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Qudian Inc. (QD) Q1 2018 Earnings Conference Call Transcript

Motley Fool Staff, The Motley Fool
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Qudian Inc. (NYSE: QD)
Q1 2018 Earnings Conference Call
May 21, 2018, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen. Thank you for standing by for Qudian Inc.'s First Quarter 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks there will be a question-and-answer session. Today's conference call is being recorded. If you require operator assistance, please press "*0". I will now turn the call over to your host, Ms. Sissi Zhu, Director of Capital Markets for the Company. Sissi, please go ahead.

Sissi Zhu -- Director of Capital Markets

Hello, everyone, and welcome to the First Quarter 2018 Earnings Conference Call for Qudian Inc. The Company's results were issued via newswire services earlier today and are posted online. You can download the earnings press release and sign up for the company's distribution list by visiting the IR section of our website at ir.qudian.com.

Mr. Min Luo, our Founder, Chairman, and Chief Executive, and Mr. Carl Yeung, our Chief Financial Officer, will start the call with their prepared remarks.

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Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risk and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's prospectus as filed with the U.S. Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statements except as required under applicable law.

Please also note that Qudian's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. Qudian's press release contains a reconciliation of unaudited non-GAAP measures with the unaudited most directly comparable GAAP measures.

We also posted a slide presentation on our IR website providing details on our results in the quarter. We will reference those results in our prepared remarks but will not refer to specific slides during our discussion.

I will now turn the call over to our CEO, Min Luo. Please go ahead.

Min Luo -- Founder, Chairman, and Chief Executive Officer

Thank you, Sissi. We delivered solid results to start the year and I'm very pleased with how our team navigated the evolving Chinese fintech industry during the quarter. We experienced an industrywide credit downturn in the consumer credit market, following the regulatory changes implemented late last year. And we took proactive steps to manage our risk by temporarily tightening our low credit standards. Those proactive steps impacted our transaction comp in the quarter but we successfully de-risked our book and experienced only a small increase in delinquency rates, which we expect to be temporary.

Despite fewer transactions and a small number of credit drawdowns, our total loan book grew in the first quarter, which we can choose risk. We chose to optimize credit attempts and credit buys to our high-quality yielders to increase our credit trend and actually made our product affordable by reducing the required monthly payment due from users.

Our strategy, positioned to tighten credit-at-risk borrowers while offering high-quality users broader options, is further evidence of the value of our data analytics as we analyze our efficient platform to connect funding sources with qualified borrowers. As the quarter progressed, we saw improving delinquency, and following the Chinese New Year, we began to embrace our consumer credit amount. While we continue to closely monitor change, all signs are currently pointed to a reduction of stable consumer credit growth.

Our Company is also excited to share some details about Dabai Auto and what we are driving on that part of our business. As of November of 2017, we have opened over 175 self-owned Dabai Auto showrooms across the nation and have quickly established ourselves as a significant player in China's automotive retail market. Capitalizing on our in-depth knowledge of our key demographic, China's young generation, we have had great success positioning Dabai Auto as the first-time car financing solution for young people, providing access to optimal cars in a comfortable shopping environment. And serving qualified but underserved borrowers with a convenient financing solution has been an obvious point of differentiation for us in the market.

We have also wanted to differentiate ourselves from other auto sellers by providing quick delivery of the consumers' desired vehicle. Our current average delivery occurred in about 15 days, with an average of over 60 days for some of our competitors. We can do that efficiently without huge investments in inventory by using our data and proprietary analytics to better predict consumer preference and manage our inventory accordingly.

Additionally, we lately entered into an agreement with a large OEM in China, which is key to securing a cost-efficient and effective supply of vehicles. This agreement is an example from an industry player of how far we have gone over a short time. We anticipate lending from this established Chinese auto industry, working in key areas such as branding, marketing, and capital management. At the same time, the OEM will benefit by using Dabai Auto's channels to further penetrate medium and small cities while leveraging our data analytic capabilities to better understand those underserved by traditional financial sources in China, especially in the youth market and their car buying needs and challenges. We are very excited about this cooperative agreement and the real synergies in it will unleash.

Strong OEM relationships and continuous improvement in operational efficiency will help us minimize delivery time and enhance revenue per staff and create a strong competitive advantage to other providers.

At the end of the first quarter, Dabai had leased over 6,600 vehicles since November. And as of today, we have exceeded 10,000 leased vehicles. Historically, retail car sales are lower in the first half of the year and pick up in the second half. So we have focused on optimizing current operating efficiencies and exploring opportunities in the first half of the year, becoming more efficient for the busy season.

We have forward momentum in our business and all signs point to an improving consumer credit market in China. We are well-positioned to leverage our over 65 million registered users, deep data analytics, and a growing foothold in the Chinese auto market to continue grow our business in the quarters and the years to come.

With that, I will now turn the call over to our CFO, Carl Yeung, who will review our key operating metrics and financial results.

Carl Yeung -- Chief Financial Officer

Thank you, Min, and hello, everyone. First, I'd like to touch base on a couple of highlights for the quarter. We delivered solid results in the quarter, with the number of registered users reaching 65.3 million and our number of users who have been approved for credit reaching 27.5 million, nearly double the number of users approved for credit as of March 31, 2017.

Additionally, the data collected from the credit downturn period provided significant enhancement to our data analytic capabilities, giving us further ability to distinguish high-quality borrowers from low-quality ones. This allowed us to start offering slightly larger ticket size and credit terms to our high-quality users, witnessed by average credit size increasing to RMB1400 and average credit term increasing to 5.1 months in the first quarter of 2018. The increase of credit term actually reduced the average amount of monthly repayment due from our users, making our product more affordable. For example, the average amount of monthly repayment in the first quarter of 2018 would be about RMB300 based on the average ticket size of RMB1400 and the average duration of 5.1 months and 36% APR, down from the average amount of monthly repayment in 2017 of about RMB400 based on the average ticket size of RMB960 and the duration of 2.5 months over a 36% APR.

Our proactive management of market-driven risk was swift and effective as we witnessed delinquency rates stabilize and then fall, the risk level was appropriate again by the end of the first quarter to have the loan book grow. Our loan book actually increased from RMB11.2 billion at the end of 2017 to RMB12.9 billion at the end of March 2018 and now has reached RMB14.6 billion today.

Overall, the steps we took to de-risk our book of business has positioned us well as the consumption credit market stabilizes and transaction volume growth resumes. We are also well-positioned to continue to grow Dabai by leveraging our large customer base, proprietary data analytics, and strategic collaboration with established OEMs to serve China's new car market. We continue to closely monitor credit trends and leverage our proprietary data to manage risk while cost-effectively making credit accessible to creditworthy but underserved consumers in China.

Now, I'd like to walk you through the detailed financial results in the first quarter of 2018. Total revenue for the quarter increased by 106% to RMB1.7 billion from RMB835 million in the prior year period, primarily due to the increase in the revenues from sales-type leases as a result of the ramp-up of our Dabai Auto business. Financing income totaled RMB777 million for the quarter, increasing 12% from RMB697 million for the quarter of 2017. Loan facilitation income and others increased to RMB278 million for the quarter, up 661% from the prior year period, as a result of a substantial increase of off-balance sheet transaction volume as well as the required adoption of new accounting treatments.

Sales commission fees increased to RMB111 million for the quarter, an 11% increase from the same period of a year ago. Revenue from sales-type leases was RMB546 million, representing revenue generation in the first full quarter since we launched Dabai Auto. Total operating costs and expenses increased by 366% to RMB1.4 billion for the quarter, from RMB299 million for the first quarter of 2017. Cost of revenues increased by 461% to RMB686 million for the quarter, up from RMB122 million for the quarter of 2017, primarily due to the cost of sales-type lease incurred by the Dabai Auto business.

Sales and marketing expenses increased by 127% to RMB123 million for the quarter from RMB54 million for the first quarter of 2017. This increase was primarily due to the higher compensation and travel expenses associated with the Dabai Auto business in the first quarter of 2018 compared with the first quarter of 2017. Excluding costs related to Dabai, sales and marketing expenses actually declined 11% year-over-year, primarily due to a significant increase of transactions directly on our own apps.

General and administrative expenses increased by 36% to RMB56 million from RMB41 million for the quarter of 2017. The increase was primarily attributable to the increase in administrative fees payable to trust companies as a result of increased use of trust funding in the first quarter of 2018 compared with the same quarter in 2017.

Research and development expenses increased by 74% to RMB44 million for the quarter from RMB25 million for the first quarter of 2017. This increase was primarily due to an increase in technology service expenses.

Our provision for loan principles, financing service fee receivables, and other receivables increased by 779% to RMB440 million for the quarter, up from RMB51 million for the first quarter of 2017. This increase was primarily due to an increase in the M1+ overdue loan principles and financing service fee receivables, which we intend to provide sufficient allowance to cover. We have cumulatively provided RMB806 million allowances for principle and financing service fee receivables, more than covering the actual M1+ overdue loan balance. Our M1+ delinquency by vintage for the new credit transactions facilitated in 2017 stayed less than 1.7% as of March 31, 2018.

Income from operations for the quarter was RMB326 million, representing a 42% decrease from RMB558 million during the same period last year. Income tax expense totaled RMB9 million for the quarter of 2018, down 91% from RMB92 million for the first quarter of 2017, primarily due to the deferred tax treatment and increased tax refund.

Net income totaled RMB316 million for the quarter, down 32% from RMB465 million for the same quarter of 2017. Net income attributable to the Company's shareholder per diluted share was RMB0.95 compared to RMB1.53 in the prior year period. Adjusted net income attributable to the Company's shareholder, which excludes share-based compensation expenses, decreased by 30% to RMB338 million from RMB486 million in the prior year period. The adjusted net income attributable to the Company's shareholders per dilute share decreased to RMB1.02 from RMB1.60 in the same period last year.

As of March 31, 2018, the Company had cash and cash equivalents of RMB5.7 billion compared with RMB6.8 billion as of December 31, 2017. The Company also had restricted cash of RMB538 million compared with RMB2,253 million as of December 31, 2017. The restricted cash is actually mainly representing the cash in consolidated trusts that can only be used to fund credit drawdowns or settle these trusts' obligations.

As of March 31, 2018, the Company had short-term amounts due from related parties of RMB517 million compared with short-term amounts due from related parties of RMB551 million as of December 31, 2017. Such amount includes RMB512 million and RMB549 million deposited in our Alipay accounts as of March 31, 2018 and December 31, 2017, respectively. Such amount is unrestricted as to withdrawal and use and is readily available to the Company on demand.

Net cash provided by operating activities for the first quarter of 2018 was RMB488 million.

Looking forward, for the full-year 2018, we are reiterating and reaffirming our prior guidance and continue to expect adjusted net income to be more than RMB2.5 billion and the number of vehicles leased to be more than 100,000 units. Now, this outlook is based on the current market conditions and reflect the Company's preliminary estimates of regulatory, market, and operating conditions, as well as customer demand, which are subject to change.

With that, this concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.

Questions and Answers:

Operator

We will now begin the question-and-answer session. To ask a question, you may press "*1" on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press "*2". For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English.

At this time, we will pause momentarily to assemble our roster. The first question comes from Charles Zhou of Credit Suisse. Please go ahead.

Charles Zhou -- Credit Suisse -- Analyst

So my first question is we also note that the accumulative car lease by your Dabai Auto is over 6,000. We also note that your sales and marketing strategy is around RMB17 million. You also talk about your full-year target of 100,000, the number of cars. So it seems to me that you're still a little bit far away from your full-year target so when shall we expect the number of cars to pick up? So this is my first question.

My second question is also we note some of the Company's use of their own financial guaranty company and also they have a financial guaranty license and the use is as part of the credit enhancement. So may I ask do you also consider to buy maybe a financial guaranty license going forward? If yes or no, then I also ask your reasons as well.

And my third question is I know that provisional expenses increased a lot in the first quarter of 2018. So was this attributable to the high delinquency ratio for loans in the fourth quarter last year? As the delinquency ratio has already stabilized, how is your trend of the provision? Thank you.

Carl Yeung -- Chief Financial Officer

Hello, Charles. This is Carl. And thank you very much for the questions. I will answer directly in English. First of all, regarding Dabai, as we all know, the auto leasing business is a complex and long-value chain. We have just launched this for a few months. For the quarter, we are learning a lot about how to lease cars in a complex, nationwide environment. So we have done a lot of work in the first quarter to optimize the work flow, conversion rates, and delivery times. Specifically, we have seen a significant increase in our delivery times to now just under 16 days from, when we started, well over 20 days. So there's a lot of optimization going on.

Secondly, the Chinese auto segment does see seasonality. Typically, the first half of the year tends to be slower and then the second half of the year tends to be more robust in terms of demand and sales. So we do expect the second half is where really the volume should pick up. Right now, we're still looking at a 100,000 vehicle target. We're not moving away from that because we believe -- we have the confidence of doing that and saying that because we believe, out of the 26 million plus people with credit limits, a majority of them do not drawdown on the very small credit side and they have some sort of auto need. So from a probability perspective, 100,000 units out of 26 million is not unachievable as long as we get the details right.

The RMB70 million sales and marketing expenses that you back-calculated from our sales and marketing is really mostly initial setup fees, our staff flying around to different cities, setting up these stores. So it should be very stable. We haven't actually deployed so-called mass marketing to push volumes yet. And if we need to, we can, but we have those options to reach these targets. As of right now, we still actually expect Dabai Auto to be breakeven, if not actually generate a sizable profit, for 2018.

Secondly, regarding the guaranty, thank you for observing that. We are in the process of applying our own guarantor license from CBRC. That time table is currently uncertain but we hope to get that in the next couple of months. At the same time, we already have signed up various license guarantor companies, as well as insurance companies, to match what Regulation 141 requires. So we are ready to go and we intend to be fully compliant with what Regulation 141 is required of.

And then the third question is related to our provision expense in the first quarter of 2018. As you can see, actual M1+ coverage is 1.01 versus previous quarters, which are usually at 1.3 times. We do not intend to do any conservative or aggressive accounting. This is the way our provision numbers are calculated. They're calculated based on a run rate model for various delinquencies that performs into the quarter. And we use these to calculate the expected percentage of loss for credit that is originated in the quarter. The current ratio is lower in this quarter. It's because there is a clear, very clear, recovery of delinquency by February and March. So the delinquency coverage ratio came down. So we believe generally the worst has passed. As transaction volumes, as well as loan balance, continue to grow, as well as the actual delinquency balance -- so already we expect, going forward, as we discussed in the prepared remarks, we should see a much lower so-called delinquency ratio by vintage.

Charles Zhou -- Credit Suisse -- Analyst

Thank you.

Operator

The next question comes from Daphne Poon of Citi. Please go ahead.

Daphne Poon -- Citi -- Analyst

Hi, good evening, management team. So, first, actually I have a follow-up on the Dabai business. So we note that actually, in addition to the 175 self-operated stores, that you have also been recently expanding into the franchise store model. So I'm just wondering how much of the full-year 100,000 sales target is expected to be driven by these franchise stores.

And second is on the funding side. We see that some algorithms assumes the on-balance sheet funding cost has been coming down quite a bit in the first quarter to around 7% from our calculations. So would you be able to comment on the reason behind and your outlook on the funding cost going forward?

And lastly is about the change in accounting policy. I just want to clarify that. Does that only apply to the off-balance sheet, i.e. the loan facilitation service fee? But for the financing income, is it still recognized on the cash basis on the outcome basis? That's all my questions. Thank you.

Carl Yeung -- Chief Financial Officer

Thank you, Daphne. This is Carl again. I appreciate the three questions. So on Dabai Auto, beyond the 170 stores, our Company is continuing to explore ways to better reach and service our users. So we have signed up with a very fragmented, multi-brand, single stores around China, namely in the fourth to fifth tier cities, to explore a cost-effective way to reach these users. So we are collaborating with some of these stores. But this is a process. As we discussed before on the call and elsewhere, Dabai is very new to us. Selling autos is a complex value chain. So we continue to see ways to service these users and explore various methods and optimize this experience.

So as with regard to how much of the full-year 100,000 units will come from our own stores versus some of these so-called service provider partners, we don't have a good estimate yet because there's still being an optimization program going on. For example, if a specific location yields a significant demand of cars to be delivered, it might make sense for us to no longer work with these service providers and open our own stores. At the same time, for locations that doesn't make sense, we may close our own stores too. So it is a process. But we're confident about the 100,000 units as of today since we have the users. It's a matter of picking the right locations to service them. So this is where we are on Dabai.

And then secondly, on the funding side, on the balance sheet, in fact, as of today, our external funding cost has remained pretty much similar as last year. So whether they're trust structures or off-balance sheet funding from banks or consumer finance companies, the annualized rate they charge us is roughly still the same. The observation you saw regarding the overall decline in the funding cost for on-balance sheet transactions was we deployed an increased amount of our own cash as investors behind the trust structures to better use our basically very large cash balance that is not generating better returns anywhere. So going forward, we'll see pretty much a stable funding environment, with some increase in the overall interest rate environment in the market. But the overall so-called funding cost should be stable.

And then finally, the change in accounting policy, or namely ASC606, that we adopted as required by the SEC was applied since January 1, 2018. This only applies to off-balance sheet transactions where we are a facilitator in the transaction. The on-balance sheet component of our revenues still use the existing or previous accounting treatment, where the service fees are recognized over the service term of its user.

Daphne Poon -- Citi -- Analyst

Okay. On the funding side, would you be able to give us a breakdown in terms of how much of the funding is from your own capital and from off-balance sheet and also from the trust channels as of 1Q?

Carl Yeung -- Chief Financial Officer

Sure. I think I'm happy to share that with the community and market. If you look at -- I'll give you the comparison as well. If you look at the loan book outstanding, on December 31, 2017, the deployment of our own equity was 26.8% and then institutional funding partners, the on-balance sheet, external-wise, is 55%, and then the off-balance sheet institution funding was 18.2%. If you bring that forward to March 31, the self-funding part was 29.1%. So it increased by about 2.3% versus three months before that. And then the institutional funding partners, external and on-balance sheet, is 46.3%. Now, that is replaced significantly by the off-balance sheet arrangements from institutional funding partners externally, which increased from 18.2% on December 31st to now 24.5%. Does that help, Daphne?

Daphne Poon -- Citi -- Analyst

Yeah, that's very helpful. So in terms of going forward, the funding mix, you expect the off-balance sheet portion to continue to increase?

Carl Yeung -- Chief Financial Officer

Yes. We are looking to see that happen because we are seeing increasing demand from licensed banks to participate in what we have to offer.

Daphne Poon -- Citi -- Analyst

Okay. Got it. That's helpful. Thank you.

Operator

The next question comes from Richard Yu of Morgan Stanley. Please go ahead.

Richard Yu -- Morgan Stanley -- Analyst

I have two quick questions. First of all, given the continued increase in registered users, I do note that the pace of the increase has somewhat slowed. And at the same time, MAU also probably have moderated somewhat. I'm just wondering, obviously the firm has not been spending some marketing dollars on the cash business for some time. I'm wondering whether, given the competition, more and more other firms are competing in the low-rate categories, whether there's a need to actually later on increase the marketing dollar for the cash loan products to maintain the active user base, MAUs, and drive a higher growth in the registered user base, meaning in the coming years and quarters.

Secondly, I guess on the auto business, given also more entrants in the market, I don't know whether you're seeing more competition in, I guess, some of the targeted cities from some of these other competitors at the moment as well. Thank you very much.

Carl Yeung -- Chief Financial Officer

Hi, Richard. Thank you for the questions. These are two really good questions against this call. For observing these registered users to actual transacting users, in the first quarter you would have seen a rather sharp decrease because the Company proactively increased the disapproval rate or really increased the rejection rate, specifically from December to January to February, to really de-risk from refinancing users. And we have done that very successfully so the results do show that the delinquency has come down.

Now, to get back to you on the specific marketing dollar, you actually see the marketing spend in the first quarter, taking Dabai auto out, actually declined from the same period last year by 11%. The Company's strategy is really never to market our way into users because we serve an interesting product called credit. And if you market to users, you're really asking users to come and borrow. We'd rather stay with these consumption scenarios where the credit is needed in a convenient way at a reasonable cost, an affordable cost. We intend to continue to do that. So we have no intention to step up our marketing dollars to convert more users into borrowers. So I think right now, looking at close to 65 million registered users, it's still a long way to go to service the right credit product to them. So that's kind of where we are.

We still have a lot of things to do. Like you see, we have optimized our credit terms in the first quarter. Although visually, on the surface, you've seen the ticket size increase and the average duration increase, we've actually lowered the per month repayment for each transaction from approximately RMB400 to now RMB300. So we're making things more affordable, otherwise our product that didn't make sense. So we think these optimizations of our products and services will continue to drive user engagement or actual transactions going forward.

Regarding Dabai Auto business, there is and has been an increase sort of level of competition in this space because everybody can tell the demand and the need is there. We do expect to put some marketing dollars behind this effort, really not for generating more sales away from competitors, but really to educate our potential users. The product we serve is actually something that we prefer in terms of a very low-risk model, where these are direct leases. These cars' titles are owned by our Company. And in the Chinese market, not all users prefer that. And they would see actually counter-party risk on our Company because they would keep repaying but the car still belongs to us until the very, very last repayment. We like this because the user is very unlikely to defraud us but it does take some education.

So with the, again, large user base, the network of auto showrooms that still need to be optimized, we think we are in a very good position to really open this market up and, if there were any sales and marketing dollars to be spent, we would spend it reasonably to really educate potential users only.

Richard Yu -- Morgan Stanley -- Analyst

Thanks. Thanks, Carl, for the answer. Just one follow-up, quick question. I understand totally the number of active borrowers as the firm tightened their credit standards, but I was just wondering whether management is a bit concerned on the average MAU year-on-year decline in the first quarter. Because that was impacted by the credit approval position. So I don't know if there's any specific reason behind that or management expects a rebound in year-on-year growth in the MAU or, I guess, the active borrowers will come from.

Carl Yeung -- Chief Financial Officer

Yeah. Thank you, Richard. The actual MAU in the first quarter has declined from the fourth quarter by about 30%. That, I think, is really mainly due to the overall ecosystems. The large ecosystems in China have basically sort of turned down various exposures because of regulatory movements. The demand is there. We don't question that. The credit need for the under bank is just so massive. So we hope and we believe that number should rebound somewhat. But let's still assume the so-called base case scenario where this MAU sticks and doesn't grow. Even at that situation, we're still looking at 20+ million unique users that come and visit our app across our own ecosystem any given month, which still means a very large and sizable opportunity for various credit products. Even out of the 20 million, we just served 4 million in the first quarter. So there's still a lot of things to do.

Richard Yu -- Morgan Stanley -- Analyst

Got it. Thank you.

Operator

The next question comes from Jinjin Qian of Needham. Please go ahead.

Jinjin Qian -- Needham & Company -- Analyst

Thanks a lot for taking my question. A couple, if I may. One is, to follow up on the user base, obviously you've expanded the size of your loan ticket to about RMB1400 and you said you're trying to focus on a high-quality user among your registered user base. Can you help us get a sense of how many of the 65 million or 27 million would you consider to be eligible for this larger ticket size? And in terms of your future customer acquisition strategy, are we going to move toward a higher tier of customers, different from what we've been focused before, or are you gonna be still targeting the same user base but some will be eligible for the smaller ticket size and then, as they grow, you can expand to the larger ticket size? Kind of on the high level, has the strategy kind of changed, given all the industry change? So that's one question on the consumer credit.

So second is on the auto business. Can you help us understand, on the inventory side, what is the typical inventory internal where you are seeing how many vehicles do you have in your inventory right now? And sort of how much capital would you expect to be needed to reach your 100,000 target this year? Thank you.

Carl Yeung -- Chief Financial Officer

Alright, thank you. Thank you very much, Jinjin Qian. And I like to help the community to understand the size of the loan ticket. I think we mentioned just briefly that actually, although you see the loan ticket average price increase to RMB1400 with a term of 5.1 months, the actual per month repayment has been lowered to about RMB300 versus RMB400 last year. One of the things we have done behind this effort was we actually got rid of all the so-called weekly products, where a user would come and borrow on a bullet term this week and then repay next week. What we have found through the credit cycle, credit downturn, was this type of product was more associated or correlated closer to refinancing users than anything. So we got rid of that product. And when that product is gone, when you don't have a lot of users borrowing on a weekly basis for RMB300, RMB400, RMB500 a week, the average does go up.

Secondly, because most players have shrunk their balance sheets in the first quarter -- well, most players who are responsible, they shrunk their balance sheet in the first quarter. We have seen a group of users with very high-quality data and so-called expected low delinquency to come through to our platform. And for those users, with that strength in our data analytics, we believe we can serve them with a higher ticket size. But as of this moment, we do not still serve any users over RMB10,000. That's sort of where our cap limit is. And for those RMB10,000 credit limits, the terms are usually 12 months, which actually still makes that transaction per month a small credit size of less than RMB1000 per month. So that's kind of where we want to stay at.

So overall we continue to want to focus on the really underserved, under-access to credit users, who is making RMB3000 to RMB5000 a month, where our advantage is just superior to other competitors. So we don't have intention to venture into unsecured credit lending, into, say, the RMB50,000 to RMB100,000 category. So that's kind of where we are.

Secondly, in terms of the Dabai Auto, as of March 31st, we actually had an inventory balance of slightly over 2,800 cars. And as of right now, we have 5,700 cars in inventory. We believe this is kind of the right level of inventory to get to the growth we want to be. We actually carry a smarter inventory logic in Dabai Auto. No. 1, we don't do a single brand product. It's all multi-brand. So we ensure the vehicles that we want to carry in inventory are hot-selling models. For the long-term demand, we try to pick them off of dealer distributors, where they have slow-moving inventory too. So with combined two together, we actually have a fairly flexible inventory model, where we can get inventory at the lower cost, at a faster pace, and we can sell these cars nationwide.

In terms of the capital required to get to the 100,000 cars this year, it should be somewhere around RMB4 billion to RMB5 billion, where we would finance roughly 50,000 units of cars. And then the remaining 50,000 of that 100,000 units, we'll find external ways to finance such.

Jinjin Qian -- Needham & Company -- Analyst

Thank you, Carl.

Operator

The next question comes from Linda Sun-Mattison of Bernstein. Please go ahead.

Linda Sun-Mattison -- Sanford Bernstein -- Analyst

Hello, Carl. I have a question regarding the general cash delinquency environment. The government, the tightening from December, there was a time table about cleaning up the cash loan industry by end of April, I think. Can you give us just a general idea where the players are? Have you heard of any players being expanding or shrinking? I just want to get a sense how this is developing and whether we've seen the last of regulatory tightening?

And then following on that, I'm looking at your Slide 8. In Q1, a lot of questions were centered around we've seen a big decline and, I think, probably very strict forward. The question is when are we going to see this rebound? You said there is enough demand but when will we see this come through your financial numbers and your KPIs? Thank you.

Carl Yeung -- Chief Financial Officer

Thank you very much, Linda. Your first question, I'm not in a position to predict where government heads. I don't think anybody in the world can. But I can comment on the actions taken and we can offer our view, in terms of what these actions mean. So, first of all, there was a lot of regulations issued throughout last year, actually, and then Regulation 141 came on December 1st. The government, all in all, has really never put a so-called stop-all approach to this industry, but rather offered guidelines in how you should run the business to serve these underserved credit needs.

There were time tables attached to some of these regulations. The April one you mentioned was more toward the P2P registration process, which the government has actually moved the deadline back without giving a further deadline time table. I think, through the conversations we have with industry participants as well as associations, we believe the government also knows that the companies who do not charge exorbitant rates, who do not go out and hurt users, are actually doing the industry a good. Right? Because if we are gone, if other players are gone, the demand is still there. Where does this demand go? They basically go offline to loan sharks and ultimately people get hurt. So as long as this industry operates with our own reasonable -- and if we provide affordable credit, the government knows that this is an OK thing to do.

So you have seen the move back of P2P deadlines. You have seen some of these deadlines regarding confirmation of various licenses, small loan license, for example, has really not been enforced or deadlines moved back. So overall I think the environment from a regulatory perspective is more relaxed and it gives the quality players much more room to serve the credit demand.

Secondly, on the second question, we are seeing substantial rebound. If you were to look at our first quarter, I can't give you the detailed numbers, but the rough average loan balance, all the way from throughout January and February and all the way through most of March was around RMB11 billion. The RMB12 billion loan balance you saw at the very, very end of March was really just increased in the very last week or two of March. And I just mentioned our current loan balance is RMB14.6 billion but delinquency rates have actually come down. So everything you've seen, in terms of declines in transaction volume, declines in loan balance, increase in the delinquency rates by vintage, will actually basically all reverse in the next quarter or so.

So it's very, very clear to us where our rebound was. That's why we had the confidence to really reaffirm that RMB2.3 billion of net income that we hope to do throughout the full year.

Linda Sun-Mattison -- Sanford Bernstein -- Analyst

Yeah. Good. Carl, can I just ask a quick, follow-on question. Are you still regulated under the ban with the licenses issued? And currently can you just clarify the kind of license situation? Is there any update basically to what we've heard from you during the Q4 briefing?

Carl Yeung -- Chief Financial Officer

Okay, sure. I can help. So our Company is really a truly fintech company. There is a tech component of it and there is a fin component of it. Now, the tech component of it is nothing more than an internet platform with apps and data analytics and machines and connections with various financial institutions. That part carries an ICP license, which we have.

Now, we do also provide loans to our borrowers on our own equity. That part has to go through licensed financial institutions. For every loan that goes out our door, it is our company policy, it has to go through a licensed financial institution. Now, we also have a license. We actually have two. We have two internet microlending licenses and we still have those. They are under review by our local financial office under the CBIC. As to the outcome of that, nobody knows yet. But our business is usual. In fact, in the 20-F that we so-called submitted a month or so back, we have not been operating in that entity, those two entities, since December and our business has not been interrupted. Because the license that we have, we work with all licensed financial institutions and they've been -- we have been a facilitator for the transaction. So really not much has changed.

Linda Sun-Mattison -- Sanford Bernstein -- Analyst

Thank you, Carl.

Carl Yeung -- Chief Financial Officer

Thank you, Linda.

Operator

The next question comes from Phil Yau of CICC. Please go ahead.

Phil Yau -- CICC -- Analyst

I have two questions. Firstly, we believe Dabai Auto sales will keep increasing as we have the capability, the channel, capital, customer base, and operation. However, are we really prepared for the alternative funding sources to support the increasing Dabai Auto sales?

And, secondly, what's the APR on average for our cash loans currently and what number should we project in the mid- and long-term? Thank you.

Operator

Excuse me, this is the conference operator. I just wanted to check.

Carl Yeung -- Chief Financial Officer

Hi. Sorry, I was on mute.

Operator

Thank you very much. Just wanted to make sure. Thank you.

Carl Yeung -- Chief Financial Officer

Thank you. Thank you, Andrew. So, first of all, thank you for the two questions. And I'll answer directly in English and appreciate the comment.

First of all, regarding auto financing, so the financing support to grow this business is strategically intended to be driven by our own capital first and then we'll seek external funding. But we're not waiting for that full-scale of internal funding to be finished and then go out to get funding. In fact, in the first quarter, two major external funding partners, one is a bank, one is a licensed asset management company, a very large-scale one, have already stepped in to provide partial funding to some of these other transactions. So they're ready to go when that volume picks up. So the so-called infrastructure for funding is already set up and are ready to be deployed.

We have full confidence in bringing in more funding partners because this, if you look at our portfolio of autos right now, we've leased out 6,600 vehicles in the first quarter with zero and one delinquency. And if you bring that number forward to now, over 10,000 vehicles leased out, we have five M1+. This is an extremely high-performing asset. Plus we're bringing some very interesting fintech elements to this portfolio for our asset buyers. In the traditional days, you buy an asset portfolio, you were just buying the asset portfolio. These days, for example, we do this asset portfolio with us where we actually provide you a platform, a tech platform behind, where you can track individually how many miles a car has driven, what locations where it's at. Because each of the vehicles are equipped with multiple telemetrics.

So that's kind of where our funding is. So we already have people who have stepped in and that process is already getting started.

Regarding cash loan pricing, we believe the average actual APR in the first quarter is somewhere around 31% effectively. We don't intend to bring this pricing down because we don't see any competitors that can do this size of a transaction at near these rates right now in the market. In fact, we have full confidence we'll actually be looking at full 36% APR across all the products, except for auto. Now, factually, if you look at the per month financing service fee, or the interest on a monthly basis, 36% versus, say, 30% versus, say, 24%, the absolute difference, in terms of RMB, because each ticket is still very small on a monthly basis, is roughly a few RMB difference. So there is really no actual impact that would enhance or deteriorate user demand by changing pricing. So we have full pricing power. We intend to keep 36%.

Phil Yau -- CICC -- Analyst

Thank you.

Operator

The next question comes from Liyang Liu of L Squared Management. Please go ahead.

Liyang Liu -- L Squared Management -- Analyst

Hi, Carl. I just have two questions. One is regarding the active users. I know you disclosed this number. I'm just wondering what percent of those users are actually new users, whether you can disclose that.

Carl Yeung -- Chief Financial Officer

Hi. Hi, Liyang. Thanks for asking that question. So out of the disclosed active users in the first quarter, roughly 500,000 in that quarter were new users.

Liyang Liu -- L Squared Management -- Analyst

Okay. The other part is you mentioned about --

Carl Yeung -- Chief Financial Officer

Of about 4.1 million, 500,000 were new users.

Liyang Liu -- L Squared Management -- Analyst

Okay. Got you. You talk about the rebirth or substantial rebound across all the metrics. I'm just wondering whether we can have some ballpark numbers on the April numbers and where do you see the upshot actually come from? Coming from the new users or just like the repeaters or high-quality?

Carl Yeung -- Chief Financial Officer

Okay. Thanks for that question. I won't mention specifically April, but you saw the loan balance at the end of March at just roughly slightly over RMB12 billion. But that full quarter in the first quarter was really generated, that income was generated roughly around a RMB11 billion loan balance. So RMB12 billion by existing March, we've been maintaining around RMB14 billion throughout April to now May. We're right now sitting on RMB14.6 billion. So the rebound is very, very large. It's substantial and we believe that the financial impact should be quite significant as we go into Q2.

The cause to really grow that is really we observe very closely minute changes in the market, as well as we observe actual delinquency rates. The delinquency rates with an effective risk management that we have implemented since December last year was effective. Our delinquency rate has come down. So we're confident to grow that loan volume.

Now, what's the loan book? What's driving that loan book growth is really -- you won't see a substantial increase in the active borrowers because we've gotten rid of a lot of the repeat financing users. But our product is now exposing more and more to more new, high-quality borrowers as a lot of platforms exit and we can pick and choose which people to serve. So you would see, as we venture into time, a slight increase in the overall ticket size as well as the duration, as we've seen in the first quarter.

Liyang Liu -- L Squared Management -- Analyst

Thanks, Carl. Just one last housekeeping question. Regarding the share buyback, can you update on the progress of it?

Carl Yeung -- Chief Financial Officer

Well, the Board did announce the RMB300 million. We do not disclose specifically how much we have bought back. We have bought back. We're not like another company, where they announce something and they move. We have bought back a large chunk of that throughout last year. Right now, because there is a substantial demand in our business services, as well as new ventures such as Dabai Auto, we intend to use that capital in driving business growth rather than just buying shares off the market.

Liyang Liu -- L Squared Management -- Analyst

Okay. Thank you.

Operator

As there are no further questions now, I'd like to turn the call back over to the Company for closing remarks.

Sissi Zhu -- Director of Capital Markets

Thank you once again for joining us today. If you have further questions, please feel free to contact Qudian's Investor Relations department through the contact information provided on our website.

Operator

This concludes this conference call. You may now disconnect your line. Thank you.

Duration: 68 minutes

Call participants:

Sissi Zhu -- Director of Capital Markets

Min Luo -- Founder, Chairman, and Chief Executive Officer

Carl Yeung -- Chief Financial Officer

Charles Zhou -- Credit Suisse -- Analyst

Daphne Poon -- Citi -- Analyst

Richard Yu -- Morgan Stanley -- Analyst

Jinjin Qian -- Needham & Company -- Analyst

Linda Sun-Mattison -- Sanford Bernstein -- Analyst

Phil Yau -- CICC -- Analyst

Liyang Liu -- L Squared Management -- Analyst

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