dwarfing even the potential of a mortgage market recovery. It could reshape investor perception of the company, shifting the narrative from a cyclical business to a data powerhouse with secular growth tailwinds.

As analysts dissect the Q1 2024 transcript, fixated on mortgage trends, they're missing the bigger picture. Equifax is quietly, yet aggressively, staking its claim in a multi-billion dollar government data gold rush, a trend that could define their success for years to come.

"Fun Fact: Did you know that Equifax data is used by over 2,000 financial institutions worldwide, including 98% of the top U.S. banks? That's a lot of trust in data!"