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

Issued: 8/5/2022

Alpha-Win Capital Inc. Research Department
http://www.awincap.com/● Summary◆ 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 the
TSE Prime. Its main customers include the Nomura Research Institute and the Fujitsu Group, and it develops
systems and provides services mainly for the financial, distribution, transportation, and telecommunicationindustries. 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 50 years of history.
・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 21
years. During this period, the annual sales growth rate (simple average of the rate of increase in sales) was +6.1%
and the annual recurring profit growth rate (simple average) was +7.3%; it has been steadily expanding its businessover the long term and has always maintained a profit. Its recurring margin has stably been around 7% and theincrease in sales has been contributing directly to increases in profit, dividend, and market capitalization. In FY
2022 (note that the Company’s fiscal year is March-ending, i.e., FY 2022 ended in March 2022), it achieved recordhigh sales and profits. It also increased dividend for the third year in a row.
・In April 2022, it moved from the TSE First Section to the newly established Prime Market.

◆ Consolidated results for the first quarter of this fiscal year: sales fell slightly by 2.4% YoY andoperating profit fell at a double-digit rate of 28.1% YoY due to the delay in receiving orders for
projects and the less-than-expected profitability improvement of the Enhancement Business.
Q1: Overview
・The financial results for the first quarter of FY 2023 (from April to June 2022: hereinafter, “Q1”) were as follows:sales of Y3,892 million (-2.4% YoY), operating profit of Y272 million (-28.1% YoY), recurring profit of Y271
million (-30.5% YoY), and net profit attributable to owners of the parent (hereinafter, “net profit”) of Y173 million(-34.0% YoY) (see Figures 1-2 and Figures 3-4 on page 2). Since the Company had finished the transition to the
new revenue-recognition standard in the previous fiscal year, there is no impact on this fiscal year’s results.
・Despite the decline in sales and profit, the Company recorded the second highest levels of Q1 sales and operating
profit following the record-high sales and profit of the Q1 of the previous fiscal year. It does not disclose its Q1
forecast, but its sales have presumably been in line with its plan, while the profits were slightly below expectation.
・In addition to the decrease in sales caused by the delay in receiving orders for some projects due to its customers’changes in schedule, in terms of profit, the measures to improve the profit margin of the Enhancement Business(reallocation of projects and resources, automatization, multi-tasking, etc.) had been less effective than expected.
These caused profit to decline.
・The gross margin fell by 1.4 basis points from 21.6% in the Q1 of the previous fiscal year to 20.2% in the Q1 ofthis fiscal year (same order applies below). Meanwhile, the SG&A expenses increased by 6.2% from Y483 million
to Y513 million, and the SG&A expenses ratio rose from 12.1% to 13.2%. As a result, the operating margin fell
by 2.5 basis points from 9.5% to 7.0%.
【Figure 1】Quarterly Change in Sales(Unit: million yen)

4,500

【Figure 2】Quarterly Change in Operating Profit (Unit: million yen)
600

4,000

500

3,500
3,000

400

2,500

300

2,000
1,500

200

1,000

100
500
0

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

Q1

Q2

Short Report

Q3

FY 2019

Q4

FY 2020

FY 2021

FY 2022

FY 2023
Result/Forecas t

0
FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

Q1Q2

FY 2019

Q3Q4

FY 2020

FY 2021

FY 2022

FY 2023
Result/Forecas t

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 Prime)

Issued: 8/5/2022【Figure 3】Quarterly Change in Operating Margin (Unit: %)
12.0%

10.0%

(Note) In Figures 1-4, actual results are shown for Q1 FY
2023, while the Company’s forecasts are shown for Q2
and the full year (FY). Prepared by Alpha-Win Research
Dept. based on the financial results summary and thefinancial results briefing supplemental materials.
Throughout this report, due to processing of data during
calculations, values for the same item may slightly differ.

8.0%

6.0%

4.0%

2.0%

0.0%
FY 2014

FY 2015

FY 2016

FY 2017Q1

FY 2018

Q2

FY 2019

Q3Q4

FY 2020

FY 2021

FY 2022

FY 2023
Result/Forecas t

FY【Figure 4】Summary of Q1 Results(Note: percent of total amount of change is the proportion of the absolute amount of change)
Q1 Results

Consolidated
Category

Unit: million yen, %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

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 (%)
New RevenueRecognition
Standard

Operating Profit

Operating Margin (%)
Recurring Profit

Recurring Margin (%)
Net Profit

Net Margin (%)

Q1 FY 2022
Apr-June 2021

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

Q1 FY 2023
Apr-June 2022

3,892
2,821
440
631
172
34
64
6.1
7.9
10.3
1,128
785
826
344
206
601
101
49
70
5
11
34
9.0
6.3
8.5
1.7
5.4
5.7
102
854
2,936
-4
34
242
-3.9
4.0
8.2
785
20.2
513
13.2
272
7.0
271
7.0
173
4.9

% Change
YoY: %

-2.4
-5.5
-10.9
24.3
-44.6
-5.6
111.3

20.7
-3.6
-22.2
7.9
-15.7
-1.5
35.0
-42.2
-52.6
-72.1
-55.5
39.8

58.3
-21.1
3.4
To loss
-72.6
-4.4

-9.0
6.2
-28.1
-30.5
-34.0

Change in Amount / Diff.
YoY: million yen / %

-94
-163
-53
123
-138
-2
34
-4.3
0.4
4.2
193
-29
-235
26
-38
-9
26
-35
-78
-15
-13
10
0.9
-4.1
-5.5
-4.8
-4.8
1.7
37
-228
96
-4
-91
-11
-3.9
-7.6
-0.7
-78
-1.4
30
1.0
-107
-2.5
-119
-2.8
-91
-1.7

% of Total Amount of Change%% of Total%

FY 2023 Full-Year Company Plan
Apr 2022 - Mar 2023

% Change
YoY: %

100.0-173.4-56.4
130.9-130.2
-1.9
32.1

100.0
72.5
11.3
16.2
63.2
12.5
23.5

17,300

7.5

205.3
-30.9
-250.0
27.7
-40.4
-9.6
24.5
-33.0
-73.6
-14.2
-12.3
9.4

29.0
20.2
21.2
8.8
5.3
15.4
37.1
18.0
25.7
1.8
4.0
12.5

4,420
3,550
3,910

13.1
6.2
-8.8

5,420

18.8

39.4
-242.6
102.1
-3.8
-85.8
-10.4

2.6
21.9
75.4
-1.5
12.5
89.0

780
5,140
11,380

122.6
10.6
2.5

-

-

1,530
8.8
1,545
8.9
1,000
5.8

7.9
7.8
5.9

Q1: Results by Segment
・Overall, sales decreased by Y94 million and operating profit decreased by Y106 million YoY (see Figure 4 forthe information below).
Results by Service Category (three categories)
・Regarding the System Integration Services (SIS), which is its core business, sales fell by Y163 million (-5.5%
YoY) to Y2,821 million. This was because although system building projects for credit card companies in thefinancial industry were expanded, system building projects for shipping companies of the transportation industry
and for the government were scaled down. Operating margin fell from 10.4% in the Q1 of the previous fiscal year
to 6.1%, and this fiscal year’s Q1 operating profit fell significantly by Y138 million (-44.6% YoY) to Y172 million.
・In the System Outsourcing Services (SOS), too, although projects for retailers of the distribution industry wereexpanded, it was not enough to compensate for the scaling down of system building projects for generalmerchandise stores. Its sales decreased by Y53 million (-10.9% YoY) to Y440 million and its operating profit
decreased slightly by Y2 million (-5.6% YoY) to Y34 million.
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 Prime)

Issued: 8/5/2022

・Regarding the Professional Services (ProS), sales increased by Y123 million (+24.3% YoY) to Y631 million andoperating profit increased by Y34 million (+111.3% YoY) to Y64 million due to the expansion of system building
projects for telecommunications companies in the telecommunication industry and for the financial industry.
Results by Industry (four industries)
・Sales and profits decreased for all three industries excluding the financial industry. Regarding the financial
industry, sales increased by 20.7% YoY to Y1,128 million due to the expansion of system building projects for
credit card companies as mentioned earlier and for insurance and securities companies. In addition, of all fourindustries, this was the single industry whose operating margin had improved, rising from 8.1% in the Q1 of theprevious fiscal year to 9.0% in the Q1 of this fiscal year. Its operating profit grew by 35.0% (+Y26 million YoY)
to Y101 million.
・Regarding the distribution industry, the transportation & telecommunication industries, and other industries, sales
decreased due to the scaling down of system building projects, operating margin fell, and operating profit declined.
In particular, operating profit of the transportation & telecommunication industries, which had contributed
significantly to profit in the Q1 the previous fiscal year, was halved from Y148 million to Y70 million. Anotherlarge factor was the decline in the operating profit of the distribution industry from Y84 million to Y49 million.
While the overall amount of sales decline was small, increased cost and worsened profit margin resulted in a profit
decline.
Results by Business Model (three models)
・Regarding the Enhancement Business, which accounted for 75% of sales and 89% of operating profit, sales
increased by +3.4% compared to the previous fiscal year’s Q1 (+Y96 million YoY) to Y2,936 million due to the
expansion of projects for the financial and the telecommunication industries. Operating profit decreased slightly
by -4.4% (-Y11 million) YoY to Y252 million. Operating margin fell from 8.9% to 8.2%.
・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 22% of sales and
13% of operating profit, the Company focused on collaborating with cloud vendors. However, due to scaled-downsystem building projects for shipping companies, sales decreased by -21.1% (-Y228 million) compared to the Q1of the previous fiscal year to Y854 million and operating profit decreased significantly by -72.6% (-Y91 million)
to Y34 million. Operating margin fell sharply from 11.6% to 4.0%.
・The Digital Business is small in scale, accounting for only 2% of total sales. However, by receiving orders for
new projects through the collaborative consultation business and orders for new, proposal-based projects targetingend users, its sales grew by +58.3% YoY (+Y37 million) to Y102 million. Operating profit/loss was close to zeroin the Q1 of the previous fiscal year, but it resulted in a slight loss of -Y4 million in the Q1 of this fiscal year.
Q1: Factors that Contributed to Increase/Decrease in Profit
・Figure 5 on page 4 shows the factors that increased or decreased operating profit in this fiscal year’s Q1. Although
there was a decrease in the R&D expenses (caused profit to increase by +Y10 million), sales decreased (caused
profit to decline by -Y32 million), the SI Business’ projects were scaled down (similarly, -Y55 million), and costs
increased due to the strengthening of management foundation for greater people development and IT investments(-Y29 million). As a result, operating profit decreased by Y106 million (-28.1%) YoY.
Q1: Progress
・Progress in Q1 against the Company’s full-year forecast was 22.5% for sales (progress during the previous Q1:
24.8%) and 17.8% for operating profit (previous Q1: 27.0%). Since the simple average of the progress during Q1for the past nine years including the previous fiscal year is 22.8% for sales and 16.2% for operating profit, thisQ1’s progress was about average for sales and somewhat greater than average for profit.
・One of the characteristics of the Company is that its business performance tends to fluctuate on a quarterly basis,
with business performance of the fourth quarter (Q4: Jan-Mar) contributing the most to the full-year results (pastnine years’ average: 27.7% of full-year sales and 33.7% of full-year operating profit). The next largest is the second
quarter (Q2 or Jul-Sep; 26.0% and 27.5%, respectively), followed by the third quarter (Q3 or Oct-Dec; 23.5% and23.3%, respectively). Q1 has generally tended to be the smallest in contribution.

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 Prime)

Issued: 8/5/2022【Figure 5】Factors that Increased/Decreased Operating Profit in Q1
Decrease inoperating profit
caused by thedecrease in sales

378

Decrease due toprojects of the SI
Business (Lift ＆Shift) becoming
scaled down

Increase in cost
due todevelopment ofmanagementfoundation (people
development and
IT investment)(Unit: million yen)

Decrease in
R&D
expenses

-32
+10

-55

272

-29

“+” is the YoY increase in profit and “-“ is the YoY decrease in profit

As of June 2021
(Q1 FY 2022)-106 million yen YoY

As of June 2022
(Q1 FY 2023)(Note) Financial results briefing supplemental materials

Number of Employees and Productivity
・In the Company's business model, sales growth is generally directly correlated with the number of employees.
The total number of employees in Japan and overseas has been steadily increased from 707 in June 2017 (end ofmonth) → 745 in June 2018 (+38; +5.4%) → 766 in June 2019 (+21; +2.8%) → 799 in June 2020 (+33;+4.3%) → 829 in June 2021 (+30; +3.8%) → 882 in June 2022 (+53; +6.4%). Its capacity has been increasing
both in Japan and overseas. However, since there is still strong potential demand for system development (DXbusinesses and non-face-to-face businesses such as those related to remote work, EC, and AI), the Company issomewhat short of staff. Consequently, it has been working on strengthening recruitment, such as through webinterviews, and improving productivity by increasing quarterly sales per employee in Japan (in the order of Q1 FY
2021 → Q1 FY 2022 → Q1 FY 2023: 4,737 thousand yen / person → 5,402 thousand yen / person → 5,082
thousand yen / person) and operating profit per employee in Japan (in the same order as above: 339 thousand yen/ person → 513 thousand yen / person → 355 thousand yen / person), which are its management indicators.
Balance Sheet
・There has been no significant change in the balance sheet as of the end of Q1. The Company has ample liquidity
on hand, with cash & deposits of Y4.9 billion (3.4 months’ worth of average monthly sales; essentially debtless).
With also a current ratio of 419.5% and an equity ratio of 73.8%, its financial standing is firm. Going forward, thekey points will be the enhancement of the return of profit to shareholders and the effective utilization of its excess
capital for future growth, such as M&As, business alliances, investments, and financing.

◆No change to the first-half or full-year forecast since the beginning of the fiscal year;
announced a large dividend hike with the payment of commemorative dividend
H1: Company Forecast
・The Company has not changed its forecast for the first half and the full year. In the first half, it plans to increase
sales and profit, albeit slightly, planning to achieve sales of Y8,155 million (+Y95 million or +1.2% YoY),
operating profit of Y749 million (+Y3 million or +0.4% YoY), and net profit of Y505 million (+Y4 million or+0.7% YoY). Continuing from the previous fiscal year, it expects to consecutively achieve first-half record highs
for sales and each of the profit.
Full Year: Company Forecast
・The Company has not changed its full-year forecast since the beginning of the fiscal year that sales will be Y17,300
million (+7.5% YoY), operating profit will be Y1,530 million (+7.9% YoY), and net profit will be Y1,000 million(+5.9% YoY). Continuing from the previous fiscal year, it expects sales and profits to increase this fiscal year aswell and plans to achieve consecutive record highs for sales and profits. It also announced that it will increase theannual dividend to 50 yen per share, which includes the initially planned annual dividend of 26 yen per share (11Short Report
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 Prime)

Issued: 8/5/2022

yen in the first half and 15 yen at the end of the fiscal year) with an additional commemorative dividend of 12 yen
per share in both the first and the second half (total of 24 yen per share) for the celebration of its 50th anniversary
since founding on July 5, 2022.
・ The Company has been working on increasing sales activities while taking measures against COVID-19(combination of decentralized/non-face-to-face sales activities using digital technology with in-person sales) andstrengthening its prioritized approach toward customers who are actively conducting strategic IT investments(strengthening its sales activities toward its major customers, expanding the existing businesses, and developing
new domains/areas of business). Through these efforts, it plans to continue increasing its earning power andenhancing the return of profit to shareholders.
Full Year: Alpha-Win Research Department’s Forecast
・Due to the rebound of COVID-19 (the seventh wave) and uncertainties of the global situation, there has been somestagnation in sales activities in general, especially with new negotiations. Some of its corporate customers havealso been refraining from IT investments due to worsened financial performance. The amount of orders received
by the Company and its order backlog in Q1 had also stayed about the same, having decreased by -1.3% (-Y51
million) or increased by +0.4% (+Y15 million) YoY, respectively. Although there is current no sign of slowdown
for the Company in negotiations or in receiving orders, we took these risk factors into account and made asomewhat cautious forecast for the full year compared to the Company (see the previous report issued on June 13,2022, and Figure A on page 7; no change to our financial forecast).
・However, while the customers’ IT investment trends are becoming polarized, the Company has been receiving
orders for strategic or derivative projects from industries with solid business performance, while also shifting tohigh-profit projects and improving resource efficiency.
・Currently, we believe that the downside risks of sales and profits are both limited this fiscal year, judging from
how the Company is receiving orders for projects in response to the demand recovery of the previously stagnant
industries such as the financial industry, how it is receiving orders for DX investment projects which companies
have been continuing to expand, the fact that there seems to be room for control, and the Company’s stable businessmodel based on orders received.
・When the Q1 results are subtracted from the Company’s first-half forecast, the expected results for Q2 (July to
September) come out to be Y4,263 million for sales (+Y190 million or +4.7% YoY), Y477 million for operating
profit (+Y109 million or +29.6% YoY), and Y332 million for net profit (+Y93 million or +38.9% YoY). The
Company seems to be expecting sales and profit growth YoY.
・In this fiscal year’s Q1, the YoY sales growth rate and operating profit growth rate were -2.4% and -28.1%,
respectively. However, in Q2, the momentum is expected to return. Considering the quarterly fluctuation of results
as mentioned above (see “Q1: Progress” on page 3), Q2 tends to exceed Q1 in terms of sales, profit, and profit
margin. Indeed, in this fiscal year’s Q2, sales are expected to increase by Y371 million (+9.5%) compared to Q1,
operating profit is expected to increase by Y205 million (+75.4%), and operating margin is expected to improveby 4.2 basis points from 7.0% ⇒ 11.2%. These are somewhat ambitious and high goals, but the Company seems
to be expecting to see positive effects from its profitability improvement measures and to be able to make up for
Q1’s delay in receiving some of the orders starting in Q2.
・The Company's plan for the second half (= full-year forecast - first-half forecast) is as follows: sales of Y9,145
million (+Y1,106 million or +13.8% YoY), operating profit of Y781 million (+Y110 million or +16.4% YoY), net
profit of Y495 million (+Y52 million or +11.7% YoY), and change in operating margin from 8.3% in the second
half of the previous fiscal year ⇒ 8.5% in the second half of the current fiscal year. Compared to the second halfof the previous fiscal year, it is expecting double-digit growths in sales and profits and a slight improvement in the
profit margin. Compared to the forecast for the first half of the current fiscal year, sales are expected to increase by
Y990 million (+12.1%) in the second half, profit is expected to increase by Y32 million (+4.3%), and operating
margin is expected to decline (9.2% ⇒ 8.5%) due to the increase in cost. This plan to increase sale and profits inthe second half is based on the fact that projects for the financial, other, and the telecommunication & transportationindustries are planned to especially increase in the second half and the fact that the start of projects has been delayed.
・The financial forecast already reflects the increase in costs such as those related to HR investment, development
and business investment in in-house products (Cubecoin, Smile Cash Register, etc.), and IT investment for COVID19 measures (strengthening networks, etc.). Therefore, there seems to be some room to accommodate for changes
and cost control.

Short Report

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 Prime)

Issued: 8/5/2022

Medium Term: Alpha-Win Research Department’s Forecast
・We have not changed our medium-term evaluation of the Company. As for this fiscal year’s dividend, we raised
it to match the Company's forecast since it plans to pay commemorative dividends this fiscal year. However, we
did not change our forecast for the medium term starting next fiscal year (annual dividend increase of +2 yen/sharefor ordinary dividend).
・IT investments are expected to continuously increase as customers adapt to the changes in the world with and after
COVID-19, as they develop new business models, strengthen their competitive edge, work on solving employee
shortages, streamline and speed up operations, and work on DX. Therefore, the Company’s growth potential islarge. We believe that the Company will be able to continue to stably increase sales and profit at a rate of about 610% per year, if economic conditions normalize, through the expansion of the Enhancement Business, acquisitionof new customers, development of new businesses, overseas expansion, and improvement of productivity throughvarious measures.

◆ Stock price and characteristics: domestic-demand-oriented, stable growth stock thathas been significantly outperforming the TOPIX over the long term. The level of valuation
is about average.
Performance・Over the past approximately 13 years, the Company’s stock price increased by about 5.2x thanks to its solid
financial performance, significantly outperforming the TOPIX (by about +290%). While its stock is small-cap anddefensive, it had been outperforming the TOPIX over the past six months too thanks to the announcement of solid
financial results and the dividend hike. However, after the announcement of the Q1 results, the stock price turned
to a decline, falling to about Y1,000 and undergoing a correction.
Valuation
・The current average of all companies listed on the TSE Prime is as follows: forecasted P/E of 13.8, P/B of 1.2,
and forecasted dividend yield (simple average) of 2.5%. The Company’s valuation is about average in terms of P/E
and the actual dividend yield. Considering this fiscal year’s firm financial performance and the medium-term
growth potential, its valuation does not seem expensive.
・Compared to its competitors listed on the TSE Prime Market (HIMACS and Toho System Science; see Figure 6),
its valuation is somewhat high regarding the major valuation measures excluding P/S, presumably reflecting therelatively low volatility indicated by its past financial results, the proven stable growth in profit, and positive
expectations for the future.
【Figure 6】Comparison of Valuation with Competitors
Company Name
Code
Stock Price (at 8/5 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)
Daily Average Trading Volume (million yen)
Q1 FY 2023: Sales (million yen)
Operating Profit (million yen)
Q1 FY 2023: YoY Sales Growth Rate (%)
YoY Operating Profit Growth Rate (%)
Operating Margin (%)
Q1 FY 2023: Progress with Sales (%)
Q1 FY 2023: Progress with Operating Profit (%)
FY 2023 Full-Year Company Forecast: Sales (million yen)
Operating Profit (million yen)
FY 2023 Full-Year Company Forecast: YoY Sales Growth Rate (%)
YoY Operating Profit Growth Rate (%)
Operating Margin (%)(Note) Prepared by Alpha-Win Research Dept. based on eachcompany’s financial results summary

CUBE SYSTEM(CS: consolidated)

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

2335

4299

4333

997
14,457
13.49
1.83
5.02
5.66
0.84
24
3,892
272
-2.4
-28.1
7.0
22.5
17.8
17,300
1,530
7.5
7.9
8.8

1,340
16,633
12.83
1.63
3.13
5.29
0.94
22
4,437
402
17.4
37.1
9.1
25.0
22.7
17,750
1,770
6.4
3.1
10.0

973
13,492
12.50
1.45
3.60
3.59
0.90
7
3,653
333
8.2
6.4
9.1
24.4
24.3
15,000
1,370
5.0
3.2
9.1

Market cap= (shares outstanding) x (market share price [at 8/5/2022 closing])
The companies' planned EPS values for FY 2023 were used in all P/E calculations. Actual BPS values of Q1 FY 2023 were used in P/B calculations.
EV/EBITDA = (market cap + interest bearing debt - cash & deposits)/(operating profit + depreciation + intangible fixed asset amortization, etc.)
Interest bearing debt and cash & deposits are actual values of Q1 FY 2023. Operating profit is each company's full-year forecast for FY 2023.
"Depreciation + intagible fixed asset amortization, etc." are actual values of FY 2022.
P/S=market cap / sales [the companies' forecasts for FY 2023]
Daily Average Trading Volume: estimated daily average trading volume over the past approx. six months (million yen)

Short Report

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 Prime)

Issued: 8/5/2022

Stock Price Outlook
・Over the short term, its stock price will likely be affected by the situation with orders received, progress in termsof financial performance (first-half and full-year levels of profit), and whether they will be a share buyback. Overthe medium term, the following should also be noted as factors that may affect stock price: changes in the sales
growth rate, profit growth rate, and profit margin in the next fiscal year and beyond; development of the SI and theDigital Business and their contribution to results; return of profit to shareholders (increase in ordinary dividend,
share buyback, and stock split); and the financial performance and IT investment trends of Japanese companies
who are its end users.
・We believe that if the Company continues to show stable, nearly double-digit annual profit growth rate as adomestic-demand-oriented, defensive, and stable growth stock, then its stock price may rise further to adjust for
the level of P/E and the increase in EPS.

【 2335 CUBE SYSTEM

Sector: Information & Communication 】

FY

2020
2021
2022
2023
2023
2023
2024
2024
2024
2025
2018
2019
2020
2021
2022
2021
2022
2021
2022
2022
2023
2022
2023

Initial Mid-Term Plan CE
CE
E
Initial Mid-Term Plan CE
Revised Mid-Term Plan CE
E
E
Q1
Q1
Q1
Q1
Q1
Q2
Q2 CE
H1
H1 CE
H2
H2 CE
Q2-Q4
Q2-Q4 CE

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)

14,70814,78816,09917,20017,30017,20018,50019,00018,70019,600
3,082
3,379
3,373
3,987
3,892
4,073
4,263
8,060
8,155
8,039
9,145
12,112
13,408

2.7
0.5
8.9
7.5
6.8
7.6
9.8
8.7
4.8
1.4
9.6
-0.2
18.2
-2.4
9.8
4.7
13.8
1.2
4.3
13.8
6.1
10.7

959
1,174
1,417
1,340
1,530
1,520
1,480
1,710
1,700
1,800
109
100
242
378
272
368
477
746
749
671
781
1,039
1,258

4.1
22.5
20.7
7.9
7.3
10.4
11.8
11.8
5.9
52.4
-8.8
141.3
56.5
-28.1
18.7
29.6
35.1
0.4
7.9
16.4
11.5
21.1

976
1,295
1,432

1.7
32.7
10.6

525
844
944

-11.9
60.7
11.9

38.69
62.11
69.82

411.96476.52531.14

18.0
20.0
23.0

1,545
1,535

7.8
7.2

1,000
1,000

5.9
5.9

73.91
74.08

Not disclosed
555.20

50.0
50.0

1,715
1,820
132
107
248
390
271
362
483
752
754
680
791
1,042
1,274

11.7
6.1
80.5
-19.0
130.8
57.1
-30.5
2.0
33.4
24.6
0.3
-1.7
16.3
-0.5
22.3

1,100
1,180
76
50
165
262
173
239
332
501
505
443
495
682
827

10.0
7.3
131.3
-34.2
229.3
59.0
-34.0
1.7
38.9
25.3
0.7
-0.2
11.7
0.4
21.3

81.48
87.41
5.45
3.70
12.17
19.35
12.84
15.95
24.49
35.30
37.33
34.52
36.58
50.47
61.07

586.69646.10393.29379.63418.69487.51
543.58

28.0
30.0
0.0
0.0
0.0
0.0
0.0
8.0
23.0
8.0
23.0
15.0
27.0
23.0
50.0

-

(Note) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate. “Initial Mid-Term Plan” is the planannounced on June 11, 2021. “Revised Mid-Term Plan” is the plan announced on May 11, 2022. Q1: Apr-June. Q2: July-Sept.
H1 (first half): Apr-Sept. H2 (second half): Oct-Mar. Q2-Q4: July-Mar.

【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】 Figure B
Item
Stock Price (Y)8/5/2022

Item

P/E

P/B

Dividend Yield

Dividend Payout Ratio

997

Last FY (actual)

14.3

1.9

2.3%

32.2%

Shares Outstanding (thou.)

14,500This FY (est.)

13.5

1.7

5.0%

67.5%

Market Capitalizatoin (million yen)

14,457

Next FY (est.)

12.2

1.6

2.8%

34.4%

Equity Ratio at End of This FY's Q1

71.2%

Last FY's ROE

13.8%

Dilutive Shares (thou.)0(Note) Estimates were made by Alpha-Win Research Dept.

Short Report

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 Prime)

Issued: 8/5/2022【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,600
1,500

Stock Price (left axis)

1,400

Price Relative to TOPIX (right axis)

1,300
1,200
1,100
1,000
900
800
700
600
500

09
/1
6
01
/1
7
05
/1
7
09
/1
7
01
/1
8
05
/1
8
09
/1
8
01
/1
9
05
/1
9
09
/1
9
01
/2
0
05
/2
0
09
/2
0
01
/2
1
05
/2
1
09
/2
1
01
/2
2
05
/
2
(M
2
M
/Y
Y
)

400

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

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

【Performance】
PeriodReturn vs. TOPIX
1 month-6.4%-6.7%
3 months
5.7%
3.9%
6 months
7.9%
4.7%
12 months
-8.8%
-8.1%
(Note)
・Reflects stock and index prices through theclosing price on 8/5/2022.
・“Vs. TOPIX” is the relative value after
subtracting the TOPIX’s performance fromthe performance of the Company’s stock.
・Performance for the 1-month period is thecomparison between the closing price on thelast day of July and the closing price on 8/5(the same applies to the other periods).

＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

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.
SV2022-0816-1300

Short Report

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.