Core Viewpoint: Although Beijing Kingsoft Office Software,Inc. continues to grow, its growth momentum is persistently slowing, with shrinking advance receipts raising questions about future growth prospects. Notably, the company's equity incentive plan for executives features unlocking conditions with performance growth rates lower than those achieved in 2024. This raises questions about whether management lacks confidence in future growth or is intentionally setting low thresholds, and whether the 50% discount equity incentive scheme may harm minority shareholders' interests. Additionally, the company has experienced discounted share transfers by employee shareholding platform Qiwen N-Dimension.

In the first half of 2025, Beijing Kingsoft Office achieved overall revenue and net profit growth, but at a decelerating pace.

The semi-annual report shows that in the first half of this year, Beijing Kingsoft Office achieved operating revenue of 2.657 billion yuan, up 10.12% year-on-year; net profit attributable to shareholders was 747 million yuan, up 3.57% year-on-year; and net profit attributable to shareholders excluding non-recurring items was 727 million yuan, up 5.77% year-on-year.

How should this performance be evaluated, and how should investors assess Beijing Kingsoft Office's future investment value? Overall, the company's performance growth rate shows a slowing trend, and with significantly shrinking advance receipts, its future growth potential may require closer observation.

Earlier this year, the company's equity incentive plan for executives and others featured unlocking conditions with performance growth rates lower than those achieved in 2024. Does this reflect management's early expectation of future performance deceleration, or is it an intentional setting of low-threshold equity incentive conditions? Could minority shareholders' interests be compromised? Additionally, the company has experienced discounted transfers by employee shareholding platform Qiwen N-Dimension.

Future Growth Prospects in Question? Shrinking Advance Receipts

The company is a leading domestic office software product and service provider, offering office services to users from over 220 countries and regions worldwide through office products represented by WPS Office, WPS 365, and WPS AI.

With over 35 years of R&D experience and technological accumulation in the office software field, all of the company's major products and services are independently developed with proprietary intellectual property rights for core technologies. The company focuses on in-depth research of various key technologies including text formatting, spreadsheet calculation, animation rendering, online collaborative editing, secure documents, and data collaborative sharing. Through breakthroughs in core technologies, it has successfully built a cloud, collaboration, and AI office application service system, pioneering new intelligent office models and bringing new intelligent office experiences to users.

Beijing Kingsoft Office's business is primarily divided into two segments:

First is the 2C personal business, where users can download WPS Office and other company office software products or use them directly online, experiencing basic functions for free. Users can register WPS accounts using various methods including email, QQ, WeChat, and mobile phone numbers, enjoying more functions and services after logging in. Compared to free users, members can enjoy numerous value-added services including output conversion, document processing, sharing collaboration, and content resources after payment, facilitating efficient office work. All members can choose monthly, quarterly, or annual payment methods to meet different user needs.

Second is the 2B institutional business, where the company provides WPS 365 products or services to organizational clients, typically signing annual or multi-year contracts. Within the contract period, clients use products or services within WPS 365 according to contract provisions, while the company collects corresponding fees as agreed. The company can also provide organizational clients with usage rights to specific versions of WPS software products, typically signing annual, multi-year, or volume licensing contracts. Volume licensing contracts usually include maintenance services for a certain period, with maintenance or other services beyond this period requiring separate purchases by clients. After purchasing WPS 365 or WPS software products, clients can choose to pay additional fees for other products or value-added services.

From the company's overall performance perspective, both revenue and net profit growth rates are showing a slowing trend. Wind data shows that over the past five years and the most recent period, the company's revenue growth rates were 43.14%, 45.07%, 18.44%, 17.27%, 12.4%, and 10.12% respectively; net profit attributable to shareholders growth rates were 119.22%, 18.57%, 7.33%, 17.92%, 24.84%, and 3.57% respectively. Revenue growth has declined significantly from the previous 40%+ rates, while net profit growth has fallen from triple digits to single digits.

Looking at the forward-looking indicator of contract liabilities, Beijing Kingsoft Office's contract liability amounts have also declined significantly from their peak. At the end of the 2023 semi-annual report period, the company's contract liabilities reached 2.892 billion yuan, while in the first half of this year, contract liabilities fell to 1.873 billion yuan. Does this indicate potential future growth challenges?

By business segment, the company's personal business represents Beijing Kingsoft Office's foundation, with both revenue growth and paying user growth showing signs of deceleration.

During the reporting period, WPS personal business revenue was 1.748 billion yuan, up 8.38% year-on-year. Notably, in 2024, the company's WPS personal business revenue was 3.283 billion yuan, up 18% year-on-year. Revenue growth has clearly declined from double-digit to single-digit growth.

From monthly active user data, growth in the first half of this year outperformed the same period in 2024.

As of June 30 this year, WPS Office global monthly active devices reached 651 million, up 8.56% year-on-year. Among these, WPS Office PC version monthly active devices were 305 million, up 12.29% year-on-year; WPS Office mobile version monthly active devices were 346 million, up 5.48% year-on-year.

As of June 30, 2024, the company's main product monthly active devices totaled 602 million, up 3.08% year-on-year. Among these, WPS Office PC version monthly active devices were 271 million, up 7.11% year-on-year; WPS Office mobile version monthly active devices were 328 million, up 0.31% year-on-year.

However, cumulative user growth has slowed. At the end of this reporting period, the company's domestic cumulative annual paying personal users reached 41.79 million, up 9.54% year-on-year; as of June 30, 2024, cumulative annual paying personal users reached 38.15 million, up 14.79% year-on-year.

For institutional business, the company's WPS software continues to decline while WPS 365 maintains high growth.

During the reporting period, WPS 365 business revenue was 308.8 million yuan, up 62.27% year-on-year; WPS software business revenue was 541.6 million yuan, down 2.08% year-on-year. Regarding the software business decline, the company previously stated in announcements that it was mainly affected by new procurement processes in the IT innovation sector for 2025.

Regarding WPS 365's significant product capability enhancement, the company stated it continuously improves collaboration component functions, promotes application development iterations, and enhances full-chain security capabilities. With continuous product function improvements, the company successfully promoted collaboration product replacement among key sector clients. The company continues advancing WPS 365 into industries and scenarios, actively promoting AI project implementation, and co-creating with leading clients, using benchmark projects as drivers for replication and promotion. During the reporting period, leveraging comprehensive product capabilities and high-quality services, the company's new WPS 365 benchmark clients include well-known enterprises such as China Unicom, China Three Gorges Corporation, China National Electric Apparatus Group, China Baowu, China UnionPay, Bank of Jiangsu, BGI Genomics, Wilmar, Mengniu Dairy, and CVTE. The company continues consolidating advantages among central state-owned enterprise clients while accelerating coverage of private enterprises and local state-owned enterprises, continuously enhancing WPS 365's market influence and driving strong revenue growth.

Discounted Executive Transfers? Was Growth Deceleration Anticipated?

In April this year, the company released an equity incentive draft plan. According to the announcement, this equity incentive mainly grants up to 3.46 million restricted shares to 198 incentive recipients. The incentive plan targets senior management, core management, and technical backbone personnel employed by the company (including subsidiaries) at the time of the plan announcement. The grant price for restricted shares is no less than 151.46 yuan per share, while the company's stock price on the day before the announcement was 302.91 yuan per share, meaning the company provided incentives to executives at a 50% discount.

Notably, the unlocking revenue growth rate for this equity incentive was lowered compared to 2024. According to the assessment targets for the second category of incentive recipients, first, the revenue target for 2025-2029 is 10% annual growth, with a trigger value of 8% annual growth; second, WPS 365 business revenue targets for 2025-2029 are 30% annual growth, with a trigger value of 25% annual growth.

In 2024, the company's revenue growth rate exceeded 10%, reaching 12.4%. This raises questions about whether the company lowered revenue growth expectations due to anticipated future growth deceleration. Do the lowered performance unlocking thresholds constitute potential benefit transfers? Could this harm minority shareholders' interests? These questions may warrant further regulatory attention.

Additionally, the company appears to have experienced discounted transfers by major shareholders.

According to announcements, nine entities including Qiwen First Dimension and Qiwen Second Dimension collectively transferred 7.761767 million shares through inquiry transfer in April 2025 at a transfer price of 267.50 yuan per share, totaling 2.076 billion yuan. Public information shows that Qiwen N-Dimension is Beijing Kingsoft Office's employee shareholding platform, with some directors, supervisors, and senior management indirectly holding company shares through Qiwen N-Dimension.

According to the inquiry subscription situation on March 31, 2025, the preliminary inquiry transfer price for Qiwen N-Dimension was set at 267.5 yuan per share, while Beijing Kingsoft Office's closing stock price on the same day was 299.12 yuan per share, clearly showing a discounted transfer price.