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I know for a fact that Word and Excel will work offline as I went offline just to test this. In theory all the apps work offline, but I have not personally verified this.

You must be online at least once a month as Microsoft checks the activations, and if the apps don’t get the activation renewed, they quit after 30 days.

Info is hard to find on this subject, as most of the links I found in google on this subject, were about the business version, which may be different.

For $20, I would snap this up, as I am paying ~$10/month.