英语流利说上市招股说明书（英文）-2018.9-269页-3mb

5,750,000 American Depositary Shares Summary

Core Content

This document outlines the initial public offering (IPO) of 5,750,000 American Depositary Shares (ADSs) by LAIX Inc., which represents Class A ordinary shares of the company. The ADSs are listed on the New York Stock Exchange under the symbol "LAIX." The offering price is US$12.50 per ADS, with underwriting discounts and commissions of US$0.875 per ADS, resulting in US$11.625 per ADS going to the company. The total proceeds to LAIX Inc. are US$66,843,750, assuming the underwriters do not exercise their over-allotment option to purchase an additional 862,500 ADSs within 30 days of the offering.

Key Information

• ADS Representation: Each ADS represents one Class A ordinary share, with a par value of US$0.001.
• Voting Rights: Class B ordinary shares, held by the founders, will be entitled to ten votes after the offering, while Class A shares retain one vote. Class B shares constitute 41.0% of total issued and outstanding share capital and 87.4% of the aggregate voting power.
• Founders' Ownership: The three founders—Dr. Yi Wang, Mr. Zheren Hu, and Dr. Hui Lin—beneficially own all Class B shares.
• Underwriters: GGV entities and CMC Lullaby Holdings Limited have subscribed for 980,000 ADSs. The underwriters receive the same compensation for all ADSs sold.
• IPO Details:
  • Offering Price: US$12.50 per ADS
  • Total Proceeds: US$71,875,000 (before underwriting fees)
  • Underwriting Fees: US$5,031,250
  • Proceeds to LAIX: US$66,843,750
  • ADS Delivery: Expected on October 1, 2018, in New York, New York.

Main Points

Company Overview

• LAIX Inc. is a leading AI company in China focused on English learning.
• Its proprietary AI teacher uses deep learning, adaptive learning, big data, and mobile internet.
• The company was named among "The 100 Most Promising Private Artificial Intelligence Companies in the World" for 2018 by CB Insights and among "50 Most Innovative Companies" for 2018 by Forbes China.
• As of June 30, 2018, LAIX had 83.8 million cumulative registered users in China and globally.

Business Model

• LAIX operates a freemium model, attracting users with free services and converting them to paying users.
• User Growth: Monthly active users increased from 2.0 million (2016) to 7.2 million (H1 2018).
• Revenue Growth: Revenues rose from RMB12.3 million (2016) to RMB165.6 million (2017) and further to RMB232.3 million (H1 2018).
• Net Losses: Net losses were RMB242.8 million (2017) and RMB182.3 million (H1 2018), compared to RMB89.2 million (2016) and RMB67.3 million (H1 2017).

Industry and Market

• AI Industry in China: Rapid growth, with a CAGR of 55.7% from 2013 to 2017 and CAGR of 86.2% from 2018 to 2022, projected to reach RMB814.0 billion by 2022.
• English Learning Market: Estimated to be RMB228.8 billion in 2017, growing to RMB548.8 billion in 2022 with a CAGR of 19.6%.
• Education 3.0: LAIX is positioned to lead the third phase of education, leveraging AI to enhance effectiveness and efficiency in learning.

Competitive Strengths

• Innovative AI Platform: Transforms learning with personalized, adaptive experiences.
• Proprietary AI Technologies: Provide real-time feedback, proficiency assessment, and personalized content delivery.
• Scalable Business Model: Driven by network effects and massive user base.
• Strong Market Position: Significant opportunities in English learning and beyond.
• Visionary Leadership: Founders and management team with strong execution capabilities.

Strategies

• Expand User Base: Enhance user engagement and increase user retention.
• Enhance AI Capabilities: Improve AI and machine learning features.
• Develop Products and Content: Enrich offerings with diverse and culturally relevant content.
• Global Expansion: Extend operations beyond English language learning.
• Build Brand Recognition: Establish a household brand globally.
• Strategic Investments: Strengthen capabilities through investments and partnerships.

Challenges

• Profitability: Struggles to achieve sustainable profitability.
• User Conversion: Difficulty in converting non-paying users to paying users.
• Regulatory and Competitive Risks: Potential regulatory changes and intense competition.
• Business Complexity: Managing increasing operational complexity.
• Market Acceptance: Gaining wider acceptance of AI-driven education.

Corporate Structure and Ownership

• LAIX Inc. was incorporated in 2013 in the Cayman Islands.
• VIE Structure: Operations in China are conducted through variable interest entities (VIEs), including Shanghai Liulishuo, Shanghai Mengfan, and Jiangsu Liulishuo.
• Founders' Equity: The founders collectively own Class B shares, which will have ten voting rights post-IPO, giving them significant control.
• Share Ownership:
  • Dr. Yi Wang: ~52.2% of aggregate voting power
  • Mr. Zheren Hu: ~22.3% of aggregate voting power
  • Dr. Hui Lin: ~12.9% of aggregate voting power

Regulatory and Reporting Status

• LAIX is an emerging growth company under the JOBS Act, eligible for reduced reporting requirements.
• The company has opted out of the extended transition period for financial reporting standards.
• LAIX will remain an emerging growth company until it meets one of the following:
  • Revenues exceed US$1.07 billion
  • Five years after the IPO
  • Issues more than US$1.0 billion in non-convertible debt
  • Becomes a large accelerated filer under the Exchange Act

Corporate Information

• Principal Offices:
  • China: 3/F, Building B, No. 1687 Changyang Road, Yangpu District, Shanghai
  • Cayman Islands: Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104
• Contact: Inquiries should be directed to the principal executive offices.
• Website: www.liulishuo.com
• Agent for Service of Process: Puglisi & Associates, Newark, Delaware

Summary of Terms and Conventions

• "ADSs" = American Depositary Shares, each representing one Class A ordinary share
• "Class A" and "Class B" = Ordinary shares with different voting rights
• "Monthly Active Users (MAUs)" = Users who launched the mobile app in a given month
• "Paying Users" = Users who made payments for courses or services
• "Gross Billings" = Total cash received from course sales, net of refunds
• "RMB" = Renminbi, the reporting currency
• "CB Insights" = A U.S.-based firm that tracks AI companies
• "Knowledge Tracing" = Modeling user knowledge over time to predict performance

Risk Factors

• The document warns that investing in LAIX's ADSs involves significant risks, including profitability, market acceptance, regulatory changes, and competition.
• A detailed discussion of these risks is included in the "Risk Factors" section, starting on page 15.

Conclusion

LAIX Inc. is an AI-driven English learning company with a strong user base and innovative technology. The company is offering 5,750,000 ADSs at US$12.50 per share, with founders holding a large voting share. Despite its growth and market potential, LAIX faces challenges in profitability and regulatory compliance. The IPO is expected to be completed by October 1, 2018, with the underwriters holding an over-allotment option.