Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE Prime)● SummaryIssued: 6/9/2023

Alpha-Win Capital Research Department
https://www.awincap.com/

Business Description
・CUBE SYSTEM INC. (hereinafter, the “Company”) is a mid-tier, specialized system integrator (SI) listed on thePrime Market of the Tokyo Stock Exchange. Its main customers are four major corporate groups including the
Nomura Research Institute (NRI) and the Fujitsu Group. It develops systems and provides services mainly for thefinancial, distribution, and telecommunication industries.
・Founded in 1972, it has 51 years of history.
・In December 2022, the Company formed a capital and business alliance with NRI, a major blue-chip company inthe industry, becoming NRI’s equity-method affiliate (NRI now has a stake of more than 20% and has become thelargest shareholder).
Trends in Financial Performance・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 25
years (including the period during which its results were nonconsolidated). During this period, its annual sales
growth rate (simple average of the rates of increase in sales) was +5.9% and its annual recurring profit growth rate
(simple average) was +7.1%; it has been steadily expanding its business and keeping its business profitable overmany years. Thanks to its committed efforts in business development and management reform, the recurring margin
has been stably around 6% to 9% (7.4% on average) and the increase in sales has been contributing directly toincreases in profit, dividend, and market capitalization.
・In the February 2023, the Company revised down its initial financial forecast for the previous fiscal year (FY2023;
note that the Company’s fiscal year is March-ending, i.e., FY2023 ended in March 2023), but the results ended up
slightly exceeding this revision. Sales were Y16.3 billion, at a slight increase of +1.4% YoY. Operating profit was
Y1.45 billion, at a slight increase of +2.4% YoY. Sales hit a record high for the 11th consecutive fiscal year andoperating, recurring, and net profits all hit their record highs.
・This fiscal year (FY2024), the Company plans to achieve sales of Y18 billion (+10.3% YoY), operating profit ofY1.62 billion (+11.5% YoY), and net profit of Y1.08 billion (+9.1% YoY). It plans to consecutively achieve recordhigh sales and profits. As for the ordinary dividend, it plans to increase it by 4 yen to 30 yen/share for the year.
・The Company expects to increase its sales at a double-digit rate by receiving orders for projects (of the Digital andthe SI businesses) pertaining to strategic IT investments by its clients. In addition to sales growth, it plans to growprofit by working on its own digitalization, resource optimization, and productivity improvement.
・Since IT investments related to DX have been robust, strong orders are expected. In addition, the Company’s
forecast that its profit margin will slightly increase YoY seems to be a realistic plan. Therefore, Alpha-Win
Research Department has evaluated that the Company’s plan for this fiscal year’s sales and profits should be
generally achievable. We believe that the risk of falling short of the plan lies more in the limited human resources
and the higher costs due to inflation, rather than the decline in demand or the orders received.
Business Strategy and Key Points Going Forward
・In May of last year, the Company announced revisions of the V2026 First Medium-Term Management Plan; it
upwardly revised its goals for the consolidated results of FY2024, the final year of the plan. It revised sales fromY18.5 billion ⇒ Y19.0 billion, operating profit from Y1.48 billion ⇒ Y1.71 billion, and operating margin from
8.0% ⇒ 9.0% (the target ROE of 13% or more has not been changed). Although these are different from thefinancial forecast for this fiscal year, no change has been made to the medium-term plan’s goals.
・The Company has been actively developing its proposal-based business in addition to its contract-based business.
It has been shifting resources to the SI Business and the Digital Business, based on the Enhancement Business, andis starting to see positive results.
・Capital raised through the capital alliance with NRI plus the Company’s own capital, which total approximately
Y2 billion, will be invested over a period of four fiscal years starting in the previous fiscal year. It will invest to
1/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

strengthen its development sites and production system to achieve further growth and eliminate its bottleneck
concerning human resources.
・In addition, in terms of business, the alliance is intended to enable the Company to strengthen the long-term andcontinuous relationship with NRI, expand business areas, and exchange talents. The alliance can therefore beviewed as a positive change, since it will contribute to the Company’s medium- to long-term business expansion
and stable growth.
・The Company has also been actively pursuing the in-house development and enhancement of new technologies
and services, as well as joint development with other companies. It has been laying the foundation for thedevelopment of new areas of business through investments, financing, and alliances.
・In the current medium-term plan, it has declared to pursue sustainability management and has set non-financial
goals ranging from diversity promotion to workstyle reform, people development, communication vitalization, andenvironment. It plans to work on achieving these goals, incorporating IT as well.
・Going forward, the key points will most likely be the effects of the alliance with NRI (actual contribution tobusiness performance) that will start to be seen, recruitment/development of employees, collaboration with major
system integrators, development of proposal-based businesses targeting end users, improvement of project
management skills, continuous improvement of profit margins, monetization of businesses in new business areas,acquisition of new customers, M&As and alliance strategies, expansion and leveraging of overseas sites, andincorporation of new technologies.

Forecast of Medium-Term Financial Results
・Uncertainties continue to surround the economic environment due to the global inflation, the monetary tightening
to control this inflation, the situation in Ukraine, and the rebound of the COVID-19 outbreak. However, the impact
on the Company is relatively small since its business is centered on domestic demand. Since the demand related to
strategic investments in IT systems by its customers has been strong, the Company plans to focus on receiving suchorders. On the other hand, the medium-term risks most likely include the recruitment/retaining of employees andthe occurrence of unprofitable projects.
・Over the medium to long term, IT and DX investments by the Company’s corporate users are expected to continue
to increase. We expect that the Company will be able to stably increase both sales and profit by about 6-10% peryear through the development of the new Digital Business and the SI Business, in addition to the Enhancement
Business, as well as through the expansion into new business areas, the acquisition of new customers, and theimprovement of productivity.
Shareholder Return
・The Company has been returning profit to shareholders, including share buybacks, stock splits, and sequential
dividend hikes. In addition to increasing its ordinary dividend, it has also paid commemorative dividends,
indicating its proactive stance with regards to returning profit to shareholders. The planned dividend payout ratio
for this fiscal year has been raised to 42%, meaning that it will increase the ordinary dividend for the fifth
consecutive fiscal year. Its DOE (based on the most recent actual value for ordinary dividend in FY2023) is 4.5%,
which is about average compared to its competitors but high compared to the market average of 2.5%. With solid
financial performance and ample cash, shareholder return measures such as share buybacks and dividend hikes canbe expected in the future as well.
Stock Characteristics and Stock Price
・Over the past 14 years or so, its stock price has increased by about 5.2x and has been largely outperforming the
TOPIX. Due to the rise in the stock price, its valuation has become somewhat higher than the average of all stocks
listed on the TSE Prime as well as its competitors, based on this fiscal year’s forecasted values. Its stock currently
seems to be priced at a premium due to the stability of business performance and its future growth potential.
・Since it is a domestic-demand-oriented, defensive stock and stable profit growth is expected to continue, it is most
likely seen as a potential medium/long-term investment target. In terms of stock price, the key points going forward
will be its progress with this fiscal year’s financial performance and the IT investment trends of its customers, aswell as the effects of the investments, the effects of its alliance with NRI, the contribution to results by the new anddigital-related technologies/areas, and the return of profit to shareholders.

2/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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)【 2335 CUBE SYSTEM
FY

2020
2021
2022
2023
2023
2023
2024
2024
2025
2026

Issued: 6/9/2023

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)

14,70814,78816,09916,325
16,20016,20018,00017,80019,00020,500

2.7
0.5
8.9
1.4
0.6
0.6
10.3
9.0
6.7
7.9

-11.9
60.7
11.9
4.8
0.6
0.6
9.1
7.7
8.5
6.9

38.69
62.11
69.82
70.35
67.53
67.53
71.23
70.25
76.18
81.46

411.96476.52531.14634.29

A

A
A
A
CE
E
CE
E
E
E

959
1,174
1,417
1,452
1,420
1,420
1,620
1,600
1,725
1,850

4.1
22.5
20.7
2.4
0.1
0.1
11.5
10.2
7.8
7.2

976
1,295
1,432
1,480
1,445
1,445
1,635
1,615
1,755
1,870

1.7
32.7
10.6
3.3
0.9
0.9
10.4
9.1
8.7
6.6

525
844
944
989
950
950
1,080
1,065
1,155
1,235

595.69654.50700.68750.14

18.0
20.0
23.0
50.0
50.0
50.0
30.0
30.0
32.0
34.0

(Note) A = actual results. CE = the Company’s estimate/forecast. E = Alpha-Win’s estimate/forecast. Note that fiscal
years are March-ending.
(Note) In this Report, decimal places have generally been rounded in the calculations or in presenting the values, andtherefore values may differ from those announced by the Company.
【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】 Figure B
Dividend Payout Ratio

Item

6/5/2023

Item

Stock Price (Y)1,179Last FY (actual)

16.8

1.9

4.2%

71.1%

Shares Outstanding (thou.)

15,750This FY (est.)

16.8

1.8

2.5%

42.7%

Market Capitalization (million yen)

18,569Next FY (est.)

15.5

1.7

2.7%

42.0%

76.6%

Last FY's ROE

11.8%

Dilutive Shares (thou.)0

P/E

Equity Ratio at Last FY-End

P/B

Dividend Yield(Note) Estimates were made by Alpha-Win Research Dept.
【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM】

Figure C

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

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

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
/2
1
02
/2
2
07
/2
2
12
/2
2
05
/2
3
(M
M
/Y
Y)

(Y)
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400

Period1 month
3 months
6 months
12 months

Performance
Return vs. TOPIX
2.4%
-1.8%
3.2%
-7.6%
13.3%
-4.1%
30.4%
11.8%

(Note) Reflects stock price and index
values through the closing price on
6/5/2023. Return for the 1-month period isthe comparison of the closing price on thelast day of May and on June 5. Similar forthe other periods. Prepared by Alpha-Win
Research Dept.

(Note) From the first week of September 2016 to the second week of June 2023＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊
Disclaimer
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 be liable forany consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on thisReport. 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, the stock of the company presented inthis 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 (https://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, or translated
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.
PF2023-0621-2300

3/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

Contents
1．Company Overview ........................................................................................................................ P5
Mid-Tier System Integrator ............................................................................................................... P5
Business Philosophy and Basic Management Policy ........................................................................ P7
2．Business Description and Business Model .................................................................................... P8
Three Lines of System Services ........................................................................................................ P8
Labor-Intensive Business Model in which Human Resources Are the Key ................................... P10
Sales and Profit Composition Well-Balanced by Industry .............................................................. P11
Stable Customer Base and Highly Maintainable Business .............................................................. P12
The Foundation for Future Areas of Growth and Next-Generation Technologies .......................... P14
Capital and Business Alliance with Nomura Research Institute (NRI) .......................................... P15
3．Shareholder Composition ............................................................................................................ P17
Change in Composition by Type of Shareholder ............................................................................ P17
Major Shareholder Composition ..................................................................................................... P17
4．ESG and Sustainability ................................................................................................................ P19
Environment, Society, Governance, and Sustainability .................................................................... P19
5．History of Growth ......................................................................................................................... P20
Company History ............................................................................................................................. P20
Past Transition in Financial Results ................................................................................................ P20
6．Business Environment .................................................................................................................. P23
Trends of Japan’s System Integration Market ................................................................................. P23
CUBE SYSTEM’s Position and Comparison with Competitors .................................................... P25
7．Last Fiscal Year’s Results and This Fiscal Year’s Company Forecast ................................... P27
Full-Year Financial Results for FY2023 (last fiscal year) ................................................................ P27
CUBE SYSTEM’s Financial Forecast for FY2024 (this fiscal year)................................................ P30
8．Growth Strategy ............................................................................................................................ P33
VISION 2026: The First Medium-Term Management Plan ........................................................... P33
Alpha-Win Research Dept.’s Financial Forecast for FY2024 (this fiscal year)................................ P36
Alpha-Win Research Dept.’s Forecast of Medium-Term Financial Results ................................... P37
9．Analyst’s Views ............................................................................................................................. P38
SWOT Analysis ............................................................................................................................... P38
Shareholder Return and Shareholder Benefit Program ................................................................... P39
Stock Characteristics/Price and Valuation Comparison .................................................................. P40
Note: 1) Upon translating to English, when the page numbers differed from the original Japanese version, they were
adjusted to those of the English version of this Report. 2) The Company’s fiscal year is March-ending; i.e., FY2024
ends in March 2024.
4/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

1. Company Overview◆ Mid-Tier System Integrator
w A mid-tier and specialized
system integrator with 51
years of history. Equitymethod affiliate of NRI.
Strong business foundation,with several blue-chipcompanies as its customer.
(1) System integrator: a company
that conducts system integration.
Abbreviated as “SI” or “SIer.” A
general term for companies that
plan, design, develop, operate, andprovide other solutions for the IT
operation systems of customers
including companies and thegovernment.

w The Company’s group ismade of the Company andthree subsidiaries.

(2) Near-shore development:
outsourcing development toregional companies or offices(3) Offshore development:
providing services that meetcustomer needs, from systemdevelopment to maintenance, at alow cost by using overseas/offshore
sites

CUBE SYSTEM INC. (hereinafter, the “Company”) is a mid-tier, specialized
system integrator1 (a.k.a. SI). It is listed on the Prime Market of the Tokyo
Stock Exchange and is an equity-method affiliate of the Nomura ResearchInstitute (or NRI), which owns a stake of more than 20%. Often as a
subcontractor for major SIs, the Company mainly develops systems for large
companies in the financial, telecommunication, and distribution industries, aswell as for the government. Its customer base is firm, having expanded its
business toward its main customers over many years. Its main customers are
the four corporate groups of NRI, Fujitsu, Aeon, and Mizuho, whose summed
sales account for about 80% of the Company’s total sales. The Company also
receives outsourced jobs from the Tokyo Stock Exchange, indicating its
technological expertise and strong credibility.
Founded in 1972 at the outset of the software industry, the Company has 51
years of history. Osamu Sakiyama, the chairman, is one of the founding
members. Masahiro Nakanishi became representative director, president, and
CDO (Chief Digital Officer) in June 2020. Nakanishi previously worked as
the vice manager of Nomura Research Institute’s Chubu Branch and thenjoined the Company in 2017. He also has experience working for a consulting
company. At the Company, he directly conducts sales activities for DX andother projects as the company representative.
The Company’s group consists of four companies: the Company and three
consolidated subsidiaries. The consolidated subsidiaries are as follows(Figure 1).
1. HOKKAIDO CUBE SYSTEM INC.
(Located in Sapporo, Hokkaido; for near-shore development2 of systems
and sales reinforcement in the Tohoku and Hokkaido regions. Became awholly owned subsidiary after the Company raised its stake from 90.9% to100% in 2022. Serves to raise the efficiency of group management.)
2. CUBE SYSTEM VIETNAM CO., LTD.
(Ho Chi Minh City, Socialist Republic of Vietnam; a wholly owned
subsidiary)
3. CUBE SYSTEM SHANGHAI CO., LTD.
(Shanghai, China; the Company established it as a joint company and thenacquired all shares in 2017)
The Company has established its overseas subsidiaries mainly for offshoredevelopment3.

【Figure 1】Locations of the CUBE SYSTEM
Group’s Subsidiaries and Offices

HOKKAIDO CUBE SYSTEM INC.
● Head office: Chuo-ku, Sapporo City
● Founded: December 1990
Sapporo

CUBE SYSTEM INC.

● Head office: Shinagawa-ku, Tokyo● Founded: July 1972
Tokyo
NagoyaOsaka

CUBE SYSTEM INC. Nagoya Office● Location: Naka Ward, Nagoya City

Shanghai

CUBE SYSTEM INC. West Japan Solutions
Headquarters● Location: Chuo-ku, Osaka City

CUBE SYSTEM SHANGHAI CO., LTD.
Ho Chi Minh

● Location: Tianzan Road, Shanghai, China● Founded: July 2009

CUBE SYSTEM VIETNAM CO., LTD● Location: Dist. 12, Ho Chi Minh City, Vietnam● Founded: March 2008

As of June 6, 2020

(Ref) Notice of convocation of the ordinary general meeting of shareholders

As ofof May2022
AstheofendMay
2023

5/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

The consolidated-to-parent-company sales ratio has stayed around 1.08 forthe past 21 years, with the parent company’s results having a large weight(Figure 2). Although each subsidiary’s profit/loss is not disclosed, theconsolidated-to-parent-company recurring profit ratio has been around 0.981.17 (simple average of 1.05) during the same period.

w Consolidated sales andprofit have been on an
increasing trend. The
consolidated subsidiaries,
as a total, have beenstably profitable.
Consolidated-to-parentcompany ratios have been
a little greater than 1 forboth sales and profit.

The total profit/loss of the subsidiaries, calculated by subtracting the parent
company’s recurring profit from the consolidated recurring profit, has been asurplus excluding the two fiscal years FY2011 and FY2012 (Figure 3).
During the three fiscal years from FY2017 to FY2019, total sales and profitof the subsidiaries (consolidated minus parent company) grew, but in FY2020,
their sales and profit turned to a decline due to the completion of thesubsidiaries’ major system development projects. However, despite being
impacted by the lockdown in Shanghai due to COVID-19, business was
generally solid from FY2021 to FY2023, maintaining a certain amount of
profit for all subsidiaries in Japan as well as CUBE SYSTEM VIETNAM.

【Figure 2】Ratio of Consolidated to Parent Company’s Sales (ratios shown on upper portion of graph)
Sales of parent company(Million yen)

18,000Consolidated sales minus parent company's sales

1.08 1.08 1.08 1.07 1.11 1.10 1.10 1.08 1.06

1.06 1.08 1.08 1.08

1.07 1.09 1.09 1.13

1.09

16,00014,000921
12,0001,151857 1,084

8,000

439 478

6,000

534

777

751

504 784

679

506

458

1,179 945

1,601

Consolidated
to parent
company
ratio

15,415
15,21013,843785

10,0001.07 1.06 1.06
889 910

13,52912,724678

12,40911,815
11,766
11,6064,000

5,805 6,097

6,566 7,172 7,139

7,358

8,660 7,974 8,564
7,730 8,027

10,432

2,000

FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
20
10
FY
20
11
FY
20
12
FY
20
13
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
20
23

0

(Ref) Figures 2 and 3: Prepared by Alpha-Win Research Dept. based on the financial results summary.

【Figure 3】Ratio of Consolidated to Parent Company’s Recurring Profit (ratios shown on upper portion of graph)
R.P. of parent company(Million yen)

1,600

1.06 1.07 1.07 1.06 1.07 1.03

Consolidated R.P. minus parent company's R.P.

1.03 1.03

0.99

0.98 1.01 1.03 1.05

1.02 1.04 1.06 1.17

1.07 1.07

1,400

1.08 1.05 Consolidated

100

80

43

1,000

140

21
31

800
600

200

to parent
company
ratio

1,407

1,200

400

73

23

409

33

467

35

33

39

22

19

516

518

545

0

578

639

1,332

61
1,215

19

21

7
938

621

48

680

-8

542

599

683

939
781

845

819

915

-9

FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
20
10
FY
20
11
FY
20
12
FY
20
13
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
20
23

-200

w 社名に込められた想い。

6/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

The Company’s financial standing is strong, continuing to have essentiallyno debt.

w Essentially debt-less andrich in cash. Financiallysolid.

Its free cash flow (FCF) has also been stably positive, and cash and deposits
have been gradually accumulating (Figure 4). In addition to approximately
Y6.75 billion in cash and deposits according to its balance sheet (Y5.06
billion at the end of the fiscal year before the previous), the Company has
Y1.73 billion in investment securities (stocks and bonds that most likely havehigh liquidity). They total to about Y8.5 billion in highly liquid assets, whichis equivalent to 70% of its total assets of Y12.5 billion and about 50% of its
sales of Y16.3 billion. In comparison, its debt is only Y240 million (all values
are as of the end of March 2023).
Its financial ratios are also stably high, with an equity ratio of 77% (71% at
the end of the fiscal year before the previous) and current ratio of 443%
(similarly, previously 355%).

【Figure 4】Transition in Cash Flow (CF)
Unit: million yen
Operating CF ①
Investing CF ②
Financing CF
FCF ( ①+②)
Cash and Cash Equivalents

FY2010
283
-1
-144
282
1,619

FY2011
622
309
-173
931
2,376

FY2012
101
54
-125
155
2,405

(Note: FCF stands for free cash flow. Unit = million yen)

FY2013
451
-321
-151
130
2,383

FY2014
317
-172
-188
145
2,339

FY2015
503
-307
-439
196
2,099

FY2016
534
25
-241
559
2,408

FY2017
936
94
-610
1,030
2,822

FY2018
388
28
-392
416
2,846

FY2019
773
46
-531
819
3,131

FY2020
747
25
-339
772
3,557

FY2021
1,043
58
-215
1,101
4,448

FY2022
1,015
-134
-324
881
5,016

FY2023
891
-304
1,102
587
6,703

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary(Note) “Cash and cash equivalents” are not values from the B/S but are the “Cash and cash equivalents at end of period” under the “Consolidated statement ofcash flows” in the financial results summary.

◆ Business Philosophy and Basic Management Policy
w The business philosophy/ goal is to “create aworld-class company.”

w The basic management
policies are customer
first, emphasis, and all
employee sales.
w Shares management
goals/results with all
employees(4) All-employee sales system: asystem where there is no
dedicated department for sales
but instead each project ismanaged as a whole fromreceiving an order to delivering
the product and confirming
payment. The system engineer,
who is in charge of customer
interaction, will materialize thesystemization needs ofcustomers through dialogues
and carry out projects withresponsibility and authority
under a sales goal.

The Company’s business philosophy is as follows:
・“Companies flourish with the people’s support. We must continue ourbusiness to ensure the well-being of people including our employees. The
source of business continuity and development is profit, and profit isgenerated by our customers. Based on this philosophy, we will aim to createa world-class company.”
The following are the Company’s three basic management policies:
・Customer first: All decisions are based on our customers’ values and it is
our standard to think from our customers’ perspectives.
・Emphasis: The four main elements of a company are people, assets, money,
and time. To maximally utilize these elements, we will focus our businessresources on the most important matters that have been decided based on ourcustomer-first policy.
・All employee sales: To provide user-oriented services, each employee will
work ardently toward the development of our company’s business withindependent and business-oriented mindset (⇒ has established a unique allemployee sales system4).
The numerical goals for sales, profits, progress rate, and other items for theentire company as well as for each department are disclosed to all employees.
Information is being shared in an open management system.

7/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

2．Business Description and Business Model◆ Three Lines of System Services
w Business is classified into
three service categories.
System Integration
Services are its main
services.
(5) System solutions: solving
issues related to systems throughhardware, software, and services

The CUBE SYSTEM Group’s business is to provide system solutions5.
Specifically, the Company provides a series of services from building
systems through planning/proposal, design, and manufacture (programming)
to testing, operating, and evaluating systems. It provides service to companies
and the government. Since this is the Company’s single business, the business
is further classified according to the informatization cycle of customers into
the following three categories (lines of service).
1. System Integration Services (SIS)
2. System Outsourcing Services (SOS)
3. Professional Service (ProS)【Figure 5】Overview Diagram of the Processes of Each Service
System Solutions/Services
Planning/Proposal
Systematization
Plan

System Operation/Evaluation

System Building

Requirement
Definition

Basic
DesignSystemProgramming

Testing① System Integration Services

SystemOperation/Evaluation

Migration② System Outsourcing Services

Business System Design/Development Services

Business Application Management

System Migration / Downsizing

System Operation/Management

Offshore Development

Offshore Enhancement③ Professional Services
System Migration
System Consulting

On-Site Consulting
Database Management

IT Infrastructure Building / Private Cloud Building(Ref) Prepared and reworked by Alpha-Win Research Dept. based on the securities report

w Projects are diversified.
(6) Requirement definition:
defining the scope and target ofsystemization(7) Basic design: also called
external design, a part of the
upstream process where thebasics of the functions necessary
for a system from the user’s
perspective are designed(interface, method of operation,
security, etc.). The workflow is asfollows: basic design → internal
design → detailed design →manufacture (also called
programming or
implementation).

1. System Integration Services (SIS)
・The Company’s main business. Develops business operation systems thatmeet the needs of its corporate users (end users such as companies and thegovernment; the same applies hereinafter). Includes requirement definition6,
basic design7, programming, and testing (Figure 5).
・While the time it takes from receiving an order to delivering the productcan range from a few months at the shortest to about three years, many of the
projects are completed in the order of a few months. Most orders are received
and delivered during the same fiscal year. The price can also range fromseveral million yen to several hundred million yen, but projects priced lessthan Y50 million are by far the most common.
・In general, engineers are stationed at the corporate user’s site and conduct
system development for each project in teams. However, to cut down on costand ensure that there is a necessary number of engineers, a part of thedevelopment is outsourced (subcontracted) to subsidiaries in Japan andoverseas, or other companies in the same business, under the supervision of
the Company’s project manager.
・Since the system development business is generally based on contract
agreements, the SI (the Company) bears responsibility for the products
8/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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)
w System Integration Services
are based on contracts.
Project management isimportant in controlling therisks and profit/loss.
(8) Standard development
framework F@CE: The
Company’s unique generalframework for standardizing andstreamlining application
development. A tool for carryingout projects efficiently by
preventing operation errors oromissions.
(9) Enhancement services:
Providing not just system
maintenance, management, anddevelopment services but also
improving system performanceand quality to increase the value ofthe system. Or proposing ideas for
new businesses. Customer
satisfaction can thus be improved.
For the Company, this service
essentially means continued
business with the customer.
(10) Business related to Oracle
Cloud: Cloud-related services andproposals based on Oracle’s
database. The Company plans tocontinue to strengthen thisbusiness by increasing the numberof employees with Oracle-related
certifications. Current annual sales
are several hundred million yen.
w SIS was the growth driver inthe past, accounting for 70%
of sales. Operating marginof the three categories waslargest in the order of Pros＞
SIS＞SOS.

【Figure 6】 Breakdown of Sales (outercircle) and Operating Profit (inner circle)
by Service Category in FY2023
Professional
Services

SystemOutsourcing
Services

SystemIntegration
Services

15.4%
18.5%

10.7%
8.7%

Sales composition(outer circle)

73.9%
72.8%

Operating profit
composition(inner circle)(Ref) Prepared by Alpha-Win Research Dept.
based on the financial results summary

Issued: 6/9/2023(systems) as the contractor. Therefore, management of the risks and the
profit/loss of the projects and products is important.
・Orders for projects are often received through proposals or by bidding.
Estimates are generally calculated based on [the number of staff] x [thenumber of months]. In building a system after receiving an order, theCompany employs knowledge, know-how, and fundamental technologies
pertaining to various industries, companies, and businesses that it has
accumulated over the years, as well as its standard development framework
F@CE8, to reduce the risks and improve quality, profitability, and efficiency.
・Since unexpected changes in specifications, additional workload exceeding
the initial estimate, and other factors can negatively impact profitability andmake a project unprofitable, the Company has a specialized department towork on improving project management. It has also been focusing on
providing the enhancement services9, in which the Company works closelywith corporate users to make various proposals that will lead to new
businesses (compact system development).
2. System Outsourcing Services (SOS)・Services related to the operation and evaluation of systems. It provides two
solution services: system operation & management (building, managing, andevaluating components of a system such as hardware, basic software,
database, and network environment) and business application management(maintenance, management, and improvement of business applications andevaluation of management processes). The Company has also established aseamlessly linked service structure in which new challenges found andproposed during system maintenance and operation (SOS) can lead to a newenhancement project (SIS).
3. Professional Services (ProS)
・Services that utilize the Company’s technologies to solve everything related
to the informatization cycle, including consulting, database improvement for
greater efficiency, system monitoring, management support, andinformatization strategies. The Company conducts everything from planning,
designing, and building infrastructure to operating/monitoring systems. Highperformance is enabled through development tools and the skills of certified
experts. The Company is especially strong in database technologies, forwhich it has expert engineers (business related to Oracle Cloud10).
Breakdown of sales and operating profit in terms of the three categories andtheir transition over the years are shown in Figure 6 and Figures 7 and 8 on
page 10. Regarding the sales breakdown, SIS accounts for about 70% of thetotal, followed by ProS and then SOS for the remaining 30% (outer circle of
Figure 6). Over the past 21 years, total sales have grown by 2.9x. Specifically,
the sales of SIS grew by 4.0x, SOS grew by 1.7x, and ProS grew by 1.6x; SIS
had been the main driver of business growth (Figure 7 on page 10).
The breakdown of operating profit is shown in Figure 6 (inner circle). The
breakdown is not largely different from that of sales. Previously, the grossmargin of each category had been disclosed, but starting in FY2022, thedisclosure was changed to operating margin per category (currently only
disclosed for three fiscal years). Regarding the gross margin of the categories
over the last 20 years, all had been within a boxed range of about 15% to 21%.
However, in recent years, they have been generally improving for all
categories. The operating margin of each category is also improving for all
categories (see Figure 31 on page 28 for details).
9/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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)【Figure 7】Transition in Sales of Each Service Category(Million yen)

18,000Issued: 6/9/2023【Figure 8】Transition in Operating Margin of Each
Service Category
12.0%

16,00014,000

11.0%

12,00010.0%

10,000

9.0%

8,000
6,000

8.0%

4,000

7.0%

2,000

6.0%

FY
20
FY 02
20
FY 03
20
FY 04
20
FY 05
20
FY 06
20
FY 07
20
FY 08
20
FY 09
20
FY 10
20
FY 11
20
FY 12
20
FY 13
20
FY 14
20
FY 15
20
FY 16
20
FY 17
20
FY 18
20
FY 19
20
FY 20
20
FY 21
20
FY 22
20
23

0

SIS (System Integration Services)
SOS (System Outsourcing Services)

5.0%

SIS

4.0%

SOS

ProS

Total

3.0%

FY2021

FY2022

FY2023

ProS (Professional Services)(Ref) Figures 7 and 8: Prepared by Alpha-Win Research Dept. based on the financial results materials (the financial results briefing materials and the financial
results briefing supplemental materials; the same applies hereinafter).

◆ Labor-Intensive Business Model in which Human
Resources Are the Key
w Labor-intensive business.
Acquiring and training
talented employees are thekey to growth.

w The number of employees
has been steadily
increasing. Sales andoperating profit per
employee in Japan havebeen improving.
(11) DX (Digital
Transformation): Thetransformation brought about
by the penetration of IT(information technology)
throughout society. Not only
businesses, but the industrial
structure and social
infrastructure are said to also
become impacted. For
companies, this means the use ofdigital technologies to bringreform to its business model,
operation, processes,organization, and culture.

Since most of the Company’s business is based on make-to-order, contractdevelopment of systems, its business is strongly characterized as a laborbased, single-product production model. Therefore, the recruitment andtraining of talented employees are key since they are the source ofcompetitive edge and growth potential. Since systems are becoming moreadvanced and complex, talented employees for roles such as project
managers for overall project management and system engineers areespecially crucial in managing system quality, cost, deadlines, and profit/loss.
Currently though, due to recent years’ labor shortage, the Compamy has notbeen able to hire enough project managers to match its business expansion.
This shortage has been a bottleneck to further growth. One of the Company’s
challenges will be to increase new graduate and mid-career recruitment aswell as further improving the work environment and training system to raise
the retention rate of its employees (in past years, the turnover rate had been
about 8% per year, which seemed to be somewhat low compared to theindustry’s average, but the rate is now rising due to greater job mobility).
The change in the number of employees of the entire CUBE SYSTEM Groupis shown in Figure 9 on page 11. In line with its business expansion, theCompany has been hiring about a few dozen new employees every year,
mainly for system engineer positions (for new areas such as DX11). Over the
medium to long term, it is also considering expanding its group to around
1,000 employees in total. Regarding the annual sales per employee in Japan,
they have gradually increased to 21-23 million yen. Annual operating profit
per employee has been steadily increasing since the most recent low in
FY2017 (Figure 10 on page 11).
With regards to the cost structure, the labor cost and subcontracting cost paid
to its business partners (essentially, mostly personnel expenses) account for
about 90% of the cost of sales. Therefore, the Company’s skill in controllingthose two costs may impact its profitability, and resource optimization andproject management will be crucial.

10/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023【Figure 9】Change in the Number of Employees in the Group(+25)(Persons)

Number of employees in Japan
Number of overseas employees

900
800
700
600
500

501
（+59）
28

498
（-3）

38

32

(+19)

539
（+28）

511
（+13）

(+4)

588
（+29）
70

58

63

(+6)

(+7)

481

496

518

(+20)

(+6)

559
（+20）

656
638
（+50） （+18）

694
（+38）

85

84

82

(-3)

720
（+26）
93

(+11)

737
（+17）
85

781
（+44）
92

( +7)

830
（+49）
116

( +24)

843（+13）(Thousand yen)

2,500

130

( +14)

1,861(+520)

2,000

( -8)

(+1)

(+14)

【Figure 10】Change in Operating Profit per Employee
in Japan

1,500

1,347
(-159)

1,421
(+74)
1,108
(-313)

400
300
200

473

473

466

(+40)

(+7)

(-7)

(+8)

(+15)

FY2013

FY2014

(+22)

571

554

(+17)

(+36)

612
(+41)

627

(+15)

652
(+25)

689
(+37)

714

(+25)

713

1,249
(+142)

1,713(-148)
1,368 1,397(-345) (+29)

1,341
(+91)

1,470
(+73)

1,471
(+ 1)

FY2019FY20201,985(+ 282)2,037(+ 51)FY2022

FY2023

1,705(+ 233)

1,000

(-1)

500

100
0

FY2010FY2011FY2012FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY20230
FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2021(Ref) Figures 9 and 10: Prepared by Alpha-Win Research Dept. based on the financial results materials(12) Agile development: anapproach to project
development. Unlike theconventional waterfall
development, it divides a system
into short phases and conducts
repeated implementation(programming) and testing to cut
down on development time.
“Agile” means dexterous andquick.

Generally, the nature of the system integration business makes it difficult torapidly expand business through unique products and services. Additionally,
although the sharing and leveraging of expertise are possible to some extent,
productivity improvement through those means is limited due to the current
reliance on manpower. The difficulty in improving the profit margin is acharacteristic of the entire industry rather than just the Company.
In response to these challenges, the Company plans to continue to improve
its profit margin by carrying out various measures such as the shift to highprofit projects, optimization of its resources, use of agile development12 andstandard platforms that do not rely heavily on manpower, strengthening oforganizational project management, making greater use of its overseas
subsidiaries, and review of contracts (negotiating and proposing to change
from payment based on the number of staff and months to payment in returnfor services).

◆ Sales and Profit Composition Well-Balanced by Industry
w Breakdown of sales interms of the fourindustries is becoming
more balanced.

【Figure 11】Sales Breakdown by
Industry in FY2023
Other

Finance

29.8%

30.8%
27.7%

Sales composition(outer circle)

32.2%

Operating profit
composition(inner circle)

19.8%
Telecommunication 17.7%& Transportation

20.3%
21.8%

Distribution(Ref) Prepared by Alpha-Win Research Dept.
based on the financial results materials

Sales breakdown by industry is shown in Figure 11. Sales from the financial
industry, which must process a massive amount of data and must be secureand reliable, had been the largest by industry type in the past. However, while
the sales from finance had declined, sales from the other industries (industries
other than the three industries of finance, distribution, and telecommunication& transportation) had grown significantly, resulting in more balance between
the four industries (Figure 12 on page 12).
Regarding HIMACS (TSE Prime: 4299) and Toho System Science (TSE
Prime: 4333), which are competitors whose business is especially similar to
the Company, their sales are highly dependent on the financial industry,
which constitute about 70% of the overall sales for both. In contrast, sales
from the financial industry are about 30% of the total for the Company,
indicating how the Company has been diversifying its sales among industries
by expanding its business with the non-financial industries.
Concerning its business with the financial industry, system development
demand from mostly megabanks had been the Company’s financial growth
driver for many years. However, this demand has leveled off due to weakearnings and the completion of consolidation/alliances in the financial
industry. This decline, though, has been offset by increased demand fromcompanies related to credit cards, online banks, and insurance, and demandhas been recovering.
11/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

Regarding the sales from the telecommunication & transportation industry,sales tend to somewhat fluctuate due to the system investment cycle ofcustomers such as telecom carriers. Another factor impacting sales is whether
the Company receives orders for large-scale projects, such as those forshipping companies in the transportation industry.
w Increasing diversification
by industry through thedevelopment of new areasof business and newcustomers

In recent years, regarding the other industries, business with manufacturers,
business with the government, energy-related businesses, and cloudconsulting-related businesses have grown significantly thanks to acquiring
new customers and receiving orders for new projects. As a result, theCompany appears to have become more balanced and diversified with regards
to industry type, resulting in greater business stability.

w Profit margins for eachindustry have been
gradually improving.

The breakdown of profit margin by industry changes somewhat every year,
but we believe that this reflects the difference in the profitability of eachindividual project, rather than the difference in the characteristics of eachindustry. Gross margins had been disclosed through FY2021 and operating
margins have been disclosed since then. In general, profit margins seem to be
gradually improving (Figure 13).

【Figure 12】Transition in Sales by Industry(Million yen)

7,000
6,000
5,000
4,000
3,000
2,000
1,000

FY
20
02
FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
20
10
FY
20
11
FY
20
12
FY
20
13
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
20
23
FY
20
24
CE

0

Finance

Distribution

Telecommunication & Transportation

Other(Ref) Figures 12-13: Prepared by Alpha-Win Research Dept. based on the financial results materials. CE: the Company’s plan.

【Figure 13】Transition in Operating Margin by Industry
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%

Finance
Telecommunication & Transportation
Total

Distribution
Other

0.0%

FY2021w A stable business, themajority of which consistsof continued business withthe existing customers.

FY2022

FY2023

Stable Customer Base and Highly Maintainable Business
Since the Company’s customers and end users are Japan’s leading corporategroups and the nature of its business requires dealing with mission-criticaloperations, the Company must provide proven, reliable, stable, convenient,secure, and sustainable solutions. Moreover, for system development and12/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

operations, accumulation of business knowledge and know-how is necessary.
Consequently, the Company has high contract repeat rates and long-term
relationships with its existing customers (Figure 14). Note that its prime ratio(percentage of direct contracts made with end users for system development)
is about 10%, and many of its projects are outsourced indirectly throughmajor SIs.
【Figure 14】Number of Client Companies (end users) by Duration of RelationshipYears of Business with the End User

Number of End Users

Attributes of the End User

15 years or more

12 companies

Major retailer, bank, general merchandise store, hardware store, thegovernment, securities company, etc.

10 to less than 15 years

10 companies

Major credit card company, telecommunication company, manufacturing
company, education business company, etc.

5 to less than 10 years
Total of the above

19 companies
41 companies

Major gas company, life insurance company, telecom carrier, etc.

(Ref) Prepared by Alpha-Win Research Dept. based on “Integrated Statement 2022” and interview.

w Sales breakdown by
customer shows that
Nomura Research Instituteis the largest, followed by
Fujitsu, Aeon, andMizuho. These fourgroups account for about
80% of the total.

As shown by the sales breakdown by customer group in FY2023 (Figure 15),
NRI is the largest customer, followed by Fujitsu, Aeon, and Mizuho. Thesefour corporate groups account for about 80% of the total (same proportion as
the previous years). Thanks to the success of the account strategy (a strategy
in which marketing activities are conducted in a concentrated manner by thedesignated person in charge) toward the four main customer groups, total
sales from the four groups have been steadily increasing: by +2.8% YoY to
Y10,351 million (+Y281 million) in FY2019, by +9.3% YoY to Y11,316
million (+Y965 million) in FY2020, by +1.3% YoY to Y11,463 million(+Y147 million) in FY2021, by +10.9% to Y12,718 million (+Y1,254
million) in FY2022, and by -1.1% to Y12,577 million (-Y140 million) in
FY2023.
【Figure 15】Sales Breakdown by Customer Group in FY2023
NRI

Fujitsu

Aeon

MizuhoOther(Ref) Prepared by Alpha-Win Research
Dept. based on the financial resultsmaterials.

23.0%
49.7%

4.5%
4.0%
18.8%

Previously, the sales growth rate for customers other than the four maingroups had been high, and the percentage of sales of the four groups had been
gradually decreasing after the peak in FY2011. However, since FY2020, theproportion of the four groups has been starting to increase again (Figure 16
on page 14).
w Increase in transactions
with NRI has driven sales
growth over many years

Looking at long-term changes, sales from the NRI Group had increased byapprox. Y7.2 billion from approx. Y900 million in FY2002 to approx. Y8.1
billion in FY2023, partly thanks to the expansion of business area from its
initial focus on the distribution industry to other industries including finance.
During this period, the Company’s overall sales grew by Y10.7 billion fromY5.6 billion to Y16.3 billion. The majority of this growth came from the NRIGroup (67%). As a result, about half of the entire sales (49.7%) was
dependent on the NRI Group in the previous fiscal year.
13/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

Similarly, the Fujitsu Group accounted for Y1.3 billion or 12% of the total
sales growth, thanks to increased transactions related to telecommunication
infrastructure, electrical power infrastructure, and the government. Having
increased sales over the long term with the major corporate groups (including
Aeon and Mizuho), the Company has earned excellent trust from its
customers and has high contract continuity.

(13) e-e Partner: an especiallyclose partner among all partnersof NRI. Of the “e Partners”(approx. 150 companies) withhighly specialized businessknow-how and IT skills andhigh-level IT security, “e-ePartners” cooperate with NRI
not only in the operation of
specific projects but also in thecooperative promotion of
innovative activities in the
Enhancement Business; in thestrategic reinforcement of HR,
quality, and IT security; and in
the creation of a mutuallyprosperous business model thatleverages each other’s expertise.
NRI has only announced threecompanies (the Company,
HIMACS, and Toho System
Science) as its e-e Partners.

The Company has especially worked closely in partnership with NRI as oneof the few e-e Partners13. In this partnership, the Company not only
cooperates in business but also makes mutual investments and exchanges
employees. Looking at the Company’s transactions with each company, we
can see that NRI has also been the largest by transaction size every year, andthe second largest has been Fujitsu.
In addition, in February 2019, the Company was awarded the Best Partner
Award by AEON IBS, with whom the Company has been in a business
relationship for about 30 years. This also shows how the Company’s customer
satisfaction level is high.

【Figure 16】Transition in Sales by Customer Group (G) and Share of the Top 4 Groups(Note: information on sales of Mizuho G before FY2003 and of Aeon G before FY2007 is not disclosed)（％）

18,00082

16,00080

14,00078

12,00076

10,000

74

8,000

72

6,000

70

4,000

68

2,000

66

0

64

FY
20
FY 02
20
FY 03
20
FY 04
20
FY 05
20
FY 06
20
FY 07
20
FY 08
20
FY 09
20
FY 10
20
FY 11
20
FY 12
20
FY 13
20
FY 14
20
FY 15
20
FY 16
20
FY 17
20
FY 18
20
FY 19
20
FY 20
20
FY 21
20
FY 22
20
23

(Million yen)

NRI G

Fujitsu G

Aeon G

Mizuho G

Other

TO P 4G's share (right axis)(Ref) Prepared by Alpha-Win Research Dept. based on the financial results materials◆ The Foundation for Future Areas of Growth and NextGeneration Technologies
w Focused on receiving orders
for projects related to newtechnologies and DX

Alongside its own R&D, the Company has been forming alliances withcompanies skilled in cutting-edge, new technologies. Also, it has received
various awards and certification from major companies as their partners.
It has also been conducting investments and preparing for the developmentof businesses that utilize next-generation technologies. Since DX-related IT
investments by corporate users are expected to rapidly increase, the Company
has set the Digital Business as its area of growth and plans to put companywide efforts into actively making proposals and responding to needs.
14/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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)w Upfront investment ingrowth areas such as
cloud, blockchain, agile
development, AI, and IoT(14) Cloud solution services: atype of service whereapplications are used as a“service” via web browsers, etc.
(15) Blockchain: decentralized
network in which information is
synchronized, recorded, andaccumulated among many
computers(16) AI: artificial intelligence(17) IoT: Internet of things. A
system that connects all devices
around us through the Internet.
(18) Smile Share Product: A
product which, under the themeof “Making employees smile
through digital technology,”
supports and develops
contactless communication andengagement among employees.
Originally developed by theCompany.
w Formed a capital andbusiness alliance with NRI
to strengthen theirrelationship.

Issued: 6/9/2023

The Company has especially been focused on technology investments incloud solution services14 including Oracle-related services; participation insocial experiments of the Blockchain15 Collaborative Consortium; capital andbusiness alliances with companies which have expertise in AI technology16,
IoT technology17, and blockchain; testing the Smile Share Product18 with the
NRI employee union; and alliances in agile development andmaintenance/operation services. These are aimed at acquiring and sharing
expertise and information on cutting-edge technologies, developing
employees, conducting joint development and proposals, and establishing
new businesses.
Also, in 2020, it created the DX Promotion Office. The Office has dedicatedmembers as well as members who concurrently work for the sales department.
The role of the Office is to catch up on leading-edge technologies and conduct
R&D and business development based on the newest core technologies.
Furthermore, through investment partnership as well as direct investments inprivate companies, the Company has been working on strategically collecting
information on new technologies and searching for promising companies.
The results of these investments had contributed positively to financial resultsin the past as gain on investment or gain on sales. Also, due to the public
listing of the companies that it has invested, unrealized gains have increased.
◆

Capital and Business Alliance with Nomura ResearchInstitute (NRI)The Company formed a capital and business alliance with the Nomura
Research Institute (NRI; securities code 4307) in December 2022 andconducted a third-party allotment of shares to NRI. NRI additionallyacquired shares through off-floor trading on the stock exchange. As a result,
NRI’s shareholding ratio rose from 1.51% to 20.18%, making it the largest
shareholder.
NRI, an SI affiliated with Nomura Securities, is listed on the Tokyo Stock
Exchange’s Prime Market. It is a major, blue-chip company ranked as one of
the top ten companies of the industry, with a market capitalization of Y2.2
trillion and forecasted sales of Y720 billion and net profit of Y78 billion forthis fiscal year (greater than the Company by 117x, 40x, and 72x,
respectively). It provides both consulting and IT solutions and has top-levelprofitability in the industry. It also has as a strong customer base particularlyin the financial industry. The Company has been in a long-term cooperative
relationship with NRI, which is also its most important client.

w Will invest a total of
approximately Y2 billion
over four fiscal years,
mainly using the raised
capital. Plans to
expand/strengthen thedevelopment sites and the
production system.

As a result of this capital alliance, the Company raised Y1,636 million in net
sum. With this raised capital, in addition to its own capital, it will have a
total of Y2,180 million to invest for further growth. Over the four fiscal years
starting in the previous fiscal year, it plans to invest in strengthening andexpanding its development sites and production system (Figure 17 on page
16).
In terms of business, some of the Company’s plans are to strengthen its longterm and ongoing relationship with NRI, expand its business domain, more
fully utilize its production sites, enhance and expand its production system,and exchange talents. The investment and alliance will mostly likely
contribute to the Company’s business expansion and stable growth over the
medium and long term.
15/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

At this stage, the Company has not disclosed any projections of the future
investment effects (such as the amount of sales growth, contribution to profit,
and the investment’s payback period). However, its plan can be viewed
positively; it plans to resolve its current insufficiency in capacity (humanresources), which has been the biggest bottleneck to sustainable growth, andsecure a budget so that it can make committed efforts toward increasing
capacity.

w Will make serious efforts
to expand capacity, which
has been its bottleneck.
The investment essential
for strengthening theCompany toward futuresustainable growth.
w Plans to make large
investments in the current
and the next fiscal year.
w Investment results(significant contribution to
profit) are expected to be
seen starting in FY2026 orlater.

Part of the investment will most likely be recorded as assets, but the expenses
associated with this investment (that will be recorded under profit/loss) will
likely reach their peak in the current or the next fiscal year, when the invested
amount will be at high levels.
We also believe that there is generally a time lag of about one to two years
before improvements in profit begin to be seen after the investment (after
expanding capacity and recruiting/developing employees). Therefore, weestimate that the investments will begin to contribute significantly to profit
starting in FY2026 or later.

【Figure 17】How the Raised Capital Will Be Used and the Schedule (investment plan)
Fiscal Year
Amount Used

Main Use of
CapitalUnits: million yen or %FY2023

FY2024FY2025

FY2026

Cumulative Sum% of Entire Investment

Total (amount): ①＝➁+③

120

845

805

410

2,180

Percent of Entire Investment
Production Facilities: Subtotal ②(breakdown shown below)

5.5%

38.8%

36.9%

18.8%

100.0%

100.0%

80

385

125

0

590

27.1%

Nearshore (create new regional sites)

80

160

0

0

240

11.0%

Nearshore (enhance existing sites)

0

100

50

0

150

6.9%

Prepare and enhance remote work environment

0

50

0

0

50

2.3%

Enhance offshore sites / form alliances with companies

0

50

50

0

100

4.6%

Purchase software assets
Production System: Subtotal ③(breakdown shown below)
Invest in recruitment (gain employees for production)

0

25

25

0

50

2.3%

40

460

680

410

1,590

72.9%

20

320

320

320

980

45.0%

Invest in training (people development)

10

30

30

30

100

4.6%

Sophistication of production/quality management

0

60

60

60

180

8.3%

Enhance engagement (with employees)

10

50

270

0

330

15.1%

(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s news release.

16/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

3． Shareholder Composition◆ Change in Composition by Type of Shareholder

w The proportion of shares
owned by “other Japanese
corporate entities”
increased, while“individuals and others”
decreased to 60%.

With regards to shareholder composition by type of shareholder as of the endof March 2023 (Figure 18), the proportion of “other Japanese corporate
entities” increased significantly due to investments by NRI (page 16). As aresult, the proportion of “individuals and others” declined from 74% to 61%,
followed by “financial institutions” which also declined from 19% to 13%.
Meanwhile, “overseas corporate entities” increased slightly from 0.8% to
1.2%.

【Figure 18】Change in Shareholder Composition by Type of Shareholder (unit: %)(as of the end of each fiscal year)
（％）

100
90
80
70

Individuals and others

60～ FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
25
20

Other Japanese
corporate entities

15

Financial institutions

10

Financial instrumentbusiness operators

50

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

Overseas corporate
entities(Ref) Prepared by Alpha-Win Research Dept. based on the notice of convocation of the ordinary general
meeting of shareholders and the securities reportuMajor Shareholder Composition

w NRI became the largest
shareholder.

The composition of major shareholders has changed due to NRI’s investment.
NRI’s shareholding ratio rose from 1.51% to 20.18%, making it the largest
shareholder.

w The employee stock
ownership plan andcurrent and former
directors are the mostprominent among theother major shareholders.

The other major shareholders and the shareholder ranking have mostly notchanged, but the shareholding ratio of each has decreased due to dilution
accompanying the third-party allotment of new shares.
The major shareholders as of the end of March 2023 are shown in Figure 18
on page 19. The following is supplemental information.
・The shareholder ranking has changed; Osamu Sakiyama (chairman andprevious president), who used to be the largest shareholder, dropped to third
place and the Employee Stock Ownership Plan remained at second place,while both experienced a decline in the shareholding ratio.
・Masahiro Nakanishi, the Company’s president, owns 15.3 thousand shares(0.1% of all shares).
・The Master Trust Bank of Japan, a trust account, is ranked at fourth place.
The same bank is also ranked at fifth place as the Company’s director
17/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

compensation BIP trust account (stock-based compensation as the director
incentive plan).
・The sixth largest shareholder, Akemi Onuki, is one of the Company’s
previous presidents. The eighth largest shareholder, Toshikuni Sato, is theCompany’s former executive managing director. The nineth largest
shareholder, Toshio Uchida, is the Company’s former executive vicepresident (new auditor candidate).
・The Custody Bank of Japan at tenth place is a trust account.
w The total of treasury
shares, stock ownershipplan, and shares held bydirectors, employees, andother related parties
account for about 26% of
all outstanding shares.

・Of the top ten shareholders, the Employee Stock Ownership Plan, thedirectors and employees (including former members), and the director
compensation BIP trust account add up to about 26% of the total.
・The Company’s stock is incorporated in funds managed by Nomura AssetManagement (Japan small cap equity fund and small cap equity open) andJapan equity index funds including those managed by Mitsubishi UFJ
Kokusai Asset Management and Asset Management One. Some of thesefunds are likely investing under the names of trust banks that are ranked as
major shareholders.

w Incorporated in several
Japanese investment
trusts.

Due to the capital increase in December 2022, the total outstanding shares
increased from 14,500 thousand shares to 15,750 thousand shares. Its
treasury shares (which include the BIP trust account) amount to about 589
thousand shares as of the end of FY2023 (3.7% of all outstanding shares),meaning that the Company is essentially the fifth largest shareholder.

w Essentially owns treasury
shares amounting to 3.7%of all outstanding shares.

【Figure 19】Current Major Shareholders
Shareholder Name

(unit: thousand shares)

Nomura Research Institute, Ltd.
CUBE SYSTEM Employee Stock Ownership Plan
Osamu Sakiyama (indiv.): CUBE SYSTEM's chairman
The Master Trust Bank of Japan, Ltd. (trust account)
The Master Trust Bank of Japan(director compensation BIP trust: 75,824 account)
Akemi Onuki (indiv.): CS's former president
SMBC Nikko Securities Inc.
Toshikuni Sato (indiv.): CS's former exec. managing director
Toshio Uchida (indiv.): former executive vice president
Custody Bank of Japan (trust account)
Masatsugu Sakurai (indiv.): general individual investor
MUFJ Bank, Ltd.
Japan Trustee Services Bank, Ltd. (trust account 5)
Mizuho Bank, Ltd.
CUBE SYSTEM INC.
Resona Bank, Limited(CUBE SYSTEM's Actual Treasury Shares)(Proportion of Treasury Shares to All Outstanding Shares)

End of Mar.
2015

End of Mar.
2016

End of Mar.
2017

End of Mar.
2018

End of Mar.
2019

End of Mar.
2020

End of Mar.
2021

1,641
1,775
-

1,672
1,675
-

1,663
1,655
-

1,668
1,646
321

1,565
1,638
394

1,602
1,632
485

214
1,551
1,622
456

End of Mar.
2022

1,531
1,614
959

End of Mar.
2023

3,179
1,468
1,122
1,062

Shareholding
ratio (%)

20.18
9.32
7.12
6.74

Shareholder
ranking

1
2
3
4

-

270

270

262

369

358

358

618

586

3.72

5

401
380
475
316
258
276
682
241
682
4.5%

401
340
415
316
258
276
458
728
4.8%

401
300
403
316
348
276
1,035
1,306
8.5%

401
300
393
316
324
276
1,236
1,498
9.8%

401
304
376
316
258
276
1,356
1,725
11.3%

401
304
369
316
258
219
1,692
11.1%

401
288
347
316
258
1,690
11.1%

401
239
329
288
258
1,000
6.9%

401
290
230
221
202

2.54
1.84
1.45
1.40
1.28

6
7
8
9
10

589
3.7%

(Ref) Prepared by Alpha-Win Research Dept. based on the notice of convocation of the ordinary general meeting of shareholders and the securities report.
(Note) “-” indicates that the shareholder was not among the major shareholders disclosed in the securities report and does not necessarily mean zero.
Shareholding ratios were calculated after subtracting the treasury shares from all outstanding shares. The proportion of treasury shares includes the
director remuneration BIP trust account.

18/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

4． ESG and Sustainability◆ Environment
w Working on continuous
improvement ofenvironmental
performance (energy andresource conservation)
w Joined the TCFD and will
work on mitigating andadapting to climate change
and promoting appropriate
information disclosure.
Added nonfinancial goals
on environment to its
medium-term plan.

w Its mission is to contributeto the further developmentof the IT society and thestrengthening of its
customers’ competitiveedge

w Of the 10 directors andauditors, 6 are fromoutside the Company.
(19) Health & Productivity
Management Outstanding
Organizations: health &productivity management
outstanding organizations
recognition program in which
companies that worked on
initiatives to solve local healthissues or promote health arejointly selected and awarded by
the Ministry of Economy,
Trade, and Industry and the
Nippon Kenko Kaigi
w Focusing on sustainability
management(20) SDGs (Sustainable
Development Goals):International goals for theperiod from 2016 to 2030
described in “The 2030 Agenda
for Sustainable Development”
that was adopted at the UN
Summit in September 2015.

Although the Company’s business does not harm the environment, under its
environment policy to “practice environment-friendly management throughcontinuous improvement of environmental performance (energy/resource
conservation),” the Company engages in environment-friendly initiatives(such as reducing the use of electricity, paper usage, and waste and adopting
the cool biz). Also, in November 2021, it joined the Task Force on Climaterelated Financial Disclosures (TCFD) and has been working on initiatives for
mitigating and adapting to climate change and promoting appropriate
information disclosure. It has also newly added nonfinancial goals on
environment to its medium-term plan (Figure 46 on page 34).

◆ SocietyAs a key industry necessary to the infrastructure supporting the economy andthe society, the CUBE SYSTEM Group believes its mission is to contributeto the further development of the IT society and the strengthening of its
customers’ competitive edge. It aims to create a more prosperous andconvenient society through the power of IT systems.

◆ Governance
As a company with auditors, the Company has set up the Nomination andCompensation Advisory Committee and the Internal Control and Integrated
Risk Management Meeting (which directly supervises various committees
including the Compliance Committee, the Internal Control Committee, theSecurity Committee, and the Working Style Reform Committee). It has also
set up an internal hotline system for compliance-related matters.
The management team consists of six directors (of which three are external
directors) and four auditors (of which three are external auditors). Of thedirectors, the chairman is a dedicated member, and three including thepresident are from NRI (of which, one is an external director). Of theremaining two external directors, one is a certified public accountant and one
is a doctor (female occupational physician specialized in elderly care andmental health). One of the external auditors (female) is also a certified public
accountant (decided at the general meeting of shareholders).
Recognizing the enhancement of human capital and the workstyle reform as
its key challenges, the Company has been working on improving andmaintaining the mental and physical health of its employees and creating a
comfortable working environment under its health management policy(certified as one of the Health & Productivity Management Outstanding
Organizations 202319; has received this award for the second year in a row).

◆ Sustainability
The Company has formulated the basic sustainability policy that is composedof eight items and has been focusing on sustainability management. To solve
the society’s problems and contribute to the SDGs20, it is leveraging its uniquevalue-creation model to continuously improve corporate value and contributeto the creation of a sustainable society. It has especially been focusing on
sound corporate management, contribution to the local community,
environmental conservation, promotion of compliance, respect for humanrights, support for the development of the next generation, and enhancementof human capital (people development and emphasis on people).
19/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

5． History of Growth◆ Company History

w Founded with theprediction that theimportance and potentialof computer systems willgrow in the future.
Specialized in the system
integration business.

In 1972, the Company was founded as Customer Engineers Corporation by
its founding members, which included the current chairman, for the purposeof software development and system operation/management (its name waschanged to the current one in 1990). As computers became popular in theJapanese society, IT investments increased and the system development
market rapidly grew. Amidst this trend, the Company became specialized in
the system integration business and built its credibility and track record. It
made contracts one after another with leading Japanese companies, its current
main customer groups. As those companies increased their IT investment andoutsourcing of system development/operation, the Company was able tosteadily expand its business as well as business domains.

w Its main customers areleading blue-chipcompanies of Japan.

w Changed its listing fromTSE Second Section to
the First Section in March2014

Regarding stock, the initial offering was made in the JASDAQ market in
2002. In 2006, the Company became listed on the Second Section of the TSE,
and then became listed on the First Section on March 2014. With the change
in the market segments of the TSE, it moved to the TSE Prime Market in
April 2022.

w Moved to the Prime
Market, the new segment,in April 2022

◆ Past Transition in Financial Results
Since foundation until now, the Company has been improving its financial
performance as a specialist (SI) in the development and operation of systems
outsourced from companies and the government. The long-term transition in
financial performance is shown in Figure 20. The following are details of thefinancial results in chronological order.

【Figure 20】Long-Term Transition in Financial Results(Million yen)

(Million yen)

20,0001,800

Sales (left axis)

18,000

1,635

Recurring Profit (right axis)

1,600

1,4321,452

Consolidated since FY2001
16,0001,295
14,0001,200

980 960
811 893

10,000

702
8,000
6,000

387

445 432499

550

550 583672
643 597 660

4,387

976

14,708606

13,559800

600

11,2179,241
9,166

6,244 6,575
4,806 5,598

1,000

14,325

7,100

7,767

7,923 8,109

8,507

8,706

400

8,431

200

0

FY
19
99
FY
20
00
FY
20
01
FY
20
02
FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
20
10
FY
20
11
FY
20
12
FY
20
13
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
2
0
FY
20 23
24
(C
E)

4,220

959

14,78812,89912,623
12,527533

302 309

2,000
0

1,400

16,09912,0004,000

18,00016,325(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s estimate/forecast.

20/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

・On a consolidated basis, with the exception of only a single fiscal year
(FY2012), the Company has being achieving an year-on-year increase insales every fiscal year for the past 21 fiscal years. This stable growth trend isnoteworthy.
・During the past 25 years, the annual sales growth rate (simple average ofthe annual rates of increase in sales) was +5.9%, and similarly the recurring
profit growth rate was +7.1%, showing how the Company has been solidly
improving its financial performance over the long term.
・Although recurring profit decreased in five out of the 21 fiscal years, thelargest annual drop stayed within a range of approx. -20%, and the Company
has been able to maintain a net profit for each year.

w Stable growth and sales
growth trend maintained
over many years. Profit
margins had been about
the same, but are starting
to increase in recent years.
w Sales decreased only for 1
fiscal year during the past
25 years.

・Analyzed statistically, the Company’s standard deviation for the rate ofchange in financial result and its variation coefficient (= standard deviation /average; shows relative dispersion; also called the relative standard deviation)
are small, indicating that the volatility of the Company’s fundamentals is low(see Figure 21 for the comparison with similar-sized competitors during themost recent 19 fiscal years).
・Furthermore, because the Company’s operating margin has stably been ataround 7% (6-9%; simple average of 7.4%; Figure 22 on page 22), sales
growth has been directly contributing to increases in profit, dividend, andmarket capitalization.

w Rate of change in financial
results has been stably
low.

【Figure 21】Analysis of Performance Volatility over the Past 19 Years (% YoY change for sales and R.P.)
Target of Analysis
FY2005 - FY2023
Market: TSE Primen = 19 fiscal years
Standard deviation
Average
Coefficient of variation% Change in Sales (YoY %)CUBE SYSTEM% Change in Recurring Profit (YoY %)Toho System Science
CUBE SYSTEM
HIMACSHIMACS
2335
4299
4333
2335
4299
CS (consolidated) HM (consolidated) TS (standalone) CS (consolidated) HM (consolidated)
5.78
7.26
16.46
13.72
30.01
5.06
3.28
8.51
6.78
8.45
1.14
2.21
1.93
2.02
3.55

Toho System Science4333
TS (standalone)298.6081.44
3.67(Ref) Prepared by Alpha-Win Research Dept. based on the securities report and financial results summary. Note: non-consolidated for Toho
System Science (standalone).

w The increase intransactions with the
major 4 groups havehelped the Company growsignificantly.

w Even right after the
Lehman’s collapse, sales
increased for 3 consecutive
fiscal years.

External environmental factors, such as increasing IT investments by
Japanese companies and the government, have not been insignificant to theCompany’s growth to date. However, much of the Company’s success seems
to have been brought by its efforts to gain more expertise, raise credibility,and build a strong customer base to consistently deliver positive results. As
mentioned earlier, it has strengthened its relationship with the four majorgroups NRI, Fujitsu, Aeon, and Mizuho. This strong relationship has enabled
the Company to continue to increase the number of orders received from thesegroups, which has been the major growth driver.
Financial performance during the most recent 14 years or so is as follows.
・In FY2009 when the Lehman’s collapse occurred, the economy faced adownturn and customers became more cautious about IT investments.
However, the Company was able to continue to increase its sales owing tocontinued business with the existing customers, mainly for systems of thefinancial and distribution industries, as well as due to the entry of companies
into the banking business giving rise to projects for operation expansion.
・The economic recession continued into FY2010 and FY2011. Systemdevelopment plans continued to be postponed, cancelled, or scaled down.
Companies continued to hold off IT investments, and competition over priceand between companies became intense. However, thanks to business withthe existing customers and the expansion of business with life insurance
21/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

companies, banks, and manufacturers, it was able to continue to increase sales.
With increasing sales, operating profit during the three fiscal years following
the Lehman’s collapse was impacted only to a small range.
･The Great East Japan Earthquake, though, had a large negative impact in
FY2012. Amidst the difficult situation, sales decreased by approx. 8%. Sales
from finance stayed about the same, but sales from distribution andtelecommunication dropped largely. This was the single fiscal year during thepast 25 years up through the previous fiscal year in which sales had decreased.
Operating profit also decreased by -20.9%, the largest drop during the same
period, but a net profit was maintained.

w In FY2012, due to the Great
East Japan Earthquake,sales decreased for the firsttime since becoming
listed. Operating profit
decreased by 20%.

w Business environment
improved thanks to
Abenomics. Digitalization
investments also
increased. The Company
began to increase sales
again.

・Then, IT investments by companies and the government recovered fromtheir previous inclination to be held off or postponed thanks to factors suchas the economic recovery brought by the Abenomics since December 2012,
recovery of corporate performance and employment, rebuilding of IT
infrastructure due to M&As, smartphone-related telecommunication
infrastructure, business related to the liberalization of electric power retail,and increased investment in areas related to social securities. With thisrecovery, as well as the recent trend of full-scale investment in digitalization,
the Company’s sales growth trend has become more definite.

w Record highs achieved forboth operating profit andrecurring profit in FY2015

・Regarding profit, in FY2015, sales increased due to business expansion
from the development of businesses with existing customers and theacquisition of new customers, and productivity improved due to strengthened
project management. As a result, record-high operating profit and recurring
profit of Y964 million and Y980 million were posted, respectively (net profit
also hit a record high in the following year or FY2016, at Y629 million).
Since then, the Company has been consecutively posting new record-highsales every fiscal year through FY2023.

w Sales have been hitting
record highs for 11 fiscal
years in a row.

・Meanwhile, due to increased cost and intensified price competition, theCompany’s gross margin and operating margin had been gradually
decreasing over the long term (Figure 22).
・The operating margin had decreased mainly due to the increased cost of
sales (subcontracting cost and labor cost), upfront investments, and increased
SG&A expenses (especially personnel expenses), but then began to improvestarting in FY2018. In the previous fiscal year (FY2023), due to the sales
growth and the improvement of the gross margin (21.4%→21.9%), each of
the profits hit their record highs for the consecutive fiscal year despite theincrease in the SG&A expenses ratio (12.6%→13.0%).

w Profit growth had beenslow due to increased cost
but profits have been
hitting record highs
consecutively for the past
three fiscal years.

【Figure 22】Long-Term Transition in the Company’s Gross Margin, SG&A Expenses Ratio, and Operating Margin
Gross Margin

Operating Margin

SG&A Expenses Ratio

（％）

25.0
21.4 21.9

20.0
17.1 17.1

18.3
15.9

16.6 16.7 16.7

19.2
17.7

16.7 16.7

10.0

5.0

16.2

15.5 15.5

17.3 17.1 17.0

17.0
15.4

13.9

15.0

8.7

9.0

8.5

8.2

8.4

8.7

7.5

7.9

9.6

7.1

9.3

7.4

10.3 10.0

8.0

7.7

9.4

7.3

9.4

7.2

9.3

9.0

6.2

6.5

7.9

8.5
7.7

5.9

9.5

9.3

11.0 10.7 10.5 11.3

7.9

7.5
6.1

6.3

6.4

12.6 13.0

8.8

8.9

6.5

FY
20
02
FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
20
10
FY
20
11
FY
20
12
FY
20
13
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
20
23

0.0

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s estimate/forecast.

22/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

6． Business Environment◆ Trends of Japan’s System Integration Market
Survey of Selected Service Industries“Sales by category of business for the information services industry” in the“Survey of Selected Service Industries” by the Ministry of Economy, Trade,and Industry shows that the sales of make-to-order software, as well as thesales of system integration (SI) which make up more than half of make-toorder software’s sales, have been increasing with the exception of the few
years after the Lehman’s collapse (Figures 23). In Japan, the outsourcing ofsystem development has become popular, and system integrators have stablygrown as the contractor of those system development projects.

w As the outsourcing ofsystem development
became popular, SIs grew
by receiving orders for
those outsourced systemdevelopment projects.

According to the same data, from 2010 to 2019, sales of system integration
increased by about 2.1% per year on a simple average. In 2020, COVID-19
caused a negative growth of -2.7%, but the market’s sales recovered by 3.1%
in 2021 and by 3.6% in 2022 (Figure 24).

w As the COVID-19 outbreaksomewhat settled down,
Japan’s SI market
recovered to growth in
2021. Growth wasmaintained in 2022 as well.

Monthly analysis of the same data (YoY change; Figure 25) shows that theYoY growth had been negative from March 2020 to February 2021. The
growth then became positive for a while, but temporarily became negative
again in January 2022 when the Russian invasion of Ukraine began, as wellas in March. Since then, a positive growth has been stably maintained for 12
consecutive months.

w Growth trend has been
maintained for themonthly SI sales (YoY) for
12 consecutive months
since April 2022.

【Figure 23】Change in the Make-to-Order Software andSystem Integration Markets (annual sales: unit = 100 million yen)

【Figure 24】Both Market’s Rate of Change(rate of YoY change in sales: %)
（％）

25.0

(100 million yen)

100,000

20.0

90,00015.0

80,00070,00010.0

60,0005.0

50,00040,0000.0

30,000-5.0

20,00010,000

-10.0
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

0

Make-to-order software

Make-to-order software

Of which, system integration

Of which, system integration(Ref) Figures 23-25: Prepared and reworked by Alpha-Win Research Dept. based on data from the “March 2022 Survey of Selected Service Industry” by
the Ministry of Economy, Trade, and Industry. Part of the original data used for market size (sales) in Figure 23 do not have continuity with the rest due
to changes in the survey target size. However, the rate of change in Figure 24 has been adjusted by the Ministry to have continuity.

【Figure 25】SI Market’s Monthly Sales on a YoY Comparison (unit: %)
(%)

20
15
10
5
0
-5
-10

Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar
May
July
Sept
Nov
Jan
Mar

-15
2015

2016

2017

2018

2019

2020

2021

2022

2023

23/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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)
w Software investment is
expected to increase by
4.0% (YoY) in 2023

Issued: 6/9/2023

Bank of Japan (BOJ) Tankan Survey
According to the BOJ Tankan Survey in March 2023, the amount of software
investment in FY2023 (plan) by companies of all sizes and all industries(including financial institutions) is expected to increase by +4.0% YoY, albeit
at a slower growth rate than the expected rise of 15.5% YoY in FY2022 (plan).

companies has beensolidly positive, albeit at asomewhat smaller
momentum.

The business sentiment of all companies of all sizes and industries slightly
declined from +6 in the December 2022 survey (recent sentiment) to +5 in
March 2023, with the outlook also somewhat dwindling at +2. The businesssentiment of large companies, which are the Company’s main customers,changed (in the same order) from +13 to +10 for the recent sentiment andfrom +8 to +9 for the outlook, and has been solid compared to mid-tier orsmall/medium-sized companies.

w In the JISA-DI survey, theDI (outlook) for expectedsales of make-to-ordersoftware has remained at a
double-digit, positive
value.

Data from the Industry Association
According to the JISA-DI Survey (March 2023) by the Japan Information
Technology Services Industry Association, the DI for the expected sales of
make-to-order software (sales outlook: the comparison between theupcoming three months and the first three months of this fiscal year = growthminus decline) had used to be a large positive value, but then suddenly fell
to -43.8 in Apr-Jun 2020 in its largest drop ever.

w BOJ Tankan’s DI for large

w The DI for expected sales
has been high forbusinesses toward thefinancial, insurance, andinformation &communication industries.

The DI for expected sales had stayed at double-digit, negative values for awhile after this, but then recovered to +8.2 in Jan-Mar 2021. The outlook
then improved further, and double-digit, positive DIs have been maintainedsince then. Its recent peak was +40.3 in Jan-Mar 2023. In the most recent
data (Apr-Jun 2023), the DI had declined to +29.6, but is nevertheless at ahigh level. With regards to the DI pertaining to each major customer of the
IT services industry, the DI for expected sales has been strong for
information & communication, the government, and especially finance andinsurance.

w Significant shortage of IT
engineers both in number
and quality

The employment situation index (DI: employee sufficiency = shortage minus
excess) has become a smaller positive value compared to the most recent
peak, but is still at 74.6, indicating an extremely strong sense of labor
shortage. In particular, there has been a shortage of IT engineers both innumber and quality, and the recruitment of talented employees for systemdevelopment continues to be difficult.

w Active strategic IT
investments by both the
public and the private
sectors

w High demand related toDX

Market Outlook
The structurally inherent labor shortage, demands for improvement in
operation efficiency, and IT investments by companies and the government(promotion and acceleration of IT investments by the Digital Agency) will
likely continue to steadily grow. In various industries and business areas,
companies have been actively investing in strategic areas and developing
technologies to raise their competitive edge.
Listed companies in Japan are continuing to show profit growth trends.
Combined with systems becoming increasingly advanced, as well as thedemand for DX, we predict that the market size will grow at a pace of about
2-5% per year once economic activities return to normal.

24/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023◆ CUBE SYSTEM’s Position and Comparison with
Competitors

w Middle ranking in theindustry by sales, at 80th to90th place from the top. Its
share of sales in the entire
system integration market
is estimated to be about
0.3%.

In the system integration industry, there are about 220 companies defined bygeneral terms as a SI whose sales can be confirmed through disclosed
securities reports and other sources. Among them, the Company is estimatedto be ranked at around 80th to 90th place from the top by sales volume. Its
share in the Japanese market is estimated to be around 0.3%.

ww Its benchmark companies

The Company’s competitors, or similar companies, are thought to be the twocompanies HIMACS (TSE Prime: 4299) and Toho System Science (TSE
Prime: 4333), which the Company uses as its benchmark. They are both e-ePartners of NRI (Nomura Research Institute; TSE Prime 4307) and are about
the same size and at very similar market positions as the Company (Figure 28
on page 26).

are HIMACS and Toho
System Science. Both are
NRI’s e-e Partners andtheir market positions andbusiness contents are very
similar.

Several of the largest SI players in the market, such as NRI and Fujitsu, arein cooperation or partnership with the Company rather than directcompetition.
We compared the long-term transition in the operating margin of the threemajor listed companies including the Company (hereinafter, the Company isabbreviated as CS in the graphs; similarly, HM for HIMACS and TS for Toho
System Science) (Figure 26).
w The Company’s profit

Compared to the other two companies, the Company’s gross margin is highbut its SG&A expenses ratio is also high. Therefore, its operating margin isrelatively low, although it has been gradually improving.

margin is somewhat low
compared to its twocompetitors.

Similarly, comparison of the return on equity (ROE) (Figure 27) shows that
the Company’s ROE had been the highest of the three companies over thefive fiscal years from FY2018 to FY2022 (same for ROA; although the profit
margins were about the same as the other two companies, its total asset
turnover was high). In FY2023, though, its ROE became the lowest instead
due to the capital increase in the previous fiscal year’s Q3. Note that theCompany’s goal for ROE over the medium term is 13% or greater.

w Its ROE had improvesignificantly and had been
the highest among thethree companies in recent
years, but decreased due tothe capital increase.

【Figure 26】Transition in the Operating Margin between
Three Mid-Tier, Listed Companies【Figure 27】Transition in ROE of the Three Companies

（％）

12.0

（％）

24.0

11.3

CS

10.0

8.4

8.0
8.0

7.7

7.3
5.9

6.0

7.6

7.3
7.2

6.2

7.7
6.9
6.5

7.6

9.2

HM
10.1

7.7

7.7

7.6

7.5

10.3
8.9

9.6
7.7

7.5
7.3

6.1

5.9

TS

6.3

8.1
6.6
6.4

7.8
6.6

7.9

9.3
8.8

9.8
8.9

9.4

20.0

9.0

18.0

8.7

16.0

8.8

14.0
12.0

6.5

10.0

5.5

4.9

8.0

4.0

6.0
4.0

2.0

2.0
FY2009FY20100.1

FY2011

16.4

HM

TS

17.2 16.8
15.4 15.5 15.3

14.0

16.3
14.6

14.2

13.8
11.3

11.1
12.4

10.0

6.7

8.8

10.9
8.6

5.2
4.3

8.6

8.7

8.5

9.2
6.2 4.4
5.4
3.8

4.3

8.4

13.5

12.1 13.2
9.1
8.0

14.0 13.8

13.2
13.4 13.1

11.6 11.4 11.4

11.9

10.7
9.0

7.1

14.1

9.8

9.8

9.6

9.8

9.6

11.2 12.0 11.8

9.1

10.2

8.8

5.3
0.2

3.0

0.0
FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023 FY2024 CE

FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
20
10
FY
20
11
FY
20
12
FY
20
13
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
20
23

0.0

CS

22.0

10.6

(Ref) Figures 26 and 27: Prepared by Alpha-Win Research Dept. based on the financial results summary and securities report

25/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023【Figure 28】Company Overview and Management Indicator Comparison for the Three Mid-Tier, Listed
Companies (the Company, HM, and TS) and NRI (reference)
Company Name

CUBE SYSTEM (CS)HIMACS (HM)Toho System Science (TS)

Code

2335

4299

4333

Characteristics

Independent. Mainly sys. dev. for finance, distribution,
telecom, and other industries (industries excluding theabove 3 industries such as makers & gov. ). Sales fromfinance account for 30% of total sales. The "otherindustries" category is the largest, at a little over 30% of
total sales.

Reference: Nomura ResearchInstitute (NRI)
4307

Began as Toho Mutual Life Insurance
Independent. 70% of sales comes from theCo.'s affiliate but is now indep.
finance industry. Sales for insurance
Specialized in finance (insurance,companies are espcially high, at a little more securities, etc.) which accounts for 80% of
than 30% of total.
total sales. Also develops software for thetelecom industry.

Merger between Nomura Research Institute andNomura Computer Systems in 1988; 50% ofsales are from finance.

FoundedJuly 1972

May 1976

June 1971

April 1965

Listed Date: JASDAQ→TSE 2nd→TSE 1st→TSE Prime (April 2022)

Oct. 2002 → Nov. 2006 → Mar. 2014

Mar. 2001 → Mar. 2004 → Mar. 2015 →April 2022

June 2001 → Mar. 2007 → Mar. 2014

TSE 1st Section (Dec. 2001) → TSE Prime
・Consulting 6.7%
・Financial IT Solutions 47.5%
・Industrial IT Solutions 38.6%
・IT Infrastructure Services 7.3%

Sales Categories/Breakdown (FY2023)

・System Integration 74.0%
・System Outsourcing 11.0%
・Professional 15.0%

・System Solution 37.9%
・System Maintenance 62.1%

・Software Development 98.1%
・IT System Services, etc. 1.9%

Director Composition (as of May 2023)

・Directors (7; of which, 3 external & 1 woman [14.3%])
・Auditors (3)・Executive officers (13; no woman)

・Directors (7; of which, 3 external and 1
woman)
・Auditors (4; of which, 2 external)
・Executive officers (10; no woman)

・Directors (9; of which, 3 external and 1 woman)
・Directors (7; of which, 3 external)
・Auditors (5; of which, 3 external and 1
・Auditors (3; of which, 2 external)
woman )
・Executive officers (5; of which, 1 woman)
・Executive officers (40; of which, 2 women)

Major Clients/Customers (FY2023)(sales = million yen; % of sales = %)Sites (including consolidated subsidiaries)

・74% from finance (of which, 30% from
nonlife insurance)

・Main office: Shinagawa-ku, Tokyo・West Japan Solutions Office in Osaka & Nagoya
・3 subsidiaries

・Main office: Yokohama, Kanagawa
・Minatomirai Office in Yokohama
・1 subsidiary・Main office: Bunkyo-ku, Tokyo

・Main office: Otemachi, Chiyoda-ku, Tokyo
・92 consolidated subsidiaries (in Japan andoverseas)

・Each employee will contribute to society throughbusiness and aim for higher corporate value
Basic strategy
・Develop a stable and sustainable business foundation
based on proposal & contract-based businesses
・Expand the conventional contract-dev.
・Work on sustainable managementbusiness (core business)
・Digital Business: seamless alignment with・Actively work on receiving orders for DX
consultations in development; provide rapid development
projects on the transformation of its
to end users using F@CE DX
customers' business models and technology
・SI Business: provide high productivity and new
innovations
development services through technologies for shifting to・Continue investment for strengthening
the cloud and microservices
business structure
・Enhancement Business: strengthen the nearshore &・Increase development staff
offshore (Asia) development system for stable and・Conduct M&As and form capital/businessexcellent productivity over the long term
alliances to solve the challenges of this・Management foundation: exchange information &current planknowledge and enhance engagement. Coordinate withpartners to achieve ESGs at high levels.

Management Policy/Strategy (summary)

18,000
10.3
1,620
11.5
1.3
8.6

Sales (million yen) CE for FY2024
CE

Operating Profit (million yen) CE
Operating Profit Growth Rate, YoY (%) CE
EPS (CE) for FY2024, YoY (%)
DOE (%) Actual
Past 14 Years’ Sales Growth Rate (FY2023's result divided by
FY2009's result: %)Operating Profit Growth Rate (same condition as above)
Equity Ratio (%) Actual
Number of Domestic/Overseas Employees, Actual
Est. Sales Per Employee (million yen / person)
Est. Operating Profit Per Employee (million yen / person)
ROE (%) Actual for FY2023

・68% from finance (of which 33% is frominsurance)

Medium term management plan, final FY
New medium-term management plan, for
Medium-term management planeach final FY:
FY2023:
・FY2022: sales Y16B (result: Y16.1B), O.P. Y1.23B(result: Y1.42B), operating margin 7.7% (result: 8.8%), ・Sales Y17.75B (result: Y17.33B) (each FY, FY2025 (first stage):・Sales Y16.5B
and ROE 13% or more (result: 13.8%)
DX-related sales of more than 10%)・FY2023: sales Y17.3B (result: Y16.3B), O.P. 1.53B
・O.P. Y1.77B (result: Y1.83B), O.P. margin ・O.P. Y1.58B (margin 9.6%)
・ROE 11.4%(result: Y1.45B), O.P. margin 8.8% (result: 8.9%), and 10% (result: 11%)
FY2028 (second stage):・Maintain ROE ≥8% (result: 13.1%)
ROE 11% (result: 11.8%)
・Sales Y20B
・FY2024: sales Y18B (previously Y19B ← initially
・
The
next
medium-term
management
plan(3O.P. Y2B (margin 10%)
Y18.5B), O.P. Y1.62B (previously Y1.71B ← initiallyY1.48B), O.P. margin 9.0% (previously 9.0% ← initially year plan) is planned to be announced upon ・ROE 12.5%
the announcement of Q1 FY2024 results.
8.0%), and ROE 11% (previously 13%)
FY2031 (third stage):・Sales Y25B

Management Goals (indicators)

Sales Growth Rate, YoY (%)

・NRI Group 8,109 (49.7%)
・Fujitsu Group 3,071 (18.8%)

・Securities: Nomura Securities, Mizuho
Securities, etc.
・Insurance: Japan Post Insurance, Sony Life
Insurance, etc.
・Banks: Seven Bank, Nomura Trust andBanking, etc.
・Other: distribution, manufacturing, services,
etc.

A=B×C×D

Net Profit Margin (net profit for the year / sales : %)B

Total Asset Turnover Ratio (sales / ave. total asset)

C

Financial Leverage (ave. total asset / ave. owner's equity)

D

ROA (recurring profit / total asset : %)E=F×G

Recurring Profit Margin (%) ActualF

Total Asset Turnover Ratio (sales / ave. total asset)

G

Medium-term management plan:
・FY2024: revenue Y720B and O.P. Y117B(margin 16.3%)
・FY2025: not disclosed
・FY2026: revenue Y810B and O.P. Y145B(margin 17.9%)

Main Pillars of the Growth Strategy:
・Deeper development of the core businesses(greater market reach in Japan): sales growthrate (growth rate from Mar. 2023 to FY ending
Long-Term Management Vision 2030
May 2026) for 1) the consulting business at more・Create the future with customers
than +Y5B, 2) the Industrial IT Solutions at
・Stably expand business, solve society's more than +Y40B, 3) the Financial IT Solutions
issues, and create a sustainable future
at more than +Y40B, and 4) IT Infrastructuresociety
Services at more than +Y5B
Priority Strategies
・Evolving the core businesses (fundamental
・Change the business portfoliotransformation of production): 1) fundamental
・Focus on the digital business
transformation in production through・Build the service businessmodernization of the existing IT assets, renewal
・Establish the DX Development Centerof the development framework, and utilization of・Raise liquidity of shares and strengthen AI in development processes, and 2) planning togovernanceinvest about Y20B during the span of thecurrent medium-term plan to improve
productivity

18,150
4.7
1,580
-13.8
-16.6
5.0

16,500
6.8
1,550
2.3
-5.2
5.7

720,000

91.9

90.2

90.4

102.8

122.8
76.6
843
19.4
1.7
11.8
6.1
1.4

150.1
80.1
891
19.5
2.1
13.1
7.5
1.4

64.9
68.5
641
24.1
2.4
13.2
7.2
1.2

125.0
47.6
16,512
41.9
6.8
20.7
11.0
0.9

4.00
117,000
4.6
2.3
7.2

1.3

1.3

1.5

2.2

13.1
9.1
1.4

14.7
10.6
1.4

12.2
9.9
1.2

13.3
15.7
0.9

(Ref) Prepared by Alpha-Win Research Dept. based on each company’s securities report, financial results materials, website, interviews, etc.
(Note) The companies’ forecasts for FY2024 are italicized; the rest are actual values of FY2023. The highest values among the three companies (excluding
NRI) are highlighted in yellow. In the ROA (E) and recurring profit margin (F) of NRI, net profit before tax was used instead of recurring profit.

26/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

7． Last Fiscal Year’s Results and This Fiscal
Year’s Company Forecast◆ Full-Year Financial Results for FY2023 (last fiscal year)
Summary
The consolidated financial results for FY2023 (previous fiscal year) were as
follows: sales of Y16,325 million (+1.4% YoY), operating profit of Y1,452
million (+2.4% YoY), recurring profit of Y1,480 million (+3.3% YoY), andnet profit attributable to owners of the parent of Y989 million (+4.8% YoY;
hereinafter, “net profit”). Sales and each of the profits reached the goals of its
plan, which had been revised downward in February 2023 from the initial
forecast made at the beginning of the fiscal year (Figure 29).

w Achieved the company
plan, which had beenrevised downward fromthe initial plan in
February 2023.

Sales have hit a record high for the 11th consecutive fiscal year starting in
FY2013 and profits have also hit record highs for the third consecutive fiscal
year. Also, the annual dividend per share was increased from the initial
forecast of 26 yen to 50 yen (of which, commemorative dividend of 24 yen).

w Hit record sales for the
11th consecutive fiscal
year and record profits
for the 3rd consecutive
fiscal year. Raised
dividend.

Alpha-Win Research Dept.’s forecasts for the previous fiscal year were thesame in amount as the Company’s revised forecasts for sales, profits, anddividend. The results came out to be mostly in line with expectations. The
achievement rate in terms of the Company’s plan (and our forecast) was
100.8% for sales, 102.3% for operating profit, and 104.2% for net profit.

w Mostly the same as therevised forecasts; there
was no surprise

While details will be described later, the Digital Business and theEnhancement Business performed well and had strong results. There were no
unprofitable projects or extraordinary losses, and the increase in operating
profit led to an increase in the net profit.

w The Digital and theEnhancement businesses
were firm.

【Figure 29】Comparison of Forecasts and Results for FY2023 (last FY)
Unit: million yen

Sales
Gross Profit
Gross Margin
SG&A Expenses
SG&A Exp. Ratio
Operating Profit
O.P. Margin
Recurring Profit
Net Profit
Dividend

InitialCompany Plan

RevisedCompany PlanA

B

Alpha-Win's
Alpha-Win's
Initial Forecast Revised Forecast
C

D

ResultE

17,30016,20017,10016,200

1,530
8.8%
1,545
1,000
26.00

1,420
8.8%
1,445
950
50.00

1,480
8.7%
1,495
970
26.00

1,420
8.8%
1,445
950
50.00

Comparison with
Revised Company
Plan (Diff.)
F＝E-B

Comparison with
Revised Company
Plan (% Achieved)
G＝F/B

Comparison with
Alpha-Win's Revised
Forecast (Diff.)
H＝E-D

Comparison with AlphaWin's Revised Forecast(% Achieved)
I＝H/D

125

0.8%

125

0.8%

32
0.1%
35
39
0

2.3%

32
0.1%
35
39
0

2.3%

16,325
3,570
21.9%
2,118
13.0%
1,452
8.9%
1,480
989
50.00

2.5%
4.1%
0.0%

2.5%
4.2%
0.0%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summaryw Both the orders received andthe order backlog increased.

Orders Received and Order Backlog
In the order of FY2022 → FY2023, the orders received increased from
Y16,072 million → Y16,620 million by Y548 million YoY (+3.4%). The
order backlog (at the end of each fiscal year) also increased steadily from
Y4,276 million → Y4,572 million (in the same order as above) by Y295
million YoY (+6.9%).
Sales and Profit by Service Category
Concerning the sales of each service category, compared to the Company’s
overall increase in sales (+Y225 million or +1.4% compared to FY2022),
27/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

w 中期経営計画に対して

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)
w ProS and SIS contributed
to the sales growth.
w ProS contributed the mostto profit.

【Figure 30】Comparison of the Past Two
Fiscal Years’ Sales (FY2022 and FY2023)
by Service Category
YoY
Change(Million yen)

18,00016,09916,325(+225)

16,000Issued: 6/9/2023

sales grew for SIS (similarly, +Y99 million or +0.8%) and ProS (similarly,+Y217 million or +9.5%) but decreased for SOS (similarly, -Y90 million or-4.9%) (Figure 30).
Operating profit grew for all categories except SOS, whose sales had declined.
SIS and ProS’s profits increased by Y12 million and Y32 million,
respectively, while SOS’s profit decreased by Y10 million (Figure 31). ProS
accounted for most of the overall increase of Y34 million in operating profit.
The Company’s overall operating margin improved slightly from 8.8% →8.9% (in the order of FY2022 → FY2023). SOS’s margin decreased from
7.5% → 7.2% (-0.3 percentage point), but the margin of SIS, which
accounted for 80% of the sales, increased from 8.7% → 8.8% (+0.1
percentage point) and ProS’s margin improved from 10.3% → 10.7% (+0.4
percentage point).
【Figure 31】Comparison of the Past Two Fiscal Years’ Operating Profit
by Service Category

14,00012,00010,00011,96812,068(+99)

Operating Profit(unit: million yen)

8,000

Operating Margin(unit: %)

6,000
4,000
1,834

1,743

(-90)

2,296

2,513

(+217)FY2022

FY20232,000
0SIS (System Integration Services)
SOS (System Outsourcing Services)
ProS (Professional Services)w By industry, sales andprofits decreased fortelecommunication &transportation, but bothincreased for theremaining threeindustries.

Total
SIS
SOS
ProS
Total
SIS
SOS
ProS

FY2022
1,417
1,044
136
236
8.8%
8.7%
7.5%
10.3%

FY2023
1,452
1,057
126
269
8.9%
8.8%
7.2%
10.7%

Diff.
34
12
-10
32
0.1%
0.1%
-0.3%
0.4%

% Diff.
2.4%
1.2%
-7.7%
13.8%

(Ref) Figures 30 and 31: Prepared by Alpha-Win Research Dept. based on the financial resultsmaterials

Sales and Operating Profit by Industry
・By industry, sales and profits decreased for the telecommunication &transportation industry, but both increased for the remaining three industries(especially finance) (Figure 32 on page 29).
・ Of the overall increase in sales (+Y225 million YoY), sales fromtelecommunication & transportation declined sharply (-Y1,401 million or 32.7% YoY) and profit also decreased (-Y245 million or -46.1% YoY) in areactionary decline from the large-scale projects in the previous fiscal year.
・On the other hand, business with the banking, insurance, and credit cardcompanies in the financial industry performed well and was the major driverof growth, with sales growing by Y948 million (+24.3% YoY) and profit
growing by Y171 million (+57.8% YoY).
・Concerning the other industries, business with the service industry andelectric power retailers grew, resulting in an increase in sales of Y467 million(+10.2% YoY) and an increase in profit of Y89 million (+28.5% YoY).
・With the distribution industry, sales from a cooperative, a retailer, and an
apparel company contributed to growth, resulting in an increase in sales by
Y211 million (+6.3% YoY) and an increase in profit by Y19 million (+7.1%
YoY).
・ Compared to the initial plan (for sales), telecommunication &transportation and the other industries fell short, while finance exceeded theplan (Figure 33 on page 29).
・Regardless of the industry, sales category, or business model, the operating
margin generally showed an upward trend for the segments with sales growth
and a downward trend for the segments with sales decline. The operating
margin rose from 7.6% to 9.6% for finance, whose sales had increased, but
fell from 12.4% to 10.0% for the transportation & telecommunication, whose
sales had decreased (Figure 34 on page 29).
28/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023【】
Figure 33 Comparison between Initial Forecasts and Results for【Figure 32】Comparison of the Past Two
Sales of Each Industry
Fiscal Years’ Sales by Industry
18,000

FY2023 Sales

YoY
Change(Million yen)

16,09916,325

3,909

4,857

Industry
Finance
Distribution
Telecommunication &Transportation
Other
Total

(+225)

16,00014,000(+948)

Finance

12,00010,0003,342(+221)

3,554

8,000
6,000

(-1,401)

4,285

2,883

4,562

5,029

FY2022

FY2023

4,000
2,000

Distribution

Telecommunication& Transportation(+467)

0

Operating profit(unit: million yen)(Ref) Figures 32-34 were prepared by Alpha-Win Research
Dept. based on the financial results materials【Figure 35】Comparison of the Past Two
Fiscal Years’ Sales by Business Model

16,00014,00016,099350

16,325
602
4,183

4,645

10,000SI Business

8,000
11,103

11,539FY2022

FY2023(+436)

4,000

Enhancement
Business

2,0000(Ref) Figures 35-37: Prepared by Alpha-Win Research
Dept. based on the financial results materials.

w By business model, theincrease in sales andprofit of Enhancementcompensated for thedecrease in sales andprofit of SI. While smallin scale, the Digital
Business has continued
to grow rapidly.
w Greater amount of profit
for the Digital Business.

FY2022
16
522
878
1,417
4.6%
11.2%
7.9%
8.8%

Diff: %
9.9%
0.1%

2,883
5,029
16,3253,910
5,420
17,300-1,027-391-977-26.3%-7.2%-5.6%

FY2022

Other
Manufacturing
Government
Other

Total
Finance
Distribution
Telecommunication &Transportation
Other
Manufacturing
Government
Other

FY2023
34
329
1,088
1,452
5.6%
7.9%
9.4%
8.9%

FY2023
296
275

467
294

532
313
51
70
190
1,417
7.6%
8.2%

287
402
86
72
244
1,452
9.6%
8.3%

12.4%
6.9%
4.2%
7.7%
7.9%
8.8%

10.0%
8.0%
5.5%
7.8%
9.6%
8.9%

Diff.
171
19

% Diff.
57.8%
7.1%

-245

-46.1%

89
35
2
54
34
2.0%
0.1%

28.5%
66.6%
2.2%
27.9%
2.4%

-2.4%
1.1%
1.3%
0.1%
1.7%
0.1%

Sales and Operating Profit by Business Model
・ The Company’s business is categorized into three business models:
Enhancement (services for improving system performance and quality), SI(system planning, design, development, and implementation services), andDigital (proposal-based business utilizing digital technologies).
・In FY2023, the Enhancement Business was by far the strongest, accounting
for 71% of total sales and 75% of total operating profit. In this business,
system development projects expanded for the finance industry, a retailcompany, and a postal service company. In addition, due to the price revisionand the optimization of employee placement, profit margins increased andled to growths in sales and profits, supporting the Company’s overall business(accounted for 194% of the overall increase in sales and 618% of the overall
increase in profit) (Figures 35-37).
・Meanwhile, although the SI Business experienced expansion with thefinancial and manufacturing industries, system development projects for ashipping company and a telecommunication company became smaller. The
profit margin also declined, resulting in declines in sales and profits.
・The Digital Business, while small in scale (4% of sales and 2% of operating
profit), experienced rapid growth, with an increase in sales by Y251 million
YoY (+71.6%) and a doubling operating profit from Y16 million to Y34
million.
・While the sales of the SI Business and the Digital Business fell short of theinitial forecasts, the sales of Enhancement exceeded the forecast (Figure 37).

【Figure 36】Comparison of the Past Two Fiscal Years’
Operating Profit and Margin by Business Model
Unit: million yen or %Digital Business
SI Business
Enhancement Business
Operating Profit (total)
Digital Business
SI Business
Enhancement Business
Operating Margin (overall average)

Diff: million yen
437
4

Total

DigitalBusiness

12,0006,000

Operating margin(unit: %)（+225)（+251)(-462)

Initial Forecast
4,420
3,550

Industry
Finance
Distribution
Telecommunication &Transportation

YoY Change

18,000

4,857
3,554

【Figure 34】Comparison of the Past Two Fiscal Years’ Operating
Profit and Margin by Industry

Other(Million yen)

ResultDifference
17
-193
210
34
1.1%
-3.4%
1.5%
0.1%

% Diff.
108.0%-37.0%
23.9%
2.4%【Figure 37】Comparison between Initial Forecasts andResults for Sales of Each Business Model
Business Model

DigitalSI
Enhancement
Total

FY2023 Sales
Initial Forecast
602
780
4,183
5,140
11,53911,38016,32517,300ResultDiff: million yen
-178
-957
159
-976

Diff: %
-22.8%-18.6%
1.4%
-5.6%

29/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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)
w Decreased sales of the SI
Business and the increasein costs were absorbed byincreased sales andimproved profit marginsof the Enhancement
Business, resulting in aslight increase inoperating profit.

Issued: 6/9/2023

Analysis of Factors that Increased or Decreased Operating Profit
Figure 38 shows an analysis of last fiscal year’s overall operating profit interms of the factors that contributed to its increase or decrease. While thesales of the SI Business decreased for industries such as transportation &telecommunication (-Y138 million) and costs had increased for the
improvement of the business foundation (people development and IT
investment) and for the 50th anniversary project (advertising expenses), they
were offset by the Enhancement Business’ sophistication and expansion ofderivative development projects (+Y258 million). As a result, company-wide
operating profit increased slightly by Y34 million.
【Figure 38】Factors Contributing to Operating Profit Growth in FY2023 (lastfiscal year) (unit: million yen)
Increase

Sophistication andexpansion ofderivative
development projects
in the Enhancement
Business(Million yen)

Decrease

+258
1,417

-29
-138

Decrease insales of the
SI Business

1
FY2022

2

3

YoY Change:

1,452
-55

Businessfoundationbuilding (people
development
and IT
investment)

Increase inadvertisingexpenses for the50th anniversary
project

456
FY2023(Ref) Prepared by Alpha-Win Research Dept. based on the financial results materials

w The gross margin
improved, absorbing theworsened SG&A
expenses ratio caused by
the increase in costs forstrengthening thebusiness foundation, etc.
Consequently, a gradualincrease in the operating
margin was observed.

The SG&A expenses increased by 4.2% YoY, which is greater than the sales
growth rate of 1.4%. The SG&A expenses ratio increased by 0.4 percentage
point from 12.6% in FY2022 to 13.0% in FY2023. This was mainly because
personnel expenses rose by more than 3% YoY (+Y33 million), causing theratio of personnel expenses to sales to increase from 6.0% to 6.1%, andbecause rent and other expenses increased.
However, the gross profit margin improved by 0.5 percentage point from
21.4% to 21.9% in the same order. The operating margin also improved by
0.1 percentage point from 8.8% to 8.9%. With sales growth as well, theoperating profit resulted in a 2.4% increase.

◆ CUBE SYSTEM’s Financial Forecast for FY2024 (thisfiscal year)
w Double-digit increases
in sales and operating
profit are expected thisfiscal year.

SummaryThis fiscal year’s results are expected to be sales of Y18,000 million (+10.3%
YoY), operating profit of Y1,620 million (+11.5% YoY), recurring profit ofY1,635 million (+10.4% YoY), and net profit of Y1,080 million (+9.1%
YoY). The Company is expecting a nearly double-digit increase in sales andprofits, as well as consecutive record highs for sales and each profit. It does
not plan to record a large amount of non-operating or extraordinary profit/loss
during this fiscal year. Note that the Company plans to increase recruitmentof new graduates and mid-career hires by a certain number, mainly in Japan.
30/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023【Figure 39】The Company’s Financial Forecast for FY2024 (this fiscal year) (unit: million yen)
Unit: million yen
Sales
Gross Profit
Gross Margin
SG&A Expenses
SG&A Expenses Ratio
Operating Profit
O.P. Margin
Recurring Profit
Net Profit

Last FY's Results
FY2023This FY's Company Plan
FY2024

16,326
3,570
21.9%
2,118
13.0%
1,452
8.9%
1,480
990

18,000

1,620
9.0%
1,635
1,080

FY2023First Half

FY2024First-Half Plan

7,892
1,651
20.9%
1,053
13.3%
598
7.6%
595
388

YoY Change
(%)

8,577

8.7%

700
8.2%
700
457

17.0%
0.6%
17.7%
17.7%

FY2023
Second Half
8,434
1,919
22.8%
1,065
12.6%
854
10.1%
885
602

FY2024
Second-Half PlanYoY Change
(%)

9,423

11.7%

920
9.8%
935
623

7.8%
-0.4%
5.6%
3.6%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results materials

w Expecting nearly doubledigit YoY growth for sales
and operating profit inboth the first and thesecond half.

Financial Forecast for the First and the Second Half
In the first half, the Company plans to achieve sales of Y8,577 million (+8.7%
YoY), operating profit of Y700 million (+17.0% YoY), and net profit ofY457 million (+17.7% YoY) (Figure 39). Subtracting the first half’s planfrom the full-year plan, the forecast for the second half is Y9,423 million(+11.7% YoY), Y920 million (+7.8% YoY), and Y623 million (+3.6% YoY),
respectively.
In previous years, the operating margin in the second half has tended to risecompared to the first half due to increased sales, improved productivity, andseasonality. During this fiscal year, too, the margin is expected to increase by
1.6 percentage points from 8.2% in the first half to 9.8% in the second half
(in the previous fiscal year or FY2023: 7.6% in the first half and 10.1% in thesecond half). Compared to the first half of this fiscal year, sales are expected
to increase by 9.9% in the second half, while the operating profit is expected
to rise by 31.4% (in the previous fiscal year, 6.9% growth in sales and 42.8%
growth in profit).

w By business model, sales are
expected to recover for SI,
continue growth for Digital,and slightly decline forEnhancement.
(21) Consulting collaboration
model: Business model in which
new customers are developed
jointly with consulting companies,
or business is developed jointlywith the consulting division ofmajor SI companies.

w By industry, the otherindustries and finance willbe the growth drivers.

Estimates/Assumptions Used in Predicting Sales GrowthThis fiscal year, the Company plans to increase sales through the following
measures/factors.
・In terms of sales by business model, while a slight decline is expected forthe sales of the Enhancement Business due to a decrease in the order backlog,
it expects to achieve a high sales growth rate for the Digital/SI Business byworking proactively to acquire strategic IT investment projects from its
customers (Figure 40 on page 32). In the Digital Business, sales are expected
to increase significantly by Y317 million (+53% YoY) due to thedevelopment of the consulting collaboration model21 and the expansion ofservices using AI technologies.
・In addition, in the SI Business, it plans to increase sales by Y1,666 million(+40% YoY) by collaborating with vendors in the cloud business, which isgreatly in demand in the market, and receiving more orders by providing
solutions. In the Enhancement Business, sales increased steadily in theprevious fiscal year, but since much of the business is concerned with theconventional areas of business and due to limitation of resources, sales are
expected to decline by Y309 million (-3% YoY).
・By industry, it plans to increase sales from the three industries excludingtransportation & telecommunication, in which less orders for projects are
expected to be received. Of the planned overall increase in sales of Y1,674
million, sales from the other industries are expected to contribute the most,with a sales growth of Y963 million (58% of the entire sales growth; +19.1%
YoY). Businesses related to manufacturing, the government, energy, AI, and
31/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

blockchain are particularly expected to grow. In addition, IT investments byfinancial institutions such as non-life insurance companies and banks arerecovering, so sales from them are expected to increase by Y643 million(38% of the entire sales growth; +13.2% YoY) (Figure 41).
【Figure 40】Forecasted Sales by Business Model in
FY2024 (this fiscal year) (CE: the Company’s plan)(Million yen)

20,00018,00016,00016,325602

14,0004,183

18,000920

YoY Change(Million yen)（+1,674)

7,000（+317)

5,850＋19.1% YoY（＋963）＋13.2% YoY（＋643）

6,000-10.7% YoY（-308）

4,000
SI Business

10,000

3,554

3,931
2,883

3,000

8,000

5,029

4,857

5,000

（+1,666)

5,993＋10.6% YoY（＋376）

5,501

Digital Business

12,0006,000【Figure 41】Forecasted Sales by Industry in FY2024(this fiscal year) (the Company’s plan)

2,575

2,000

11,53911,2304,000（-309)

Enhancement
Business

1,000
0

2,000

FY2023(result)

0
FY2023

FY2024(plan)

Finance

FY2024 CE

FY2023(result)

FY2024(plan)

Distribution

FY2023(result)

FY2024(plan)

Telecommunication &Transportation

FY2023(result)

FY2024(plan)
Other(Ref) Figures 40 and 41: Prepared by Alpha-Win Research Dept. based on the financial results materials.

w Expecting to absorb theinvestment costs for future
growth and slightly
increase the operating
margin. With sales growth,a double-digit increase inoperating profit is expected.

Estimates/Assumptions Used in Predicting Operating Profit GrowthThis fiscal year, although productivity is expected to continue to improve, itwill be offset by an increase in costs due to greater investment for future
growth. Consequently, the operating margin is planned to improve by only
0.1 percentage point from the previous fiscal year to 9.0%. However, theoperating profit is expected to increase by Y167 million or 11.5% YoY due
to sales growth (as reference, the operating margin was 6.5% in FY2020 →
7.9% in FY2021 → 8.8% in FY2022 → 8.9% in FY2023).

w Planning to improve
profitability by working on
digitalization, improving
productivity, and shiftingto high-value-added
businesses

The Company expects the following factors to increase profit:(1) Promoting in-house digitalization to improve business productivity(2) Continuing with measures to improve profitability through thesophistication of the enhancement services(3) Creating a development system that optimizes resources(4) Providing services with high added value (DX projects and proposalbased business)w This fiscal year’s main
themes are building thealliance with NRI,
executing the HR strategy,
and expanding the DX
business.

Themes of the Current Fiscal YearBusiness development, production system expansion/enhancement, andcorporate planning are the three themes of this fiscal year. It plans toespecially focus on developing its alliance with NRI, executing HR
strategies, and expanding DX, business, and processes (Figure 42).
【Figure 42】Themes of FY2024 (this fiscal year)
Business
Development

ExpandandEnhance theProduction
SystemCorporate
Planning

Capital and business alliance with NRI
HR strategy (hiring/development/engagement)

Tiering strategy

Partnership strategy

Finance strategy

DX/Business/Processes

Quality strategy

R&D Strategy (investment)(Ref) Financial results materials.

32/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

Issued: 6/9/2023

8． Growth Strategy◆ VISION 2026: The First Medium-Term Management
Plan
As the successor to the previous VISION 2020, the Company has announced
VISION 2026, the medium-term vision for the six years from FY2022 to
FY2027. The Company is currently working on the First Medium-Term
Management Plan which targets the first half of this VISION’s span, or thethree fiscal years ending in FY2024.

w Working on the First
Medium-Term
Management Plan ofV2026. This fiscal year isthe final year of this first
medium-term plan.

Direction of Business (No change; continuation)
With the impact of COVID-19, the society’s themes and workstyles are
expected to change as the society makes a transition to the new normal. To
proactively and flexibly respond to these changes, the Company has createdthe following two guidelines.
・The employees themselves will have their own vision and business-oriented
mindset, thinking and acting for themselves.
・Achieve business growth through the proposal-based business (a businessmodel in which solutions are developed based on the Company’s
technologies and expertise in its customers’ industries, proposed to its
customers/industries, and provided as services) and the contract-based
business (a business model in which the Company conducts contractdevelopment of information systems as requested by its customers).
w In the medium-term plan
V2026, it plans to actively
work on developing the
proposal-based businessin addition to its
conventional contractbased business.

The Company plans to achieve growth by shifting from the conventional
contract-based business to the proposal & contract based business. It will
actively make proposals, start new businesses, and build a stable andsustainable business foundation. It also plans to increase investment in the SI
Business (cloud projects and cooperation with major SIs) and the Digital
Business (solutions) based on the Enhancement Business.

w Based on Enhancement, it
plans to achieve growthby focusing investment
on its SI and Digitalbusinesses.

The Company’s current business is categorized into three business models:
Enhancement, SI, and Digital . As shown in Figure 43, the proportion of eachbusiness model’s sales in the order of Enhancement, SI, and Digital is planned
to be changed from 83%, 16%, and 1% in FY2021 to 60%, 30%, and 10% in
FY2027 and 40%, 40%, and 20% over the long term (about ten years fromnow).

【Figure 43】Direction of the Medium-Term Plan
(V2026)
Image of Sales Breakdown by Business Model
ActionActionTake on challenges with a completely
Take on new
challenges
witha completely
approachthanbeforenew approach than before

66

Investment
efficiency
as(raisemuch capitalas possible)
as much as possible)& Shift)
Shift)

Expand share through two approaches
and strengths
Expand share throughtwo approaches
and strengths
Large-scale ▶ Cooperate with SIer
▶ Cooperate
Large-scale
with
SIer
▶ Solution
Small/Mid-scale
proposals
Small/Mid-scale ▶ Solution proposals

SI Business(Lift & Shift*)rmation themetion
egacytheme
systemsndplatforms
y systems
platforms

Business
iness

Survive in a shrinking market

Enhancement
Survive in a shrinking market
In-depth pursuit of highproductivity
and highofadded-value
Business
In-depth
pursuithighrmation systems
rtandderivativetion
systemsndderivatived effficient
resource

icient resource

Business Portfolio 2026
Business Portfolio 2026

Proposal-based approach

Proposal-based
approach
Alliances
DigitalBusiness
Alliances
Investment (raise capital efficiency

ation theme
theme
ital
technologies
echnologies
asedbusinesssbusiness(high profitability)
productivity
and high added-value(high profitability)

Progress with the Medium-Term Plan and Our Next Steps

Concept forfor Sales
Concept
Sales Breakdown
Breakdownby
byBusinessBusinessModel
Model
Business Portfolio
事業ポートフォリオ
Business Portfolio

Business Model

usiness
ness【Figure 44】Progress and Next Steps of the Medium-Term Plan (V2026)： 3 ： 1 Model： 3 ： 1 Model

10%
10%
10%
1%
1%
1%
1%
16%
16％
16%
83%
83%
83%
2020

30%
30%
30%
Per
PerPerson
PersonPer
PersonY30
mil 60%Y30 mil.
60%
Y30 mil 60%

2026

The First Medium-Term Management Plan (FY2022 – FY2024)
Building the management/business foundation

モデル
4
2 Model
： 4
： 2
4︓
4︓
4 ： 4 ： 2 Model

20%
20%
20%

Results Achieved to Date
Digital Business
Develop digitalsolution services

40% Digitalization Business
40%
Business
40% SIDigitalization
SI BusinessBusiness
SI Business
Enhancement
Enhancement

40%
40%

40%

Long-Term Goal

2019

2026

Long-Term Target

2019

2026

Long-Term Target(Ref) Financial results materials(Note) *Lift & Shift: Providing SI services in which the conventional
system environment is moved to the cloud environment (“Lift”)
and the cloud-based system is rebuilt (“Shift”). 2020 points to
FY2021 and 2026 points to FY2027.

The Second Medium-Term Management Plan (FY2025 – FY2027)
Generate results from the transformation and accelerate growth

Build areas of strengthin Lift ＆ Shift
Enhancement Business
Build and execute thenew enhancement model

Our Next Steps and Directions

Brand

・Seamless alignment with consultations in・Develop original products
development
V2026 第1次中期経営計画（ 〜2023年）
・Develop the proposal-based SI business・Provide rapid development to end users through新たなビジネスへの変⾰の時期・経営/事業基盤の構築(moretransactions with the end users)

F@CE DX

Growth・Collaborate with solution vendors
・Lift ＆ Shift businessProfit・Consolidation, efficiency improvement,
optimization, and sophistication of HR,
technologies, and know-how

Management Foundation

・Enhance human resources
Strength people development,(recruitment/development strategies)
・Quality enhancement
group governance, and・Work on corporate governanceinternal control

Provide high productivity and new development
solutions through technologies for shifting to the cloudand microservices
Strengthen the nearshore and offshore (Asia) sites toensure that production capacity will be stable andstrong over the long term
・Enhance engagement and communication of
information and knowledge
・Achieve ESG at high levels, collaborating withpartners(Ref) Financial results materials

33/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

Priority Measures and Directions
The Company has set out its three business models, as well as the priority
measures and directions concerning its business challenges, and has been
making progress according to its plan (Figure 44 on page 33). It plans to focus
on expanding business, improving profitability, and enhancing human capitalfor the Second Medium-Term Management Plan (FY2025 – FY2027) inwhich it will “generate results from the transformation and accelerate growth.”

w Will focus on expanding
business, improving
profitability, andenhancing human capital

Key Performance Indicator (KPI)The Company has announced the indicators for its first medium-term planand its medium/long-term directions based on financial and non-financial
approaches. Indicators are updated or added as necessary.
The financial indicators have been clearly defined as five items, which consistof ROE, operating margin, and three items related to sales (Figure 45). In
May 2022, the Company announced upward revisions for three of the itemsof the First Medium-Term Management Plan, excluding the ROE (13% ormore) and sales per employee (Y23 million). Specifically, it raised thenumerical targets for the sales breakdown representing business modeltransformation (the SI Business’ sales growth since FY2021: +Y2.5 billion⇒ +Y3.3 billion), the sales growth rate (CAGR = compound annual growth
rate: about 8% or 7.8% ⇒ 8.7%), and the operating margin (8% ⇒ 9%) (nochange to the medium-term plan itself since then).

w Financial and nonfinancial indicators havebeen defined as its KPI
w Five items set as financial
indicators: ROE, sales perperson, sales breakdown,
sales CAGR, andoperating margin

As its non-financial indicators, it had previously set the following four items
that it plans to achieve through the power of IT: diversity promotion,
workstyle reform, communication vitalization, and people development(previously added). It has now also added environmental goals (GHG
emission goals) as another item. These items are based on the idea that therespect for the people (enhancement of human capital) and the environmentis essential to sustainability management and achieving sustainable growth.
The breakdown of the KPIs of each non-financial item has also been
described, with numerical targets and results now clarified (Figure 46). It will
work on achieving all KPI targets, focusing on increasing the percentage offemale managers, correcting the gender wage gap, and improving thepercentage of male employees taking childcare leave.

w Added environment to its
non-financial KPIs, which
now consist of a total of 5
items. The breakdown ofeach item has been
described and KPIs havebeen set.

【Figure 45】Medium-Term Plan (V2026): Financial and
Non-Financial Goals (KPIs)
Key Performance
Indicator (KPI)

Capital Efficiency
Productivity
FinancialBusiness Model
Transformation

ROE(FY2020: 14.0%)

Sales per person(FY2020: 21M yen)

Sales breakdown

FY2023 Results

11.8%

23M yenSI Business

SI Business1.6B yen+

Sales CAGR

5.1%

Profit Indicator

Operating margin

8.9%

Diversity Promotion

Percentage of female
employees amongsection-chief positions(Based on FY2020)(FY2020: 7.9%)

Key Performance Indicator (KPI)

Medium/Long-Term Plan

Maintain

22.8M yen(Compared to FY2020)

Growth Potential

Goals of the First
Medium-Term
Management Plan

13.0% or greater

Workstyle Reform

Paid holiday
acquisition rate

Communication Vitalization Smile Share Product

Digital Business +2B yen (since FY2023)+3.3B yen (since FY2020)
Ratio 6:3:1 for Enhancement, SI, and Digital

Approx.

8%

9%

Approx.
Approx.

9%People Development

Diverse career paths
and development

Measures to improve profitability and productivity continuously

Promoting female participation,
supporting employment of people withdisabilities, and supporting LGBTQ

64.1％

Job satisfaction, mental and physicalhealth, absenteeism, and healthmanagement

Started an IT
professional
development program

Workstyle Reform

10%

15.3％
Consideredengagement
indicators/survey

Diversity
Promotion

30M yenFY2023 Results

NonFinancial【Figure 46】Medium-Term Plan (V2026): Details of the NonFinancial Goals

New
新規設定
次ページ参照Targets

Improving well-being through theoriginal product Smile ShareWorkplace with diverse professionals(Ref) Financial results materials(Notes on items in the figure)*1: Result for FY2022 is the YoY sales comparison with the sales of FY2021.
*2: Acquisition rate (%) = Total number of days of paid holiday acquired by
all employees ÷ Total number of days of paid holiday granted to all
employees ×100
*3 Thanks Connect: one of the Smile Share Products that visualizes people’s
feelings of “thank you”

Womenʼs
Participation

・Percentage of female managers
・Percentage of female employees amongsection-chief positions (JP-A)
・Percentage of women among JP-A promotion
applicants

Wage Gap

Gender wage gap*1

Work-Life
Balance・Hours of overtime work (monthly
average)*2・Paid holiday acquisition rate・Menʼs childcare leave acquisition rate

HealthManagement

・Providing health education and motivation
to all employees
・Percentage of highly stressed employees

Engagement

Percentage of employees with job
satisfaction

Communication Vitalization
People Development
Environment

Utilization of the Smile Share Productamong employees (% using INOPAY*3)・IT skills training attendance rate
・Encouragement of certification (Applied IT / AWS/ Oracle Cloud)*4

・Days of training/education (incl. selfdevelopment) per employee
GHG emissions goal (Scope 1, 2, and 3）(Compared to FY2020)

FY2023 Results

8.6％
15.3％
22.2％

FY2024 Goals

10％
20％
25％

－

－

31 hr
64.1％
35.7％

25 hr
70％
50％
－

－

14.4％

10％

40.0％

60％

60％

80％

91%
21％/1％/2％
2.9 MD100%

YOY Increase

Scope 1 & 2: 234t-CO2

Scope 1 & 2: 263t-CO2

Scope 3: 4,368t-CO2

12 MD

Scope 3: 4,348t-CO2(Ref) Financial results materials(Notes on items in the figure)*1: Planned to be disclosed in the securities report*2: Calculated based on the number of hours exceeding the scheduled working
hours (7.5 hr); average of all employees.
*3: Utilization rate of INOPAY (cashless settlement app for the internal currency
including its mini app)
*4: Applied information technology engineer examination / AWS certification(professional level) / Oracle certification (Oracle Cloud Infrastructure)

34/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

Financial Goals of the Medium-Term Management Plan
The Company has not changed the financial targets of its medium-term
management plan (revised upward on May 11, 2022) for the current fiscal
year (FY2024), which is the final year of the plan. On the other hand, at the
beginning of this fiscal year, it announced lower forecasts for the same fiscal
year (this fiscal year) (Figures 47 and 48).

w The medium-term plan’stargets for this fiscal year,
which is the final year of
the first medium-term
plan, remain unchanged(regarding this fiscal
year’s forecasts, there aredifferences between themedium-term plan andthe forecast announced at
the beginning of the fiscal
year).

In the order of the old forecast of the medium-term plan ⇒ new forecast of
the medium-term plan / current forecast announced at the beginning of the
fiscal year, sales are Y18.5 billion ⇒ Y19.0 billion / Y18.0 billion (-Y1.0
billion from medium-term plan’s forecast); operating profit is Y1.48 billion⇒ Y1.71 billion / Y1.62 billion (similarly, -Y90 million); and ROE is 13%
or more ⇒ 13% or more / 11%. The forecasts for this fiscal year haveessentially been revised downward, but the operating margin target of 9.0%
has not been changed.

w No change to theoperating margin target

Comparing the each business model’s sales forecast for this fiscal year
between the medium-term plan’s new forecast and the forecast announced at
the beginning of the fiscal year, the Digital Business was revised down by
Y80 million and the Enhancement Business was revised down by Y1,070
million, both by about -8%. On the other hand, the SI Business was revised
upward by Y150 million or about 3%.

w Sales forecasts bybusiness model havebeen revised downward
for Digital andEnhancement but revised
upward for SI.

As a result, the overall sales CAGR (annual rate over three fiscal years) is
expected to decline from +8.7% to +6.8%.

【Figure 47】Financial Goals of the First Medium Term Management Plan (V2026) (FY2022 – FY2024)
FY2021Million yen
Sales
Digital Business
SI Business
Enhancement Business
Operating Profit
Operating Margin
ROE

Results
14,78866
2,561
12,162
1,174
7.9%
14.0%

First YearFY2022
Initial CE (mediumterm plan: old)
16,000320
4,130
11,5501,230
7.7%
13% or more

FY2022
Results
16,099350
4,645
11,103
1,417
8.8%
13.8%

Second YearFY2023
FY2023Medium-term
Medium-term
plan: Old CE
plan: New CE
17,20017,300
400
780
4,500
5,140
12,30011,380
1,340
1,530
7.9%
8.8%
11.0%

FY2023Results
16,325602
4,183
11,539
1,452
8.9%
11.8%

Third YearFY2024FY2024FY2024
Medium-term
Medium-term
CE at beginning ofplan: Old CE
Plan: New CE
FY
18,50019,00018,000
500
1,000
920
5,000
5,700
5,850
13,00012,300
11,230
1,480
1,710
1,620
8.0%
9.0%
9.0%
13.0%
11.0%

(Ref) Excerpt from the financial results materials. “Initial CE” or the “Medium-term plan: Old CE” is the Company’s forecast announced onJune 11, 2021. “Medium-term plan: New CE” is the forecast announced on May 11, 2022.

【Figure 48】Forecasts of Medium-Term Financial Results (the Company’s plan and Alpha-Win’s forecast)
Unit: million yen, %Sales
Digital Business
SI Business
Enhancement Business
Gross Profit
Gross Margin
SG&A Expenses(% over sales)

Operating Profit(% over sales)

Recurring Profit(% over sales)

Net Profit(% over sales)

Sales (% YoY growth)Gross Margin (% YoY diff.)
SG&A Expenses (% YoY growth)

Operating Profit (% YoY growth)
Recurring Profit (% YoY growth)
Net Profit (% YoY growth)

FY2023 Results

FY2024
Medium-term plan: Old CE

FY2024
Medium-term plan: New CE

FY2024
CE at beginning of FY

16,326602
4,183
11,539
3,570
21.9%
2,118
13.0%
1,452
8.9%
1,480
9.1%
990
6.1%

18,500500
5,000
13,00019,0001,000
5,700
12,30018,000920
5,850
11,230

1,480
8.0%

1,710
9.0%

1,620
9.0%
1,635
9.1%
1,080
6.0%

1.4%
0.4%
4.2%
2.5%
3.4%
4.8%

13.3%

16.4%

10.3%

1.9%

17.7%

11.5%
10.4%
9.1%

FY2024Old E
18,7001,000
5,800
11,900
4,000
21.4%
2,300
12.3%
1,700
9.1%
1,715
9.2%
1,100
5.9%

FY2024New E
17,800900
5,800
11,100
3,900
21.9%
2,300
12.9%
1,600
9.0%
1,615
9.1%
1,065
6.0%

FY2025Previous E
19,6001,200
6,200
12,200
4,200
21.4%
2,400
12.2%
1,800
9.2%
1,820
9.3%
1,180
6.0%

FY2025New E
19,0001,200
6,200
11,600
4,150
21.8%
2,425
12.8%
1,725
9.1%
1,755
9.2%
1,155
6.1%

FY2026New E
20,5001,700
6,800
12,100
4,500
22.0%
2,650
12.9%
1,850
9.0%
1,870
9.1%
1,235
6.0%

14.5%
-0.5%
8.6%
17.0%
15.8%
11.1%

9.0%
0.0%
8.6%
10.2%
9.1%
7.6%

4.8%
0.0%
4.3%
5.9%
6.1%
7.3%

6.7%
-0.1%
5.4%
7.8%
8.7%
8.5%

7.9%
0.1%
9.3%
7.2%
6.6%
6.9%

(Ref) Prepared by Alpha-Win Research Dept.

35/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023◆ Alpha-Win Research Dept.’s Financial Forecast for
FY2024 (this fiscal year)
Revisions of the Financial Forecast
We have reviewed our financial forecast for this fiscal year and revised sales
from the previous Y18,700 million to Y17,800 million (Figure 48 on page35). We also lowered our operating profit forecast from Y1,700 million toY1,600 million. Compared to the Company’s forecast for this fiscal year,
sales and operating profits are expected be slightly lower by -Y200 million
and -Y20 million, respectively. However, we expect the operating margin to
be 9%, which is the same level as the Company’s forecast.

w We reviewed our previous
forecast for this FY andrevised sales and profit
downward to mostly thesame level as theCompany's plan.

w The company forecast

With its customers showing strong enthusiasm in making strategic IT
investments, the Company has been solidly receiving orders. We believe that
if the Company carries out cost control, the planned values of profit are within
an achievable range. However, judging from the YoY sales growth rate, theCompany’s forecast seems somewhat ambitious. We therefore made asomewhat more cautious forecast, taking into account the risks to a certain
amount, including the increase in costs.

seems to be within an
achievable range, but wemade a somewhat cautious
forecast considering thehigh growth rate estimatedfor sales and the risk ofincrease in costs.

w We expect the increase incost to be offset by the
improvement inproductivity, so that theoperating margin willslightly increase as theCompany plans.

The Company is expected to actively invest futher toward growth, causing
various costs such as personnel expenses and subcontracting costs to increase.
Meanwhile, productivity is expected to improve due to digitalization andresource optimization, so we expect the operating margin to be 9.0%, risingby 0.1 percentage point from the previous fiscal year’s 8.9%.
Financial Forecast and Track Record of Financial Performance
We analyzed the past deviation between the Company’s initial forecasts madeat the beginning of fiscal years and the results over the long term (Figure 49).

w Over many years, there has
generally been a small
deviation on average
between the initial forecast
made at the beginning of
the fiscal year and theactual results, but theCompany has tended toannounce somewhat
ambitious forecasts.

During this period, on a simple average, the deviations have been small.
Results for sales were 1.9% lower than the initial forecasts, and operating
profit, recurring profit, and net profit were 3.9%, 2.5%, and 3.1% lower,
respectively. Neither operating nor recurring profit has ever been more than
30% lower than the initial forecast in any fiscal year. The Company tends toannounce targets that are ambitious but within a realistically achievable range.

【Figure 49】Comparison of (the Company’s) Initial Forecast Made at the Beginning of the Fiscal Year vs. Consolidated
Results over the Years
Sales

Consolidated
Unit: million yen
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008FY2009FY2010FY2011FY2012FY2013
FY2014FY2015FY2016FY2017FY2018FY2019FY2020
FY2021
FY2022
FY2023
FY2024 CE

Initial Forecast
6,900
7,000
7,800
8,300
8,300
8,500
8,800
9,200
9,300
9,000
10,00012,00013,00014,00014,30014,70015,50016,00016,00017,30018,000

Green highlight: record-high value

Operating Profit
Results

Initial Forecast
4,806
5,598
6,244
6,575
7,100
7,767
7,923
8,109
8,507
8,706
9,166
8,431
9,242
11,217
12,527
12,623
12,89913,55914,325
14,70814,78816,09916,325Results

Recurring Profit
Initial Forecast

Results

Net Profit Attributable to Owners of
the Parent (N.P.)

Initial Forecast

Results

387
485
445
246
510
432
235
491
522
500
284
280
558
532
551
287
315
549
600
551
340
312
590
570
584
330
324
605
645
610
643
336
342
680
652
685
597
350
308
660
637
670
660
350
349
675
662
680
672
263
208
665
524
675
533
350
118
620
601
630
606
350
338
700
665
700
702
380
387
840
964
840
981
480
594
1,000
949
1,020
960
600
629
920
781
940
811
450
551
1,060
855
1,080
893
650
567
1,010
922
1,010
960
640
597
1,090
959
1,090
976
684
525
1,120
1,174
1,120
1,295
700
844
1,230
1,417
1,250
1,432
850
944
1,530
1,452
1,545
1,480
1,000
989
1,620
1,635
1,080
Simple average of diff. (unit: %), calc. for longest period with data on both sales and profits→
Yellow: 2nd highest
Number of times revised up:down from initial forecast →

Sales

O.P.

R.P.

N.P.

% Diff. from Initial Forecast

Sales

O.P.

R.P.

N.P.

% YoY Change for Actual Results

-4.7%
1.4%
-0.4%
-4.5%
-2.3%
0.1%
-1.1%
-0.4%
-9.3%
2.7%
12.2%
4.4%
-2.9%
-7.9%
-5.2%
-2.5%
-5.1%
-7.6%
0.6%
-5.6%

6.6%
-4.1%
-3.5%
-1.9%
-21.2%
-3.1%
-5.0%
14.8%
-5.1%
-15.1%-19.3%-8.8%-12.0%
4.8%
15.2%
-5.1%

-4.3%
3.5%
-8.2%
2.4%
5.4%
-12.8%-1.5%-1.2%-21.0%
-3.8%
0.3%
16.7%
-5.9%
-13.7%-17.3%-5.0%-10.5%
15.6%
14.6%
-4.2%

-1.5%
9.7%
-8.3%
-1.8%
1.9%
-12.1%-0.3%-20.9%-66.4%
-3.5%
1.7%
23.8%
4.8%
22.4%
-12.8%-6.8%-23.2%
20.6%
11.1%
-1.1%

-1.9%
6 ： 14-3.9%
4 ： 12-2.5%
7 ： 13-3.1%
8 ： 12

16.5%
15.0%
11.5%
5.2%
-2.9%
-4.4%
5.3%
-3.7%
15.7%
18.9%
8.0%
13.6%
10.2%
12.5%
9.4%
-1.6%
0.0%
-1.0%
2.0%
7.4%
5.9%
3.9%
2.3%
9.4%
10.2%
5.7%
4.9%
1.1%
-7.1%
-10.1%
2.3%
-2.3%
10.6%
13.4%
5.3%
4.0%
1.8%
-40.4%-8.0%-20.9%-20.7%-43.4%
9.6%
14.8%
13.7%
186.7%
21.4%
10.6%
15.8%
14.5%
11.7%
45.0%
39.7%
53.7%
0.8%
-1.6%
-2.1%
5.9%
2.2%
-17.7%-15.5%-12.4%
5.1%
9.5%
10.1%
2.9%
5.7%
7.8%
7.5%
5.2%
2.7%
4.1%
1.7%
-12.0%
0.5%
22.4%
32.7%
60.8%
8.9%
20.7%
10.6%
11.8%
1.4%
2.5%
3.4%
4.8%
10.3%
11.5%
10.4%
9.1%
5.9%
6.2%
7.1%
13.2%
↑ Simple average the FYs (excl. FY2024 CE)(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s forecast.

36/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023◆ Alpha-Win Research Dept.’s Forecast of Medium-Term
Financial Results
w We revised our mediumterm forecast. We believethat sales and profit willcontinue to increase overthe medium term,
consecutively hitting theirrecord-highs.

w The macroeconomic
environment andrecruitment will be therisk factors.

w We predict the mediumterm profit growth rate to
be about 6-10% per year.

w We expect the Company toable to grow sales by
当調査部では、今後も日
w be
about
5-8%IT
per投資は増加
year by
本企業のsuccessfully receiving
し、同社の中期年間利益
orders for projects related
成長率を
％と予想。
to strategic6～
IT10
investments.

w Over the medium term, we
expect the profit margin tostay flat due to costs
pertaining to upfront
investments. Sales growthis expected to be the main
factor contributing to
profit growth.

We revised our previous medium-term forecast and prepared a forecast for
the three fiscal years including this fiscal year, with the forecast for FY2026
newly added (Figure 48 shown previously on page 35).
For medium-term results, we made a somewhat more cautious forecast thanthe Company for both sales and profit upon considering the factors/estimates
described below and the risk factors. We believe, though, that the Company
may be able to continue its sales and profit growth trend in the next fiscal
year onwards as well, hitting record high sales and profits consecutively.
Risk Factors and Medium/Long-Term Profit Growth Potential
・Regarding the macroeconomic environment, there are concerns that thebusiness performance of Japanese companies may be impacted over the
medium term by the prolongation of the war in Ukraine, the depreciating yen,
the price rise, interest rate rising and remaining high to control inflation, andthe subsequent risk of a global recession occuring.
・Factors that are hard to predict include the earnings environment of theCompany’s main end users, IT investment trends, the impact of the costs
pertaining to the Company’s upfront investments, the increase in costs, andthe recruitment situation.
・Currently, the demand for systems is strong. Therefore, based on thefollowing factors and estimates, we predicted that sales and profit willcontinue to increase annually by about 6-10% over the medium to long term.
Factors and Estimates Used in Predicting Increased Sales
・Strategic IT investment projects are expected to increase for the time being.
By responding to such demand, the Company is likely to grow sales at about
5-8% per year over the medium term.
・The business with its major customers, the Digital Business, and the SI
Business are expected to continue to expand through the technologicalexpertise and credibility that it has developed over the years.
・Sales growth can be expected due to the development of new businesses
and business domains, specifically the businesses related to DX, energy,
consulting, and new solutions (Smile Share Product, cloud, AI, blockchain,etc.)
・Sales growth from large-scale M&As has not been factored in.
Factors and Estimates Used in Predicting Increased Profit
・The gross margin rose last fiscal year due to various measures (productivity
improvement, reviewing subcontracting cost, etc.), but we expect it to stayflat at a high level starting this fiscal year.
・ The Company is expected work on upfront investments, such as
strengthening its business foundation for future growth (expand and enhance
its development sites and production system), increasing personnel expenses
and subcontracting cost, and conducting research on new technologies andbusinesses. Therefore, we expect that the cost of manufacturing and the
SG&A expenses will increase over the medium term.
・Consequently, we predict that the operating margin will also stay flat (atabout 9%) starting in the next fiscal year and that sales growth will be themain factor contributing to profit growth.
・No significant occurrence of unprofitable projects, nonoperating profit/loss,
or extraordinary profit/loss are expected.
37/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

9． Analyst’s Views◆ SWOT Analysis
The Company’s SWOT analysis result is shown in Figure 50. The
strengthened relationship with NRI in the capital and business alliance wasadded to is strengths. The expansion/enhancement of its development sites
and production system and the strengthening of its development system suchas agile development have been added to its opportunities (changes made inthis report are shown in red).
【Figure 50】SWOT Analysis
・ Long history in the industry, extensive experience, and strong credibility
・ Stable and excellent customer base・ Talents and organization with technological expertise, unique know-how, and knowledge (for different industry types and project/risk management)

Strength

・ Entry barrier essentially high; highly maintainable business model・ Capital and business alliance with NRI・ Cash-cow business, ample cash & deposits, and firm financial standing・ Business management focused on new business development and business expansion (actively investing to strengthen and enhance its development
sites and production system)
・ Consulting-based sales through direct sales activities
・ Quality people development and training system
・ Low-cost development system using overseas subsidiaries
・ Relies heavily on certain customers
・ IT-related labor market is tight and retaining/recruiting talented employees is difficult (bottleneck to further growth)

Weakness・ Industry structure in which profit margin is hard to improve
・ Takes a long time for next-generation, growth-strategy products and services to gain full momentum
・ Project management (inherent risk of unprofitable projects ocurring)・ Specialized in domestic demands; overseas development difficult
・ Continous growth of the market for IT systems due to labor shortage and the need to streamline operation
・ DX, new products, new services, and technology innovations leading to increased strategic demand for systems

Opportunity

Threat・ Shifting to upstream processes, niche areas, large-scale dev. projects, and direct-contract projects; strengthen the Enhancement Business・ Improvement of productivity through agile development and AI
・ Business expansion following the global entry of customers
・ M&As and strengthening alliances
・ Reduced IT investment by customers, less demand for version updates, and intensifying price competition due to worsening macroeconomic
environment and economic downturn
・ Emergence of alternatives (popularization of AI or packaged business software), delayed product development, and product defects
・ Information management and leakage risks
・ Increased personnel expense and subcontracting cost(Ref) Prepared by Alpha-Win Research Dept.

w Its strengths are its
credibility and trackrecord over many years
and its technologicalexpertise. Growthpotential of the Company
is large since Japanesecompanies are expected
to increase IT
investments.

Describing the strengths in more detail, the Company has an excellent
customer base owing to its credibility and technological expertise that it has
built based on its extensive track record. The Company’s strength also lies in
its close position to the end users, which means that it can suggest related orderivative systems to its customers and obtain new development and service
projects (enhancement). Since its users, or Japanese companies, are expected
to continue to strategically increase IT and DX investments to improvebusiness efficiency and profitability, the Company’s growth potential is large.

w Acquisition of talented
employees is thebottleneck to further
growth.

On the other hand, looking at its weaknesses in more detail, the Company’s
industry in general tends to have a flat profit margin over the long term,
although it is beginning to gradually improve. Therefore, profit tends to notincrease without sales growth. Development of new areas of business andnew customer acquisition are also crucial to increasing sales, but the shortageof employees, especially for project manager positions, has been thebottleneck to further growth.

w Focusing onstrengthening project
management. However,
the occurrence of
unprofitable projects willcontinue to be an
inherent risk.

Also, the Company as well as the entire SI industry has been strengthening
preventive measures and project management over many years, but someprojects such as development in new areas still sometimes become
unprofitable and cause a temporary profit decline. Although it has beenworking on further improving its quality control and has been seeing positive
results in recent years, this point should be noted as a constant risk factor.
38/41

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023◆ Shareholder Return and Shareholder Benefit Program
The Company’s policy is to raise the shareholder asset value by improving
its financial results to conduct stable dividend payments and increase market
capitalization.
w The goal for consolidated
dividend payout ratio has
been raised from 35% to40%. Plans to raise
dividend (ordinary
dividend) consecutively.
w Plans to increase ordinary
dividend again this fiscal
year by 4 yen. Dividend
hikes are also possible
over the medium-term.
w Actual annual (maximum)
yield including theshareholder benefit
program is about 3.0%.

w The DOE is at a high level.

w Proactively returning
profit to shareholders.
w Rich in cash; may conduct
share buybacks and stock
splits in the future as well.

The consolidated dividend payout ratio changed from 46.5% in FY2020,
32.2% in FY2021, and 32.9% in FY2022, and then rose to 71.1% in FY2023
due to the commemorative dividend. The Company’s target dividend payout
ratio used to be 35%, but it has now raised this to 40%. The ratio is expected
to be 42.1% based on the Company’s forecast for FY2024. As a result of thischange, the ordinary dividend per share has been steadily increasing from 23
yen in FY2022 to 26 yen in FY2023 and 30 yen in FY2024 (plan) (Figure 51).
Since profit growth is expected over the medium term, we believe that
dividend may be increased more in the next fiscal year onwards.
The dividend yield is 2.5% when calculated based on a stock price of Y1,179(closing price on June 5). Many of the Company’s investors are individual
investors; the Company also has a shareholder benefit program in which JCB
gift cards are given to shareholders based on the number of shares they own(Figure 52 on page 40). When this benefit program is taken into account, thedividend yield actually increases to approx. 3.0% at maximum (based on the
optimum number of shares owned). The Company plans to continue to stably
pay dividend while raising the EPS to enhance the return of profit toshareholders. The actual annual yields of its competitors, including theirshareholder benefit programs (both companies grant QUO cards), are 3.7%
for HIMACS and 3.4% for Toho System Science. In comparison, theCompany’s dividend yield is somewhat low (as reference, NRI’s is 1.3%).
The dividend on equity ratio (DOE = total dividend / shareholder’s equity) in
FY2023 was 8.6% for the Company (4.5% excluding the commemorative
dividend), 5.0% for HIMACS (no commemorative dividend), 5.7% for Toho
System Science (no commemorative dividend), and 7.2% for NRI (asreference; no commemorative dividend). They are all high compared to thecommon level.
Since becoming listed on the market, the Company has conducted several
stock-splits, but none has been conducted since the 2-for-1 split in October
2014. It has also conducted several share buybacks in the past and has beenreturning profit to shareholders through means not limited to dividend hikes.
Since the Company has a solid financial standing and is rich in cash,
depending on the level of the stock price, additional share buybacks are
possible in the future.
【Figure 51】Change in Dividend and Dividend Payout Ratio (unit: yen or %)（ %）Dividend (left axis)

60.0

80.0

Commemorative dividend (left axis)

71.1

Dividend payout ratio (right axis)

70.0

50.0

60.0
51.2

40.0

48.9
42.7

41.2
36.3

30.0

46.5
35.2

30.1

32.4

35.8

39.4

24.0

37.0
32.2

42.7

42.0

30.0

10.0
8.3

8.3

50.0
40.0

32.9

20.0

8.3

41.7

8.5

2.5

2.5

8.5

8.5

14.0

14.0

14.0

16.0

16.0

18.0

20.0

23.0

26.0

30.0

32.0

34.0

0.0

20.0
10.0
0.0

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026
E
E
E(Ref) Prepared by Alpha-Win Research Dept. Estimates/forecasts (E) were made by Alpha-Win.

39/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023【Figure 52】Shareholder Benefit Program and Actual Net Yield (shareholder benefit vesting date: end of Sept.)
Number of Shares Owned
Shareholder Benefit
Actual Net(less than)
Dividend: Y(greater than or equal to)(JCB Gift Card: Y)
Yield: %
200
400
1,000
30
3.0
400
1,000
2,000
30
3.0
1,000
3,000
30
2.8
Actual net yield* = (dividend + benefit value) / (stock price)*Calculated for the min. (optimum) number of stock owned in each range
Stock price assumed to be Y1,179 (closing price on June 5, 2023). Dividend is based on this FY's forecast.

(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s website

w A defensive, domesticdemand-oriented growthstock. Stock priceincreased by approx. 5.2x
over the past approx. 14
years, largely
outperforming the
TOPIX.
w Stable growth is expected
to continue and it may be
an attractive
medium/long-term
investment target.

◆ Stock Characteristics/Price and Valuation Comparison
The Company’s stock is a defensive, small-cap, and domestic-demandoriented growth stock. Over the past approximately 14 years, the Company’s
stock price rose by about 5.2x, largely outperforming the TOPIX by +350%(calculated with stock splits taken into account; based on the closing price onJune 5, 2023; Figure 53). This rise seems to reflect the Company’s strong
fundamentals and firm financial growth over the long term.
With the rise in strategic IT and DX investments by Japanese companies, theCompany is expected to be able to maintain a relatively stable profit growth.
It may therefore be seen as a candidate for medium- to long-term investment.

【Figure 53】Long-Term Return of the Company’s Stock (CS) and TOPIX(change in monthly stock price over the past approx. 14 years)
700%
600%

CS％
TPX%

500%

Past approx. 14 years' growth rate (%)
CS
TPX
Relative return
515.1
165.0
350.2

400%
300%
200%

End of April 2009
CS*
192
TPX
837.796/5/2023
CS
1,179
TPX
2,219.79*Adjusted for stock split

100%
0%
-100%
4/20094/20104/20114/20124/20134/20144/20154/20164/20174/2018

2019/42020/42021/42022/42023/4

Note: CS stock price and TOPIX at the end of April 2009 set to 0% as the start point(Ref) Prepared by Alpha-Win Research Dept. The most recent stock price and TOPIX price are theclosing prices on June 5, 2023.

w Outperforming the
TOPIX for the past 12
months.

w Due to the rise in stock
price, the valuation isslightly higher than themarket average and thetwo competitors. Stockprice is priced at apremium, reflecting theCompany’s growthpotential and stability.

Over the past 12 months, the Company’s stock has outperformed the TOPIX,
its two competitors (HIMACS and Toho System Science), and NRI due toits strong business performance. However, in the last six months, it has beenslightly underperforming the TOPIX in a market environment favorable forlarge-cap stocks.
The Company’s valuation was compared in terms of the major valuation
indicators with all stocks listed on the TSE Prime Market as well as its
competitors (and NRI as reference). Due to the rise in stock price, theCompany’s valuation is slightly high in comparison, but not overvalued, in
terms of all major indicators and based on the values forecasted for this fiscal
year (Figure 54 on page 41). It could be interpreted that the Company's stock
price is priced at a premium due to its stable growth in business performanceto date and the anticipation of future growth.
40/41This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin 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: 6/9/2023

When defensive, small-cap, and domestic-demand-oriented growth stocks
gains attention in the market, the Company’s stock price will likely startoutperforming again. In addition, since its valuation does not seem
overpriced, the stock price will mostly likely respond to changes in thebusiness performance.

w We will continue tofollow the Company as adefensive, domesticdemand-oriented growthstock.

Note that the weekly beta relative to the TOPIX over the past five years is
1.20, which is high for a defensive business.
【Figure 54】Comparison of Valuation and Liquidity
Company Name
Code
Stock Price (at 6/5 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)

CUBE SYSTEM(CS: consolidated)

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

2335

4299

4333

1,179
18,569
16.55
1.86
2.54
7.22
1.03
26
1.20

Past approx. 6 Months' Average Daily Trading Value (million yen)

Past 5 Years' Weekly Beta (β: relative to TOPIX)

1,417
17,589
12.74
1.60
3.03
5.24
0.97
16
0.63

24 SI Companies
All TSE Prime Stocks
Listed on TSE Prime(average)(average)
4307
3,657
1,142.32
2,170,986
560,089
28.36
15.14
18.80
5.42
1.29
2.50
1.31
2.32
2.43
13.85
3.02
6,985
0.92
-

Refernce:
Nomura Research Institute(NRI: consolidated)

1,161
16,098
12.64
1.61
3.45
4.39
0.98
10
0.56

Market cap= (shares outstanding) x (market share price [at 6/5/2023 closing])
The companies' planned EPS and dividend values for FY2024 were used in all P/E and dividend yield calculations. Actual BPS values of FY2023 were used in P/B calculations.
EV/EBITDA=(market cap + interest bearing debt - cash & deposits*)/(operating profit + depreciation + intangible fixed asset amortization)
Operating profit is the companies' forecasts for this FY; depreciation and intangible fixed asset amortization were estimated based on last FY's results.
*Cash & deposits are the balance as of the end of March 2023
P/S=market cap / sales [the companies' forecasts for FY2024](Ref) Figures 54 and 55: Prepared by Alpha-Win Research Dept. based on the securities reports, financial results summaries, and stock data.

w Compared with the 24companies of the same
industry, its valuation isslightly low.

Relative to a universe of the leading 24 SI companies listed on the TSE Prime
Market (including the Company, the two competitors mentioned earlier, and
NRI; the total market capitalization of the 24 companies is approx. Y13.4
trillion, their total sales are about Y9.5 trillion, total operating profit isY945.9 billion, and operating margin is 9.5% on a simple average and 12.1%
on a weighted average), the Company’s valuation seems somewhat cheap(Figures 55).

w Valuation (P/E, etc.) could
rise to higher levels if
profit margins continue
to improve in addition to
the sales growth.

Going forward, we believe that if the Company’s operating margin
continuously improves and its sales grow, its EPS and valuation (P/E, etc.)
may rise sharply and its market capitalization may also increase.

【Figure 55】Comparison of Major Stocks in the SI Sector
Dividend
PayoutRatio
9613
NTT DATA
2,864,606
2,043
4,100,000
292,000
7.1%
11.0
19.9
2.0
1.1%
23.00
102.701,035.93
0.7
22.4%
4684
OBIC
2,382,930
23,925
111,000
70,000
63.1%
16.1
38.9
6.5
1.1%
260.00614.57
3,697.16
21.5
42.3%
4307
Nomura Research Institute2,170,986
3,657
720,000
117,000
16.3%
20.7
27.7
5.4
1.3%
48.00
131.83674.35
3.0
36.4%
4768
Otsuka Corporation
1,042,922
5,489
901,000
58,600
6.5%
13.0
25.9
3.4
2.4%
130.00211.87
1,619.79
1.2
61.4%
3626
TIS
942,337
3,855
530,000
63,500
12.0%
18.8
22.1
3.1
1.4%
53.00
174.191,227.44
1.8
30.4%
4739
Itochu Techno-Solutions
898,080
3,742
625,000
58,000
9.3%
11.8
21.6
2.9
2.3%
86.00
173.101,292.40
1.4
49.7%
9719
SCSK
709,2822,269
470,000
54,000
11.5%
14.4
18.6
2.6
2.5%
56.00
121.66870.56
1.5
46.0%
2327
NS Solutions
383,389
4,190
305,000
33,500
11.0%
11.0
16.8
1.9
1.9%
80.00
249.192,191.60
1.3
32.1%
8056
BIPROGY
378,778
3,454
350,000
32,500
9.3%
15.0
15.8
2.5
2.6%
90.00
218.95
1,391.89
1.1
41.1%
4812
ISID
342,860
5,260
137,000
20,000
14.6%
18.1
24.4
4.6
1.7%
88.00
215.16
1,150.30
2.5
40.9%
9749
Fujisoft
303,974
9,020
300,000
20,000
6.7%
8.8
23.0
2.1
1.5%
137.00391.61
4,322.94
1.0
35.0%
1973
NEC Networks & System Int.
293,267
1,964
340,000
24,000
7.1%
10.0
20.9
2.1
2.5%
49.00
93.99
948.23
0.9
52.1%
9759
NSD
241,860
2,780
97,00014,000
14.4%
19.3
24.6
3.9
2.4%
68.00
113.18711.73
2.5
60.1%
9682
DTS
171,089
3,595
115,000
12,000
10.4%
13.0
19.2
2.6
2.6%
95.00
187.101,408.81
1.5
50.8%
9692
CEC
56,212
1,495
51,000
5,550
10.9%
14.2
13.1
1.3
3.3%
50.00
114.401,111.48
1.1
43.7%
4719
ALPHA SYSTEMS
49,8863,550
36,000
4,300
11.9%
7.5
17.0
1.3
2.0%
70.00
209.41
2,833.16
1.4
33.4%
4674
CRESCO
44,781
1,947
52,500
5,250
10.0%
14.3
11.5
1.7
2.6%
50.00
170.001,160.39
0.9
29.4%
9739
NIPPON SYSTEMWARE
35,8202,404
48,500
5,600
11.5%
14.5
9.1
1.2
2.3%
55.00
265.11
2,005.37
0.7
20.7%
4725
CAC Holdings
35,2901,718
50,000
3,300
6.6%
8.8
13.3
1.0
4.7%
80.00
129.17
1,659.07
0.7
61.9%
9600
I-NET
24,266
1,494
37,700
2,750
7.3%
7.7
11.8
1.4
3.5%
52.00
126.37
1,099.90
0.6
41.1%
2335
CUBE SYSTEM
18,5691,179
18,000
1,620
9.0%
11.8
16.6
1.9
2.5%
30.00
71.23
634.29
1.0
42.1%
4299
HIMACS
17,5891,417
18,150
1,580
8.7%
13.1
15.3
1.6
3.0%
43.00
92.83
886.45
1.0
46.3%
4662
Focus Systems
17,254
1,059
30,100
2,000
6.6%
10.1
11.0
1.2
3.6%
38.00
96.07
848.98
0.6
39.6%
4333
Toho System Science
16,098
1,161
16,500
1,550
9.4%
13.2
13.3
1.6
3.4%
40.00
87.23
722.291.0
45.9%
Simple Average
560,089
12.1%
13.2
18.8
2.5
2.4%
2.1
41.9%
Simple Average (excl. OBIC)
480,835
9.9%
13.0
17.9
2.3
2.5%
1.3
41.9%
(Note) Unit for market cap., sales, and operating profit (O.P.): million yen
Sales and operating profit are generally based on the companies' most recent forecasts.
BPS is the value from the most recent quarter.
Unit for stock price, dividend, estimated EPS, and actual BPS: yen
No unit for P/E, P/B, and P/SStock price is based on the closing price on June 5, 2023.
Only valid data used in the averages
Code

Company Name

Market Cap.

Stock
Price

Sales

O.P.

O.P. Margin

Actual ROE(%)

Est. P/E

Actual P/B

Est. Dividend
Yield

Est.
Dividend

Est. EPS

Actual BPS

P/S(Ref) Prepared by Alpha-Win Research Dept. based on the securities reports, financial results summaries, and stock data.

41/41
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report 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 thatthe 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 from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.