Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE First Section)● SummaryIssued: 2/7/2022

Alpha-Win Capital Inc. Research Department
http://www.awincap.com/◆Independent, mid-tier system integrator with long-term, stable growth・CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent, mid-tier system integrator listed on theFirst Section of the TSE. It is expected to move to the Prime Market under the new market segments of the Tokyo
Stock Exchange.
・Its main customers are the following corporate groups: Nomura Research Institute, Fujitsu, Aeon, and Mizuho.
It develops systems and provides services mainly for the financial, distribution, transportation, andtelecommunication industries. Its strengths are its excellent customer base, extensive experience, high credibility,
and the technology and expertise that it has built up over the years. Founded in 1972, it has about 49 years ofhistory.
・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 20
years. During this period, the annual sales growth rate (simple average of the rate of increase in sales) was +6.0%
and the annual recurring profit growth rate (simple average) was +7.1%; it has been steadily expanding its businessover many years. Its recurring margin has stably been at around 7% and it has always remained in profit. Its
increase in sales has been contributing directly to increases in profit, dividend, and market capitalization.
・It has been focusing on the SI Business and Digital Business to expand them over the medium to long term.

◆ Consolidated results for the first nine months of this fiscal year: thanks to sales growth
as well as improved gross margin and reduced SG&A expenses, operating profit grewsignificantly by 41.7% YoY.
Consolidated Results for the First Nine Months
Overview
・Consolidated results for the first nine months of FY 2022 (“Q3 YTD” or April-Dec 2021; note that the Company’s
fiscal year is March-ending, i.e., FY 2022 ends in March 2022) were as follows: sales of Y12,041 million (+13.7%
year-on-year or YoY), operating profit of Y1,122 million (+41.7% YoY), recurring profit of Y1,133 million(+22.9% YoY), and net profit attributable to owners of the parent (hereinafter, “net profit”) of Y755 million(+26.6% YoY) (Figure 1 on page 2 and Figure A on page 7). Sales as well as operating, recurring, and net profits
all reached their record highs for the first nine months.
・Double-digit sales growth was achieved due to increased IT investment by companies, mainly in DX. In addition,
costs were reduced during the COVID-19 crisis and operational efficiency was improved, resulting in a significant
increase in profit. The gross margin increased by 2.7 percentage points from 18.7% in the previous fiscal year’s
first nine months to 21.4% in the current fiscal year’s first nine months (numbers in this Report has generally beenrounded to the first decimal place). The SG&A expenses ratio rose by 0.9 percentage point from 11.2% to 12.1%
over the same period, but the operating margin rose about 1.8 percentage points from 7.5% to 9.3% (see Figure 1
on page 2 for the descriptions below).
Segments
・Overall sales for the first nine months increased by Y1,450 million (+13.7%) YoY. The profit margin also
improved, and operating profit resulted in a significant increase of Y330 million (+41.7%).
Results by Service Category (three categories)
・Sales of the System Integration Services (SIS; percent of entire sales for this fiscal year’s first nine months was75%), which is the Company’s core business segment, had increased by Y1,547 million (+20.7% YoY) to Y9,019
million. The increase in system building projects for shipping companies in the transportation industry and forretailers and general merchandise stores in the distribution industry had contributed significantly to the result. In
addition to the increase in sales, the operating margin also improved (last fiscal year’s first nine months ⇒ thisfiscal year’s first nine months: 7.3% ⇒ 9.4%), resulting in an increase in operating profit by Y306 million YoY
Short Report

1/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022(+56.5% YoY) to Y849 million. This accounts for about 93% of the total increase in profit.
・Sales of the System Outsourcing Services (SOS; 12% of total sales during this fiscal year’s first nine months)
decreased by Y227 million (-14.0% YoY) to Y1,396 million due to the decrease in system building projects for
credit card companies in the financial industry and the completion of projects for data centers. On the other hand,the operating margin improved from 5.7% to 7.9%, and operating profit increased by Y18 million (+20.0% YoY)
to Y110 million.
・In the Professional Services (ProS; 13% of entire sales during this fiscal year’s first nine months), sales increased
by Y130 million (+8.7% YoY) to Y1,624 million due to the increase in system building projects fortelecommunications companies, despite the decrease in consulting projects. Although the operating margin fell
from 10.5% to 10.0%, operating profit slightly increased by Y5 million (+3.3% YoY) to Y162 million.
【Figure 1】Quarterly Change in Financial Results
Consolidated
Category

Consolidated Sales
Sales

By Service Category

Operating Profit

Operating Margin
(%)

Sales

By Industry

Operating Profit

Operating Margin
(%)

Sales

By Business Model

Operating Profit

Operating Margin(%)
Consolidated

Q1, Q2, and Q3 Results

Q1 FY 2021

Q1 FY 2022

Change inAmount / Diff.

Change (%)

Q2 FY 2021

Q2 FY 2022

Change inAmount / Diff.

Change (%)

Q3 FY 2021

Q3 FY 2022

Change inAmount / Diff.

Change (%)

First Nine Months
FY 2021First Nine Months
FY 2022

Change inAmount / Diff.

Change (%)% of Total Amountof Change% of Total

Unit: million yen

Apr-Jun 2020

Apr-Jun 2021

YoY: million yen/%

YoY: %

Jul-Sep 2020

Jul-Sep 2021

YoY: million yen/%

YoY: %

Oct-Dec 2020

Oct-Dec 2021

YoY: million yen/%

YoY: %

Apr-Dec 2020

Apr-Dec 2021

YoY: million yen/%

YoY: %%%

Service/Category Name

System Integration: SIS
System Outsourcing: SOS
Professional: ProS
System Integration: SIS
System Outsourcing: SOS
Professional: ProS
System Integration: SIS
System Outsourcing: SOS
Professional: ProS

Finance
Distribution
Telecommunication & Transportation
Manufacturing (other)Government (other)
Other (other)
Finance
Distribution
Telecommunication & Transportation
Manufacturing (other)Government (other)
Other (other)
Finance
Distribution
Telecommunication & Transportation
Manufacturing (other)Government (other)
Other (other)
Digital Business
SI Business
Enhancement Business
Digital Business
SI Business
Enhancement Business
Digital Business
SI Business
Enhancement Business

Gross Profit

Gross Margin (%)
SG&A Expenses

SG&A Expenses Ratio (%)
Operating Profit

Operating Margin (%)
Recurring Profit

Recurring Margin (%)
Net Profit

Net Margin (%)

3,373
2,311
506
555
158
21
61
6.9
4.3
11.1
989
675
592
329
182
603
72
35
84
16
5
27
7.3
5.2
14.3
5.0
3.1
4.6
19
509
2,843
-5
33
213
-26.3
6.5
7.5
643
19.1
400
11.9
242
7.2
248
7.4
165
4.9

3,987
2,985
493
508
311
37
30
10.4
7.5
6.1
934
815
1,062
318
244
610
75
84
148
20
24
24
8.1
10.4
14.0
6.5
10.2
4.0
64
1,082
2,840
0
125
253
0.0
11.6
8.9
863
21.6
483
12.1
379
9.5
390
9.8
264
6.6

614
673
-12
-47
153
15
-30
3.5
3.2
-5.0
-55
140
470
-11
62
7
3
49
63
4
19
-3
0.8
5.2
-0.3
1.5
7.1
-0.6
45
573
-3
5
92
40
26.3
5.1
1.4
220
2.5
83
0.2
137
2.3
142
2.4
98
1.7

18.2
29.1
-2.4
-8.5
95.9
69.9
-50.0

-5.6
20.7
79.4
-3.3
34.4
1.2
3.9
142.3
75.4
25.0
339.0
-11.3

231.4
112.4
-0.1
95.9
69.9
18.9

34.2
20.8
56.5
57.1
59.0

3,710
2,677
585
447
220
37
55
8.2
6.3
12.3
1,073
729
673
367
204
664
90
55
77
37
16
37
8.4
7.5
11.4
10.1
7.8
5.6
13
656
3,043
-4
59
256
-30.8
9.0
8.4
683
18.4
373
10.1
310
8.4
355
9.6
235
6.3

4,073
3,082
443
548
278
31
58
9.0
7.0
10.6
927
881
1,104
339
232
591
67
79
137
14
16
56
7.2
9.0
12.4
4.1
6.9
9.5
75
1,207
2,792
1
169
198
1.3
14.0
7.1
856
21.0
488
12.0
367
9.0
362
8.9
238
5.8

364
405
-142
101
58
-6
3
0.8
0.7
-1.7
-146
152
431
-28
28
-73
-23
24
60
-23
0
19
-1.2
1.4
1.0
-6.0
-0.9
3.9
62
551
-251
5
110
-58
32.1
5.0
-1.3
173
2.6
115
1.9
57
0.7
8
-0.7
3
-0.5

9.8
15.1
-24.3
22.6
26.4
-16.2
5.5

-13.6
20.9
64.0
-7.6
13.7
-11.0
-25.6
43.6
77.9
-62.2
0.0
51.4

476.9
84.0
-8.2
186.4
-22.7

25.3
30.9
18.5
2.2
1.5

3,508
2,484
533
492
164
34
40
6.6
6.4
8.1
904
680
751
308
230
636
43
56
77
10
18
35
4.8
8.2
10.3
3.2
7.8
5.5
16
598
2,893
-3
36
207
-18.8
6.0
7.2
653
18.6
414
11.8
240
6.8
319
9.1
196
5.6

3,981
2,952
460
568
260
42
74
8.8
9.1
13.0
987
808
1,100
273
203
611
67
61
158
11
13
66
6.8
7.5
14.4
4.0
6.4
10.8
87
1,227
2,667
9
140
226
10.3
11.4
8.5
862
21.7
487
12.2
375
9.4
380
9.5
253
6.4

473
468
-73
76
96
8
34
2.2
2.8
4.9
83
128
349
-35
-27
-25
24
5
81
1
-5
31
2.0
-0.7
4.1
0.8
-1.4
5.3
71
629
-226
12
104
19
29.1
5.4
1.3
209
3.1
73
0.4
135
2.6
61
0.4
57
0.8

13.8
18.8
-13.7
15.4
58.5
23.5
85.0

9.2
18.8
46.5
-11.4
-11.7
-3.9
55.8
8.9
105.2
10.0
-27.8
88.6

443.8
105.2
-7.8
288.9
9.2

32.0
17.5
56.9
19.5
29.1

10,591
7,472
1,624
1,494
542
92
156
7.3
5.7
10.5
2,966
2,084
2,016
1,004
616
1,903
205
146
238
63
39
99
6.9
7.0
11.8
6.3
6.4
5.2
48
1,763
8,779
-12
128
676
-25.0
7.3
7.7
1,979
18.7
1,187
11.2
792
7.5
922
8.7
596
5.6

12,041
9,019
1,396
1,624
849
110
162
9.4
7.9
10.0
2,848
2,504
3,266
930
679
1,812
209
224
443
45
53
146
7.4
9.0
13.6
4.8
7.9
8.1
226
3,516
8,299
10
434
677
4.4
12.3
8.2
2,581
21.4
1,458
12.1
1,122
9.3
1,133
9.4
755
6.3

1,450
1,547
-227
130
306
18
5
2.1
2.2
-0.5
-118
419
1,250
-74
63
-91
4
77
205
-18
14
47
0.5
2.0
1.8
-1.5
1.5
2.9
178
1,753
-480
23
306
1
29.4
5.1
0.5
601
2.7
271
0.9
330
1.8
211
0.7
159
0.7

13.7
20.7
-14.0
8.7
56.5
20.0
3.3

100.0
106.7
-15.7
9.0
92.8
5.5
1.5

100.0
74.9
11.6
13.5
75.7
9.8
14.4

-4.0
20.1
62.0
-7.4
10.2
-4.8
2.0
52.7
86.1
-28.6
35.9
47.5

-8.1
28.9
86.2
-5.1
4.3
-6.3
1.2
23.3
62.1
-5.5
4.2
14.2

23.7
20.8
27.1
7.7
5.6
15.0
18.6
20.0
39.5
4.0
4.7
13.0

363.8
99.4
-5.5
To profit
239.1
0.3

12.3
120.9
-33.1
7.0
92.8
0.3

1.9
29.2
68.9
0.9
38.7
60.3

30.4
22.8
41.7
22.9
26.6

(Note) Prepared by Alpha-Win Research Dept. based on the financial results summary and financial results briefing supplemental materials. Due toprocessing of data during calculations, values for the same item may slightly differ throughout this Report in its words and figures. The same applies to therest of this Report.

Results by Industry (six industries)
・In terms of sales by industry (six industries), sales from the financial industry and other industries (manufacturing,etc.) decreased, but business with the distribution industry and the telecommunication & transportation industry
contributed significantly to the increase in sales and profit as the drivers of overall business performance. Regarding
the distribution industry, sales increased by Y419 million and operating profit increased by Y77 million YoY. As
for the telecommunication & transportation industry, sales increased by Y1,250 million and operating profit grewby Y205 million YoY. Together, the two industry categories accounted for about 115% of the Company’s overall
increase in sales and about 85% of the overall increase in operating profit. The operating margin increased for thefive industries excluding the manufacturing industry in the other industries category.
Results by business model (three business models)・In the Enhancement Business, which accounted for 69% of sales and 60% of operating profit, projects for thefinancial industry and the other industries decreased. However, due to the increase in high-profit, additional
development projects for the existing markets, sales resulted in Y8,299 million, having only decreased by 5.5%
YoY. Operating profit, though, was maintained at Y677 million, which is about the same level as the same periodof the previous fiscal year (+0.3% YoY).
・In the SI Business (Lift & Shift: moving the legacy environment to the cloud environment in “Lift,” and stepwise
system restructuring while optimizing for the cloud environment in “Shift”), which accounted for 29% of sales and
39% of operating profit, sales doubled and operating profit increased by about a little over 3x due to the increasein the scale of system development projects for shipping companies, new cloud projects (microservices*-related
projects: *a software development method in which individually developed, small-scale services are provided as a
Short Report

2/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022

collection), and co-creation with cloud vendors.
・The Digital Business is in the start-up phase and its sales are small, at only about 2% of the total. However, its
sales increased by +363.8% YoY from Y48 million in the previous fiscal year’s first nine months to Y226 million
in the current fiscal year’s first nine months. With the increase in sales, its profit/loss also improved by Y23 million
from a loss of -Y12 million to a profit of +Y10 million.
Factors that Contributed to Profit Increase/Decrease in the First Nine Months
・Figure 2 shows the factors that increased or decreased operating profit in this fiscal year’s first nine months.
Although there was an increase in cost from the strengthening of the governance system and increased R&D
expenses, they were absorbed by the positive effects from the concentration of resources to high-profit projects in
the SI Business (improved operation rate through the increase in the work volume, reviewed employee allocation,and improved efficiency), in addition to the increase in projects received from the transportation &telecommunication industry and increase in additional projects in the Enhancement Business. As a result, operating
profit increased by Y330 million (+41.7%) YoY.
・Regarding non-operating profit/loss, +Y130 million was recorded in the same period of the previous fiscal year
due to a gain on investment in investment partnership and gain on sale of investment securities, but +Y11 million
was recorded this fiscal year since there was no significant factor. As a result, the growth rates (YoY) of both therecurring profit and the net profit were lower than the operating profit growth rate, but they were still high at over+20%.
【Figure 2】Factors that Increased/Decreased Operating Profit in the First Nine Months (Unit: million yen)
Concentration of
resources on highprofit projects of the
SI Business (Lift ＆Shift)
Increase in orders
received fromtransportation &telecommunicationindustry etc.

+245

Increase in additional
development projects inthe Enhancement
BusinessStrengthening
corporate governanceand management
system(Unit: million yen)

Increase in R&D
expenses

+38

1,122
-144

+227

-36

792

Factors Contributing to Quarterly Change in Profit
Overall increase in profit
Increase in orders received
SI Business: consolidation of resources
Enhancement: increase in derivative projects
Increase in cost from strengthening governance
Increase in R&D expenses

Dec 2020

Q1
136
63
72
40
-34
-4

YoY increase/decrease:+330 million yen

Q2
58
37
109
7
-71
-25

Q3
Q3 YTD
136
330
127
227
64
245
-9
38
-39
-144
-7
-36

Dec 2021(Note) Financial results briefing supplemental materials, partially added and revised.

Number of Employees and Productivity
・In the Company's current business model, sales growth is generally directly correlated with the number of
employees. The total number of employees in Japan and overseas has been increasing from 739 in December 2018(end of month; same applies to the rest) → 745 in December 2019 (+6 employees or +0.8% YoY) → 786 in
December 2020 (+41 employees or +5.5% YoY) → 815 in December 2021 (+29 employees or +3.9% YoY).
Sales per employee in Japan had stayed about the same, but operating profit per employee in Japan improved
significantly (operating profit per person during the first nine months, in the same order as above: 938 ⇒ 949 ⇒
1,136 ⇒ 1,565 thousand yen per person).
・Even amidst the COVID-19 crisis, there has still been strong demand for system development (DX businesses
and non-face-to-face businesses such as those related to remote work, EC, and AI). The Company has beensomewhat short of staff for system development, but it has been working on improving productivity and efficiency
by optimizing the allocation of employees and shifting to high-profit projects.
Short Report

3/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022

Change in Orders Received and Order Backlog
・Orders received during the first nine months had increased steadily from Y10,490 million in the same period of
the previous fiscal year to Y11,707 million, in a +Y1,217 million increase (+11.6% YoY). The order backlog at
the end of Q3 had also increased slightly by +Y41 million (+1.0% YoY) from Y3,928 million to Y3,969 million.
・By industry, both the orders received and the order backlog decreased for the financial industry and otherindustries, but this decrease was compensated by the increase from the distribution industry and transportation &telecommunication industry. Similarly, by business model, the decrease in the Enhancement Business wascompensated by the increase in the SI Business and the Digital Business.
Balance Sheet
・There has been no significant change in the balance sheet as of the end of Q3 (end of December 2021). The
Company has ample liquidity on hand, as cash & deposits have increased further to Y4.9 billion (essentiallydebtless). Its financial standing is also firm, with a current ratio of 372.5% and an equity ratio that has increased
further to 72.2%.
Consolidated Results for the Third Quarter (three-month period)
・In the third quarter (Oct-Dec 2021: hereinafter, “Q3”), sales were Y3,981 million (+13.8% YoY), operating profit
was Y375 million (+56.9% YoY), recurring profit was Y380 million (+19.5% YoY), and net profit was Y253
million (+29.1%YoY) (Figures 1 and 3-4 on page 2 and Figure 5 on page 4). As with Q1 and Q2, sales and profit
had continued to grow in Q3. On a quarterly basis (three-month period), gross margin improved by 3.1 percentage
points from 18.6% in the previous Q3 to 21.7% in the current fiscal year’s Q3, and the operating margin also
increased by 2.6 percentage points from 6.8% to 9.4% despite an increase in the SG&A expenses ratio.
・Normally, there are seasonal variations in sales and profits (Q4> Q2> Q3> Q1: Q1 is April to June, Q2 is July to
September, and Q4 is January to March), but this fiscal year, sales had been flat but maintained high at around Y4
billion due to projects carried over from the previous fiscal year in Q1; quarterly sales were Y3,987 million (+18.2%
YoY) in Q1 ⇒ Y4,073 million (+9.8% YoY) in Q2 ⇒ Y3,981 million (+13.8% YoY) in Q3 (Figure 3).
Similarly, from Q1 to Q3, the gross margin had stayed around 21%, the SG&A expenses ratio was also around
12%, and the operating margin was around 9% (Figure 5 on page 5). As a result, the amount of operating profit
was also maintained at about the same level.
・Compared to Q2, results in Q3 were mostly flat with a 2.3% decrease in sales and a 1.9% decrease in operating
profit. The YoY growth in operating profit had changed from +Y136 million in Q1 to +Y58 million in Q2 and+Y136 million in Q3, but the operating profit for each quarter was Y378 million ⇒ Y368 million ⇒ Y375
million (in the same order), maintained stably at around Y370 million (Figure 4).
【Figure 3】Quarterly Change in Sales(Unit: million yen)

【Figure 4】Quarterly Change in Operating Profit(Unit: million yen)

4,500

450

4,000

400

3,500

350

3,000

300

2,500

250

2,000

200

1,500

150

1,000

100

500

50
0

0
FY 2014

FY 2015

FY 2016

FY 2017Ｑ1

FY 2018
Ｑ２Ｑ３

FY 2019
Ｑ４

FY 2020

FY 2021

FY 2022

FY 2014

FY 2015

FY 2016

FY 2017Ｑ1

FY 2018
Ｑ２Ｑ３

FY 2019

FY 2020

FY 2021

FY 2022

Ｑ４(Note) Figures 3-5 were prepared by Alpha-Win Research Dept. based on the financial results summary and the financial results briefing supplemental
materials. FY 2022’s Q1, Q2, and Q3 are actual results, while Q4 and full year (FY) values are the Company’s forecasts.

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4/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022【Figure 5】Quarterly Change in Operating Margin (Unit: %)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Ｑ1

Ｑ２

Ｑ３

Ｑ４

FY

◆ No change in the full-year financial plan that has been previously upwardly revised andrecord-high sales and profits are expected
The Company’s Full-Year Forecast
・The Company has not made changes to the full-year sales of Y16,000 million (+8.2% YoY) that it announced at
the beginning of the fiscal year, but in November 2021, it revised the profits and dividend upward to an operating
profit of Y1,440 million (+19.2% YoY), net profit of Y950 million (+12.6% YoY), and annual dividend per shareof 23 yen. Since then, it has not changed its forecasts.
・It expects sales to increase for the tenth consecutive fiscal year and operating and recurring profits to increase forthe fifth consecutive fiscal year. It plans to achieve consecutive record highs in sales and profits.
Progress and Q4 Forecast
・Progress in the first nine months against the full-year company forecast was solid, at 75.3% for sales (71.6% in
the same period of the previous fiscal year), 80.2% for operating profit (previously, 67.6%), and 79.5% for net
profit (previously, 70.6%). Compared to the full-year plan to increase sales by +8.2% YoY, the actual sales growthrate in the first nine months was +13.7%. Similarly, while the profit growth rate in terms of net profit is planned to
be +12.6%, the growth rate in the first nine months was +26.6%. Both sales and profit growth rates have exceeded
the plan.
・When the results for the first nine months are subtracted from the full-year forecast announced by the Company,
the planned Q4 results (January-March 2022) come out to be sales of Y3,959 million (-5.7% YoY), operating profitof Y278 million (-27.2% YoY), and net profit of Y195 million (-21.1%YoY). Sales and profit declines are expected.
The Company is expecting operating margin to decrease from 9.1% in the previous Q4, 9.5% in this fiscal year’s
Q1, 9.0% in Q2, and 9.4% in Q3 to 7.0% in Q4, which seems to be a somewhat conservative forecast.
Alpha-Win Research Department’s Forecast
・Corporate clients with solid business performance have been becoming increasingly active in making strategic IT
investments, leading to strong progress of the Company’s sales. In addition, there has been greater-than-expected
improvement in profitability thanks to measures such as shifting to high-profit projects, optimizing resources, andimproving operational efficiency. Considering the conservative estimates for Q4, we believe that compared to theCompany's full-year plan, sales could be about 100 to 200 million yen greater and operating profit could be 25 to
100 million yen greater (Alpha-Win’s forecasts in figures such as Figure A on page 7 are based on the lowest
values of these ranges).
・We have not revised our medium-term financial forecasts for the next fiscal year onward. We believe that theCompany has the potential to stably maintain sales and profit growth at an annual rate of around 8% (in normal
conditions) over the medium to long term due to the large growth potential of the IT- and DX-related investment
market, growth of SI Business and the Digital Business, expansion of the Enhancement Business toward its majorclients, development of new projects and new customers, and improvement of productivity through various
measures.
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5/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022◆The Company’s Recent Situation (response to COVID-19, restructuring of organization,and industry trends)
Response to COVID-19
・Toward the post-COVID-19 world and the new normal, the Company has been utilizing digital technology andremote work (combination of decentralized/non-face-to-face activities with in-person sales) and encouraging
workstyles in which each employee incorporates both work at home and at offices according to their job
characteristics and abilities.
・Although sales activities had been temporarily stagnant for some period due to COVID-19, the Company currently
incorporates online methods and there has been no major issue with customer interaction and business negotiations.
Looking at the orders received and the level of sales and profits, the impact of COVID-19 seems to be limited.
Restructuring of Organization
・Toward achieving the next medium- to long-term vision “VISION 2026,” the Company plans to focus ondeveloping the DX business and, starting in April 2022, establish a partner promotion office and IR conference andpartially restructure its organization. It will also work on strengthening sustainability and governance.
Industry Trends
・According to the “Survey of Selected Service Industries” (finalized report on November 2021), sales of system
integration of make-to-order software had been showing negative growth YoY, but since April 2021, there havebeen many months in which sales exceeded the previous year, indicating a general trend of recovery (simple
average of the monthly YoY growth rates in April-November 2021: +3.1%).
・Since the sales increase/decrease rates (YoY) of the Company and its competitors HIMACS (TSE First Section
4299; hereinafter, “HM”) and Toho System Science (TSE First Section 4333; hereinafter, “TS”) during the firstnine months include the sales increase/decrease rate for December, a simple comparison cannot be made with thedata of the “Survey of Selected Service Industries.” However, the sales growth rate was +13.7% for the Company,+6.9% for HM, and +21.1% for TS, each exceeding the average growth rate of the industry and making solid
progress. Similarly, the operating profit increase/decrease rates (YoY) (first nine months) were +41.7%, +29.0%,
and +44.8%, respectively, each greatly exceeding the sales growth rates. In addition to increased sales, the rise inoperating margin due to the improvement of the gross margin or the decrease in the SG&A expenses ratio has been
the common factor contributing to their high profit growth rates. For the current full fiscal year, all three companies
have announced upward revisions to their profits and dividend during the fiscal year.

◆ Stock price and characteristics: domestic-demand-oriented, stable growth stock
Performance
・The Company’s stock is seen as a defensive and stable growth stock. Thanks to solid financial performance, overthe past approximately 12 years and nine months, its stock price has increased by about 5x and has been
outperforming the TOPIX by about 260%. However, over the past twelve months, small-cap stocks have tended tounderperform and the Company’s stock price had also fallen in reaction to a previous rise in stock price for someperiod, causing the Company’s stock to underperform the TOPIX and its two competitors (HM and TS).
Valuation
・Due to the relatively low volatility of business performance and high liquidity, the Company valuation seems tobe slightly at a premium compared to its two competitors concerning the major valuation indicators (Figure 6 on
page 7). On the other hand, compared to the average of the TSE First Section, valuation indicators are at somewhat
underpriced levels except for the P/B (TSE First Section’s average vs. the Company’s values: this fiscal year’s
expected P/E of 14.4 vs. 13.4, simple average of dividend yield of 2.1% vs. 2.4%, and actual P/B of 1.2 vs. 1.8).
・Key points concerning the Company's future stock price will be the upward revision of profits for the current fiscal
year, next fiscal year’s forecast at the beginning of the fiscal year, quarterly amount of orders received, andquarterly financial results. Over the medium term, key points that should continue to be watched are the progresswith customer development, expansion into new technologies and fields such as DX and their contribution tobusiness performance, overall sales growth rate, changes in operating margin and profit growth rate, return of profit
to shareholders (dividend hike, share buyback, and stock splits), and the business performance and IT investment
trends of Japanese companies that are its final users (the Company’s target customers).
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6/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022

・We believe that if stable profit growth (EPS) close to a double-digit rate per year can be maintained in the future,
the rise in EPS and the correction of the level of P/E will lead to stock return over the medium to long term.
【Figure 6】Comparison of Valuation with Competitors
Company Name

CUBE SYSTEM(CS: consolidated)

HIMACS(HM: consolidated)Toho System Science(TS: non-consolidated)

2335

4299

4333

Code
Stock Price (at 2/4 closing)Market Cap (million yen)
P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Dividend Yield (%)
EV/EBITDA
P/S (price-to-sales ratio)
Sales (this Q3's results: same applies below) (million yen)
Sales Growth Rate (%)
Operating Profit (million yen)
Operating Profit Growth Rate (%)
Operating Margin (%)
Sales (company forecast for this full FY: same applies below) (million yen)
Sales Growth Rate (%)
Operating Profit (million yen)
Operating Profit Growth Rate (%)
Operating Margin (%)
Forecasted Dividend Payout Ratio (%)

941
13,645
13.4
1.8
2.4
6.1
0.85
12,041
13.8
1,122
35.1
9.3%
16,000
8.2
1,400
19.2
8.8%
32.8

1,176
14,598
11.9
1.6
3.4
4.5
0.88
12,199
6.9
1,314
29.0
10.8%
16,500
6.9
1,700
9.7
10.3%
40.3

914
12,674
12.1
1.4
3.3
3.3
0.91
10,525
21.1
1,058
44.8
10.1%
14,000
14.9
1,340
24.5
9.6%
39.6

Market cap= (shares outstanding) x (market share price [at 2/4/2022 closing])
The companies' planned EPS and dividend values for FY 2022 were used in all P/E and dividend yield calculations.
Actual BPS values of Q3 FY 2022 were used in P/B calculations.
EV/EBITDA = (market cap + interest bearing debt - cash&deposits)/(operating profit + depreciation + intangible fixed asset amortization)
Interest bearing debt and cash & deposits are actual values of Q3 FY 2022. Operating profit is the companies' forecast for FY 2022.
Depreciation and intagible fixed asset amortization are actual values of FY 2021.
P/S=market cap / sales [the companies' forecasts for FY 2022](Note) Prepared by Alpha-Win Research Dept. based on each company’s financial results summary.
【 2335 CUBE SYSTEM
FY

2018
2019
2020
2021
2022
2022
2023
2024
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022

CE
E
E
E
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4 CE
Q3 YTD
Q3 YTD

Sector: Information & Communication 】 Figure A

Sales

YoY

O.P.

YoY

R.P.

YoY

N.P.

YoY

EPS

BPS

Dividend(million yen)（%）(million yen)（%）(million yen)（%）(million yen)

(%)

(Y)

(Y)

(Y)

13,55914,325
14,70814,78816,000
16,10016,80017,700
3,373
3,987
3,710
4,073
3,508
3,981
4,197
3,959
10,592
12,041

5.1
5.6
2.7
0.5
8.2
8.9
4.3
5.4
-0.2
18.2
0.5
9.8
1.3
13.8
0.6
-5.7
0.5
13.7

2.9
5.1
-11.9
60.7
12.6
14.3
3.6
8.0
229.3
59.0
23.2
1.1
29.6
29.1
86.9
-21.1
51.8
26.6

40.59
43.25
38.69
62.11
70.16
71.48
74.08
80.00
12.17
19.35
17.30
43.20
15.34
21.76
18.22
14.39
43.89
55.77

372.23393.29411.96476.52531.20587.87648.83418.69487.51476.52509.03449.26
-

855
921
959
1,174
1,400
1,425
1,500
1,600
242
378
310
368
239
375
382
278
792
1,122

9.5
7.8
4.1
22.5
19.2
21.4
5.3
6.7
141.3
56.5
6.5
18.7
6.2
56.9
12.0
-27.2
28.2
41.7

892
959
976
1,295
1,420
1,450
1,520
1,620
248
390
355
362
319
380
373
287
922
1,133

10.0
7.5
1.7
32.7
9.6
12.0
4.8
6.6
130.8
57.1
22.4
2.0
38.1
19.5
7.2
-23.0
46.8
22.9

567
596
525
844
950
965
1,000
1,080
165
262
235
238
196
253
247
195
596
755

16.0
16.0
18.0
20.0
23.0
23.0
25.0
27.0
0.0
0.0
8.0
8.0
0.0
0.0
12.0
15.0
8.0
8.0

(Note) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate. Q1: April-June.
Q2: July-September. Q3: October-December. Q4: January-March. Q3 YTD: April-December.
【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】
Item

2/4/2022

Item

Figure B
P/E

P/B

Dividend Yield

Dividend Payout Ratio

941

Last FY (actual)

15.2

2.0

2.1%

32.2%

Shares Outstanding (thou.)

14,500This FY (est.)

13.2

1.8

2.4%

32.2%

Market Capitalizatoin (million yen)

13,645

Next FY (est.)

12.7

1.6

2.7%

33.7%

Equity Ratio at End of This FY's Q3

72.2%

Last FY's ROE

14.0%

Stock Price (Y)Dilutive Shares (thou.)0(Note)
Estimates
werebymade
by Alpha-Win(Note) Estimates
were madeAlpha-Win
Research Dept.Research Dept.

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7/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE First Section)

Issued: 2/7/2022【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,600
1,500
1,400
1,300

Stock Price (left axis)
Price Relative to TOPIX(right axis)

1,200
1,100
1,000
900
800
700
600
500
09
/1
6
02
/1
7
07
/1
7
12
/1
7
05
/1
8
10
/1
8
03
/1
9
08
/1
9
01
/2
0
06
/2
0
11
/2
0
04
/2
1
09
/
21
(M
M
/Y
Y
)

400

2.00
1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60

Period1 month
3 months
6 months
12 months【Performance】
Returnvs. TOPIX
1.7%
-0.1%
4.8%
4.7%
-13.9%-12.4%-13.6%-17.1%(Note) Reflects stock and index
prices through the closing price on
2/4/2021. Performance for eachperiod is the comparison between
values of 2/4 and the last day of themonth of each corresponding period.
For example, performance for the 1month period is the comparison
between the closing price on the last
day of the previous month orJanuary and the closing price on 2/4.

(Note) From the first week of September 2016 to the first week of February 2022＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital
Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not beliable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use ofor reliance on this Report. Investors who read this Report must make their own decisions on all investment
matters and take full responsibility regarding their investment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis of generally accessible
public information and supplemental information including interview(s) by the analyst. Alpha-Win, the writer,
and/or other persons involved in the publication of this Report may already hold, or buy and sell in the future, thestock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject to change
without notice. For the latest (updated) report, please see our website (http://www.awincap.com/). We also do
not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied, cited, ortranslated without our consent. For inquiries regarding this Report, please send us an e-mail to info@awincap.com.
However, Alpha-Win and the writer of this Report do not have any obligation to reply to inquiries.
SV2022-0207-2100

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8/8This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this Report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this Report may be copied, photocopied, cited, or translated without our consent.