LAIX INC. COMPANY PRESENTATION April 2019 LAIX LIFE EMPOWERED BY - PowerPoint PPT Presentation

LAIX INC. COMPANY PRESENTATION April 2019

LAIX LIFE EMPOWERED BY AI TO REACH (X)INFINITE POSSIBILITIES OUR MISSION: EMPOWER EVERYONE TO ACHIEVE THEIR FULL POTENTIAL AND BECOME A GLOBAL CITIZEN

1 BUSINESS HIGHLIGHTS

OUR JOURNEY Beijing Mountain View, Princeton, CA NJ Shanghai Dr. Yi Wang Zheren Hu Dr. Hui Lin Founder / CEO Founder / CTO / Founder / Chief Scientist Head of English for Adults Business 4 4

OUR PATH TO TRANSFORM LEARNING 2018 Launched LiuLi Reading course in the English Liulishuo app 2017 2016 Launched Authentic Pronunciation course in L i u l i R e a d i n g Launched paid courses in the English Liulishuo app the English Liulishuo app 2015 50 Most Innovative Companies for 2018 by Started to develop AI Forbes China English teacher 2014 A u t h e n t i c P r o n u n c i a t i o n Launched online 2013 Launched enterprise learners’ community 100 Most Promising learning services in the Launched the Liuliba in the English Private AI Companies English Liulishuo app English Liulishuo Liulishuo app in the World for 2018 mobile app by CB Insights Launched the IELTS Liulishuo app E n t e r p r i s e L e a r n i n g S e r v i c e s Awarded “Selected Apps of the Year” by Apple App Store Listed on NYSE Creation of AI teacher Monetization 5

OUR FREEMIUM BUSINESS MODEL Effective Registered Users Active Users First Purchase Repurchase Customer Acquisition DongNi English RMB499 DongNi English RMB99 for for 180-day access, Up to App stores 30-day access RMB998 for 12-month and social media access platforms Free Co u rs es Premium Service Authentic Pronunciation Traffic 轻松学 RMB2,880 to RMB59,880 RMB49 for 14-day access based on course length Multiple ways or number of course units Word-of- Rich and to drive mouth engaging conversion viral free content growth LiuLi Reading RMB199 for Other new products ... 100-day access Offline marketing activities 6

OUR GROWTH Gross Billings (2) Net Revenues Paying Users (1) (Thousands) (RMB MM) (RMB MM) 637 2,500 987 3.8x 3.1x 3.2x 816 313 166 2017 2018 2017 2018 2017 2018 Notes: 1 Paying users for a certain period are users who make payments for any of our courses and services during that period; a user who makes payments across different courses and services offered on the same mobile app using the same registered account is counted as one paying user; a user who makes payments for the same course or service multiple times in the same period is counted as one paying user 7 2 Gross billings for a certain period are the total amount of cash received from the sale of course packages in that period, net of the total amount of cash refunds paid to users in the same period

OUR PROPRIETARY AI TECHNOLOGIES Learning Process for Language and Most Other Subjects Teaching Practicing Assessment Feedback Human Teacher Time consuming to Hard to give detailed Long class One-size-fits-all give personalized and personalized preparation times content feedback assessment Adaptive learning Adaptive learning Advanced auto- AI Teacher Real-time and knowledge based on users’ scoring engine and personalized tracing technology proficiency levels speech recognition feedback in a to personalize and according to technologies variety of formats learning process past learning and through an practice data Adaptive, interactive, gamified Natural language personalized, real- interface processing to Address mistakes time language provide feedback on that users make in proficiency questions real time assessment and personalized advice 8

STRONG PRODUCT DEVELOPMENT CAPABILITIES 26.3Bn Sentences and 2.0Bn Minutes Users Conversations Record (1) Data-Driven Product Development Philosophy Data Feedback Loop User Experience Supported by designers, Leverage product managers, engineers, learning data to ops and OSAs improve our products Content Backed by content development team Refresh course content in weeks Feed- (vs. years in back Education traditional Loop education) Pedagogies Backed by renowned education experts Select most AI Technologies effective Supported by AI pedagogical experts and practices for users scientists Note: 9 1 As of December 31, 2018

ENGAGING USER EXPERIENCE Real-time Feedback Gamification Pop Culture Social Human Touch ■ Users can receive real- ■ Gamified exercises/ ■ Lessons in pop culture ■ Our “Liuliba” is a social ■ Online Study Advisors time performance texts to recap what has themes community where users (OSAs) monitor and feedback to track their been learned ■ Makes learning can create content to encourage users in progress and view their ■ Visualized learning interesting showcase their English Wechat-based study rankings on leader progress to motivate skills or share study groups boards users tips ■ Maintains human touch ■ Motivates users to in learning process share their learning progress 10

2 FINANCIAL HIGHLIGHTS

RAPID GROWTH IN GROSS BILLINGS DRIVEN BY PAYING USERS GROWTH Gross Billings Paying Users (RMB MM) (Thousands) 986.6 2,500 1,000 359.0 313.0 816 400 132.2 25.7 71 2016 2017 2018 2017 Q4 2018 Q4 2016 2017 2018 2017 Q4 2018 Q4 12

FAST GROWING NET REVENUES AND HIGHLY VISIBLE FUTURE REVENUES Net Revenues Deferred Revenues Revenue Recognition Method (RMB MM) (RMB MM) 637.2 Deferred revenues Deferred revenues Beginning balance Ending balance 477.6 Deferred rev. Addition to deferred recognized as net revenues revenues 224.5 this year 165.6 116.4 Gross billings 76.1 recognized as net 12.8 revenues this year 12.3 2016 2017 2018 2017 Q4 2018 Q4 2016 2017 2018 Gross Billings Net Revenue This year This year 13

HIGHLY SCALABLE BUSINESS MODEL WITH IMPROVING OPERATING LEVERAGE Cost of Revenues Sales and Marketing Expenses (RMB MM) (RMB MM) (28.5) (21.6) (27.5) (57.7) (27.4)% (136.2) (71.7) (241.7) (34.8)% (283.1) (28.4%) (31.9%) (110.7)% (174.7) (107.7)% (171.0)% (179.1)% (705.4) (223.0)% (231.4)% 2016 2017 2018 2017 Q4 2018 Q4 2016 2017 2018 2017 Q4 2018 Q4 Sales and marketing expenses As % of net revenues Cost of revenues As % of net revenues 14

HIGHLY SCALABLE BUSINESS MODEL WITH IMPROVING OPERATING LEVERAGE (CONT’D) Research and Development Expenses General and Administrative Expenses (RMB MM) (RMB MM) (21.6) (7.8) (32.1)% (8.8) (30.0) (24.3)% (17.1) (53.2) (53.7) (19.8) (28.4)% (10.2)% (7.6)% (23.9)% (12.0)% (10.3)% (155.2) (243.4)% (71.0)% (65.4) 2016 2017 2018 2017 Q4 2018 Q4 2016 2017 2018 2017 Q4 2018 Q4 Research and development expenses As % of net revenues General and administrative expenses As % of net revenues 15

HIGHLY SCALABLE BUSINESS MODEL WITH IMPROVING OPERATING LEVERAGE (CONT’D) Loss from Operations Adjusted Net Loss (RMB MM) (RMB MM) (72.7)% (69.5)% (71.2)% (69.9)% (141.5)% (142.8)% (149.9)% (82.5) (84.6) (111.1) (108.6) (146.1)% (159.7) (234.2) (248.2) (157.0) (668.8)% (686.4)% (442.6) (463.5) 2016 2017 2018 2017 Q4 2018 Q4 2016 2017 2018 2017 Q4 2018 Q4 Loss from Operations Operating Margin Adjusted Net Loss Adjusted Net Margin 16