Qudian withdraws FY19 guidance
Qudian announced that the company withdrew its FY19 guidance and will not issue guidance in the near term due to uncertainty related to the recent regulatory and operating environment. China's online consumer finance industry was affected by several regulatory developments in Q4, including further restrictions on loan collection practices, more stringent user data privacy rules and the requirements for P2P lending platforms to orderly exit their P2P businesses. These regulatory developments have reduced the availability of funding for consumer credit and driven up delinquency rates across the industry, including the company's loan portfolio. To better protect the company's assets and funding partners from these industry headwinds, Qudian implemented significantly stricter standards for loan approvals. Accordingly, transaction volumes in loan facilitation and on the open platform have decreased substantially. As a result of the company's revenue recognition policy under ASC606, the decrease in transaction volumes in Q4 is expected to have a more pronounced impact on the company's revenue for such quarter. According to ASC606, the major portion of revenue from the loan facilitation process is recognized at the time the company successfully matches borrowers and institutional funding partners. Furthermore, the company expects to recognize increased amounts in loss of guarantee liability and provision for Q4 due to the rise in delinquency rates, which will adversely affect net income for such quarter. As a precautionary measure in the current environment, the company has deployed a conservative and prudent strategy to reduce loan volumes and has suspended its credit trial program. Given the rapidly evolving market dynamics and regulatory framework, the company believes it is appropriate to withdraw its FY19 annual guidance and cease to issue guidance in the near term. Qudian remains confident in its operating fundamentals, business model and the industry's long-term prospects.