Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE Prime)● SummaryIssued: 6/14/2024

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 52 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 year-on-year (YoY) forthe past 26 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 +6.1% and its annual recurring profit growthrate (simple average) was +7.6%; it has been steadily expanding its business and keeping its business profitable
over many 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
to increases in profit, dividend, and market capitalization.
・In the previous fiscal year (FY2024; note that the Company’s fiscal year is March-ending, i.e., FY2024 ended in
March 2024), sales increased to 18 billion yen (+10.4% YoY) and operating profit increased to 1.54 billion yen(+5.8% YoY). Sales reached a record high for the 12th consecutive year, and operating, recurring, and net profits
also all hit their record highs. However, while sales reached the Company’s initial forecast at the beginning of the
fiscal year, profits fell somewhat short due to higher costs.
・In the current fiscal year (FY2025), the Company plans to achieve sales of 18.8 billion yen (+4.3% YoY), operating
profit of 1.6 billion yen (+4.2% YoY), and net profit of 1.1 billion yen (+3.1% YoY). It plans to achieve recordhigh sales and profits and increase dividends for the consecutive year (+5 yen in ordinary dividend, to 40 yen per
share for the full fiscal year).
・Sales are expected to increase due to new projects pertaining to strategic IT investment by customers (in the Digitaland the SI businesses), as well as due to contribution from the Enhancement Business as a result of resource
realignment. By industry, the Company expects an increase in sales from the financial and other industries. By
business style, it expects sales growth mainly in the SI Contracting Business, but also in both the Service Providing
Business and the Direct Contract Business. Despite the increase in sales, the Company expects only a slight increasein profit due to upfront investments such as strengthening the production and development systems, increasing
personnel expenses, and increasing subcontracting costs.
・We, Alpha Win Research Department, expect the Company’s planned sales and profits for the current fiscal year
to be largely achievable. This is because DX-related IT investments have been robust and orders are expected to
be strong. Also, the Company’s plans for the sales growth rate, profit growth rate, and margins seem reasonable.
The risks of underachievement most likely lie in higher costs due to increased investment and inflation, as well as
human resource constraints, rather than lower demand or a decrease in orders. In any case, judging from the current
situation, the downside risks seem to be limited.

Business Strategy and Key Points Going Forward
・The results of FY2024, the final year of the First Medium-Term Management Plan, were somewhat below the
1/44This 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: 6/14/2024

target figures (for consolidated sales and profits). In the Second Medium-Term Management Plan (VISION 2026),
which is positioned as the Company’s ‘second founding’, it targets sales of 23 billion yen (CAGR +8.5%),
operating profit of 2.41 billion yen (CAGR +16.2%), operating margin of 10.5% (+2.0 percentage points comparedto FY2024), and ROE of 14% (+3.2% from FY2024) in the final fiscal year of the plan or FY2027. Along with the
expansion of scale, the Company aims to increase profitability by improving productivity and shifting to highvalue-added projects. It plans to thereby achieve exponential growth and maximize its corporate value.
・Since FY2023, after forming a capital and business alliance with NRI, it has been investing in strengthening its
development bases and production system to achieve further growth and eliminate its bottleneck concerning humanresources. This alliance can be viewed as a positive change contributing to the Company’s medium- to long-termbusiness expansion and stable growth, specifically through the strengthened long-term and continuous relationshipwith NRI, expansion of business area, exchange of talents, and accumulation and sharing of know-how. In fact,
positive effects of the alliance are already starting to be seen in business performance.
・In the Second Medium-Term Management 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, and environment. It is currently working on achieving these goals.
・Going forward, the key points will most likely be the acceleration of synergies through the alliance with NRI(further contribution to business performance), recruitment and development of employees, collaboration withmajor system integrators, development of contract-based businesses targeting end users (gaining direct contracts),
progress with the Service Providing Business that it is focused on, improvement of project management skills,
continued improvement of profit margins, monetization of businesses in new business areas, acquisition of new
customers, M&A and alliance strategies, expansion and leveraging of overseas sites, and incorporation of newtechnologies.

Forecast of Medium-Term Financial Performance
・The economic environment remains uncertain, with global inflation, monetary tightening to curb the inflation,
geopolitical risks, and a weak yen. However, there should be relatively small direct or indirect impact on the
Company since its business portfolio is centered on domestic demand. The business environment has beenfavorable for the Company, with strong demand related to strategic IT system investment by customers to increase
manpower, improve operational efficiency, differentiate business, enhance responsiveness to changes, increase
their competitive edge, and reduce costs. Medium-term risks, meanwhile, most likely include the recruitment andretaining of employees and the occurrence of unprofitable projects, as well as a deterioration in the performance ofits corporate users.
・Over the medium to long term, IT and DX investments by the Company’s corporate users are expected to continue
to increase. Although human resource shortages may become a bottleneck and constrain growth, we expect a stablesales growth of around 6-8% per year and an even greater profit growth rate due to the effects of the NRI alliance,
expansion into new business areas, acquisition of new customers, and improvement of productivity.

Shareholder Return
・ The Company has been proactively returning profits to shareholders through share buybacks, stock splits,
sequential dividend increases, and other measures.
・It plans to raise its consolidated dividend payout ratio target from 40% to 50% in the current fiscal year and toincrease the annual dividend by 5 yen YoY (for the sixth consecutive fiscal year of increase for ordinary dividend)
to 40 yen (forecasted dividend payout ratio of 55%).
・Its DOE (FY2024) is also high at 5.4%. With strong performance and abundant cash, shareholder return measures
such as dividend hikes and share buy-backs can be expected in the future as well.
Stock Characteristics and Stock Price
・Over the past 15 years or so, its stock price has risen by about 5.8x and has been largely outperforming the TOPIX.
・Its valuation based on this fiscal year’s financial forecasts (the Company’s forecasts) seems slightly low comparedto the average of all TSE Prime stocks in terms of the P/E, while high in terms of the dividend yield, making theCompany somewhat undervalued.
2/44This 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: 6/14/2024

・On the other hand, compared to its competitors, its valuation is mixed, but there is no sense of overvaluation.
・The current share price seems undervalued, with a P/E of 11.6, P/B of 1.4, and dividend yield of 4.5% based on
Alpha-Win’s forecasts for FY2027.
・Since it is a domestic-demand-oriented, defensive stock whose profit is expected to continue to stably grow, there
is an upside potential to the share price and the Company can be seen as a candidate for medium- to long-term
investment.
・In terms of share price, attention should be paid to the progress of financial performance against the medium-term
plan, including the current fiscal year, as well as the IT investment trends of customers, the contribution of the
Direct Contract and Service Providing businesses to financial performance, and shareholder return measures.
(Note) In this Report, values have generally been rounded to the nearest unit during the calculations or in presenting them, and may
therefore differ from those announced by the Company.
【 2335 CUBE SYSTEM

Sector: Information & Communication 】 Figure A

FY

2020
2021
2022
2023
2024
2024
2024
2024
2025
2025
2025
2026
2026
2026
2027
2027

A
A
A
A
A
Medium-Term Plan: Revised CE
CE
E
CE
New E
Old E
Medium-Term Plan
New E
Old E
Medium-Term Plan
E

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)

14,70814,78816,09916,32518,021
19,00018,00018,20018,80018,80019,00020,60020,00020,50023,00021,700

2.7
0.5
8.9
1.4
10.4
16.4
10.3
11.5
4.3
4.3
5.4
9.6
6.4
7.9
11.6
8.5

959
1,174
1,417
1,452
1,536
1,710
1,620
1,620
1,600
1,600
1,725
1,950
1,850
1,850
2,410
2,150

4.1
22.5
20.7
2.4
5.8
17.8
11.5
11.5
4.2
4.2
12.3
21.9
15.6
7.2
23.6
16.2

976
1,295
1,432
1,480
1,590

1.7
32.7
10.6
3.3
7.5

525
844
944
989
1,067

-11.9
60.7
11.9
4.8
7.8

38.69
62.11
69.82
70.35
70.39

411.96476.52531.14634.29668.41

18.0
20.0
23.0
50.0
35.0

1,635
1,635
1,650
1,650
1,755

10.4
10.4
3.7
3.7
10.4

1,080
1,080
1,100
1,100
1,155

9.1
9.1
3.1
3.1
8.2

71.23
71.23
72.55
72.55
76.18

Not disclosed
654.63Not disclosed
705.91709.53

30.0
30.0
40.0
40.0
32.0

1,900
1,870

15.2
6.6

1,250
1,235

13.6
6.9

82.45
81.46

748.35717.81

43.0
34.0

2,200

15.8

1,450

16.0

95.64

800.9950.0(Note) A: actual results. CE: the Company’s estimate/forecast. E: Alpha-Win’s estimate/forecast. Note that fiscal years are March-ending.

【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】 Figure B
Dividend Payout Ratio

Item

6/7/2024

Item

Stock Price (Y)1,108Last FY (actual)

15.7

1.7

3.2%

49.7%

Shares Outstanding (thou.)

15,750This FY (est.)

15.3

1.6

3.6%

55.1%

Market Capitalization (million yen)

17,451

Next FY (est.)

13.4

1.5

3.9%

52.2%

FY After the Next (est.)

11.6

1.4

4.5%

52.3%

5.4%

Last FY's ROE

10.8%

Dilutive Shares (thou.)0

Last FY's Equity Ratio

75.1

P/E

P/B

Last FY's DOE

Dividend Yield(Note) Estimates were made by Alpha-Win Research Dept.

【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM】 Figure C
(Y)
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400

2.00
1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
Y)
/Y
M

Period1 month
3 months
6 months
12 months

Performance
Return vs. TOPIX
-0.1%
-0.2%
0.3%
0.0%
0.6%
-16.6%-10.7%-32.0%(Note) Reflects share price and index
values through the closing price on
6/7/2024. Return for the 1-month period
is the comparison of the closing price on
the last day of May and on June 7.
Similar for the other periods. Preparedby Alpha-Win Research Dept.

(M

09
/2
3

09
/2
2

09
/2
1

09
/2
0

09
/1
9

09
/1
8

09
/1
7

09
/1
6

Stock Price (left axis)
Price Relative to the TOPIX(right axis)(Note) From the first week of September 2016 to the first week of June 2024

3/44This 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: 6/14/2024＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

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.
PF2024-0614-0904

4/44This 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: 6/14/2024

Contents
1．Company Overview ........................................................................................................................ P6
Mid-Tier and Specialized System Integrator ..................................................................................... P6
Business Philosophy and Basic Management Policy ........................................................................ P8
2．Business Description and Business Model .................................................................................... P9
Three Lines of System Services ........................................................................................................ P9
Labor-Intensive Business Model in which Human Resources Are the Key ................................... P11
Sales and Profit Composition Well-Balanced by Industry .............................................................. P12
Stable Customer Base and Business with Long-Term Viability ..................................................... P13
The Foundation for Future Areas of Growth and Next-Generation Technologies .......................... P15
Capital and Business Alliance with Nomura Research Institute (NRI) ............................................ P16
3．Shareholder Composition ............................................................................................................ P18
Change in Composition by Type of Shareholder ............................................................................ P18
Major Shareholder Composition ..................................................................................................... P18
4．ESG and Sustainability ................................................................................................................ P20
Environment, Society, Governance, and Sustainability .................................................................. P20
5．History of Growth ......................................................................................................................... P21
Company History ............................................................................................................................. P21
Past Transition in Financial Results ................................................................................................ P21
6．Business Environment .................................................................................................................. P24
Trends of Japan’s System Integration Market ................................................................................. P24
CUBE SYSTEM’s Position and Comparison with Competitors .................................................... P26
7．Last Fiscal Year’s Results and This Fiscal Year’s Company Forecast ................................... P28
Full-Year Financial Results for FY2024 (last fiscal year) ................................................................ P28
CUBE SYSTEM’s Financial Forecast for FY2025 (this fiscal year)................................................ P32
8．Growth Strategy ........................................................................................................................... P34
VISION 2026: The Medium-Term Management Plan .................................................................... P34
Alpha-Win Research Dept.’s Financial Forecast for FY2025 (this fiscal year)................................ P38
Alpha-Win Research Dept.’s Forecast of Medium-Term Financial Performance .......................... P39
9．Analyst’s Views ............................................................................................................................. P40
SWOT Analysis ............................................................................................................................... P40
Shareholder Return and Shareholder Benefit Program ................................................................... P41
Stock Characteristics, Stock Price, and Valuation Comparison ...................................................... P43
Notes: 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., FY2025
ends in March 2025.
5/44This 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: 6/14/2024

1. Company Overview◆ Mid-Tier and Specialized System Integrator
w A mid-tier and specialized
system integrator with 52
years of history. Equitymethod affiliate of NRI.
Strong business foundation,with several blue-chipcompanies as customers.
(1) System integrator: a company
that conducts system integration.
Abbreviated as “SI.” A generalterm 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 utilizing
overseas/offshore sites

CUBE SYSTEM INC. (hereinafter, the “Company”) is a mid-tier, specialized
system integrator1 (SI). It is listed on the Prime Market of the Tokyo Stock
Exchange and is an equity-method affiliate of Nomura Research Institute (orNRI), which owns a stake of more than 20%. Often as a subcontractor to
major SIs, the Company mainly develops systems and provides them to large
companies in the financial, telecommunication, and distribution industries, aswell as for the government. Its customer base is firm, having expandedbusiness with its main customers over many years. Its main customers are thefour corporate groups of NRI, Fujitsu, Aeon, and Mizuho, whose summed
sales account for about 80% of the Company’s total sales. The Company also
works on projects that are outsourced from the Tokyo Stock Exchange (TSE),
indicating its technological expertise and strong credibility.
Founded in 1972 at the outset of the software industry, the Company has 52
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 branch manager of Nomura Research Institute’s Chubu Branch andthen joined the Company in 2017. He also has experience working for a
consulting company. At the Company, he directly conducts sales activities
for DX and other projects as the company representative.
The Company’s group consists of four companies: the Company and three
consolidated subsidiaries. It has five bases in Japan and two overseas bases.
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, 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.
SapporoTokyo

CUBE SYSTEM SHANGHAI CO., LTD.

Nagoya●Location: Shanghai, China●Founded: July 2009

HakataOsaka●Location: Sapporo City, Hokkaido●Founded: December 1990

CUBE SYSTEM INC.

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

Shanghai

CUBE SYSTEM INC. Nagoya Office
CUBE SYSTEM INC.
Fukuoka Office

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

(Ref) The Company●Location: Nagoya City, Aichi●Founded: May 2019

●Location: Fukuoka City, Fukuoka●Founded: September 2023
Ho Chi Minh

CUBE SYSTEM INC.
West Japan Solutions Business Division●Location: Osaka City, Osaka●Founded: April 1985

As of June 1, 2024

6/44This 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: 6/14/2024

The ratio of consolidated sales to parent-company sales has stayed around1.08 for the past 22 years, with the parent company’s performance having alarge weight (Figure 2). While each subsidiary’s profit or loss is not disclosed,
the ratio of consolidated recurring profit to the parent company’s recurring
profit has been around 0.98-1.17 (simple average of 1.05) during this period.

w Consolidated sales andprofit have been on an
increasing trend. The
consolidated
subsidiaries, as a total,have been stably
profitable. Consolidatedto-parent-company ratios
have been a little greaterthan 1 for both sales andprofit.

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 total sales and profit turned to a decline due to the completion of major
system development projects at the subsidiaries. However, despite being
impacted by the lockdown in Shanghai due to COVID-19, business has been
generally solid from FY2021 to FY2024, maintaining a certain amount of
profit at the subsidiary 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)

20,000Consolidated sales minus parent company's sales

863

18,00014,000921
12,0008,000

439 4784,000

0857 1,084

1,151

5,805 6,097

534

504 784

751

777

679

506

458

1,179 945

1,601

15,415
15,21013,843
13,529785

10,0002,000

910 17,158

889

16,0006,000

Consolidated
to parent
companyratio

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 1.07 1.06 1.06 1.05

12,724678

12,40911,815
11,7666,566 7,172 7,139

7,358 7,730 8,027

8,660 7,974 8,564

11,606
10,432

FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024(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)

1,800

1.06

1.07 1.07

1.06

1.07

1.03 1.03

Consolidated R.P. minus parent company's R.P.
1.03

0.99 0.98 1.01

1.03 1.05

1.02 1.04

1.06

Consolidated

1.17

1.07

1.07

1.08 1.05

1,600

100

1,400

43

140

21
31

800
600

0

company
ratio

1,407

1,000

200

34
1,556

80

1,200

400

73

1.02 to parent

23

409

33

467

35

33

39

22

19

516

518

545

578

639

1,332

61
1,215

19

21

7
938

621

48

680

-8

542

599

683

939

781

845

819

915

-9

-200
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

w社 名 に 込 め ら れ た 想
7/44
い。
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: 6/14/2024

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
6.84 billion yen in cash and deposits according to its balance sheet (6.75
billion yen at the end of the fiscal year before the previous), the Company has
2.07 billion yen in investment securities (stocks and bonds that most likely
have high liquidity). They total to about 8.9 billion yen in highly liquid assets,
which is equivalent to 66% of its total assets of 13.5 billion yen and about
49% of its sales of 18.0 billion yen. In comparison, its debt is only 230 million
yen (all values are as of the end of March 2024).
Its financial ratios are also stably high, with an equity ratio of 75.1% (76.6%
at the end of the fiscal year before the previous) and current ratio of 406%
(similarly, previously 443%).
【Figure 4】Change in Cash Flow (CF)Units: million yen
Operating CF ①
Investing CF ②
Financing CF
FCF ( ①+②)
Cash and Depsits

FY2010
283
-1
-144
282
1,619

FY2011
622
309
-173
931
2,376

FY2012
101
54
-125
155
2,405

FY2013
451
-321
-151
130
2,383

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

FY2024
1,044
-259
-672
785
6,815

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

w The business philosophy
or goal is to “create aworld-class company.”

w The basic management
policies are customer
first, emphasis, and all
employee sales.
w Shares management goals
and 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 responsible for customer
interaction, will materialize thesystemization needs ofcustomers through dialogues
and carry out projects withresponsibility and authority
under a sales goal.

◆ Business Philosophy and Basic Management Policy
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).

8/44This 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: 6/14/2024

2． Business Description and Business Modelw Business is classified into
three service segments.
System Integration
Services, which mainly
concern systemdevelopment, are its main
services.
(5) System solutions: solving
issues related to systems throughhardware, software, and services◆ Three Lines of System 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 service segments (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 50 million yen 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 the 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
9/44This 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 is important incontrolling the risks andprofit/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 The SIS, accounting for a little
less than 80% of sales, was thegrowth driver in the past. For
the three service segments,
operating margins are largest
in the following order: Pros＞
SIS＞SOS.

【Figure 6】 Breakdown of Sales (outercircle) and Operating Profit (inner
circle) by Service Segment in FY2024
Professional
Services
SystemOutsourcing 9.1%
Services

SystemIntegration
Services

13.2%
14.8%

7.1%

77.7%

Sales
composition(outer circle)
Operating profit
composition(inner circle)

77.9%(Ref) Prepared by Alpha-Win Research Dept.
based on the financial results summary

Issued: 6/14/2024(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 enhancement services9, in which the Company works closely withcorporate users to make various proposals that will lead to new businesses(small-scale 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 and monitoring systems.
High performance is enabled through development tools and the skills ofcertified experts. The Company is especially strong in database technologies,
for which it has expert engineers (businesses related to Oracle Cloud10).
Breakdown of sales and operating profit for each of the three service
segments and their change over the years are shown in Figure 6. Regarding
the sales breakdown, SIS accounts for a little less than 80% of the total,
followed by ProS and then SOS for the remaining 20% (outer circle of Figure6). Over the past 20 years, overall sales have grown by 3.2x. Specifically, thesales of SIS grew by 4.2x, SOS grew by 1.6x, and ProS grew by 1.5x; the SIS
had been the main driver of business growth (Figure 7 on page 11).
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 service segment had been disclosed, but starting in FY2022,
the disclosure has been changed to operating margin per service segment. For
20 years in the past, though, the gross margin of each service segment had
been within a boxed range of about 15% to 21%. The operating margin ofeach service segment had been improving, but in the most recent fiscal year,
it somewhat declined for each (see Figure 8 on page 11 and Figure 31 on page
29).
10/44

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】Change in Sales of Each Service Segment(Million yen)

20,000Issued: 6/14/2024【Figure 8】Change in Operating Margin of Each Service
Segment

18,00012.0%

16,00011.0%

14,000

10.0%

12,00010,000

9.0%

8,000

8.0%

6,000
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
FY 23
20
24

0

ProS (Professional Services)
SOS (System Outsourcing Services)

5.0%

SIS

4.0%

SOS

ProS

Total

3.0%

FY2021

SIS (System Integration Services)

FY2022

FY2023

FY2024(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).

◆w Labor-intensive business.
Acquiring and training
talented employees are thekey to growth.

w Employee turnover rate is
declining.
w The number of employees
has been steadily
increasing. Sales andoperating profit per
employee in Japan havebeen improving.

Labor-Intensive Business Model in which Human
Resources Are the Key

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, andprofitability.
However, due to recent years’ labor shortage, the Company has not been 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 tocontinue to raise the retention rate of its employees. Recently, the turnoverrate has started to decline due to the introduction of a new HR system andmeasures to improve engagement.
The change in the number of employees of the entire CUBE SYSTEM Groupis shown in Figure 9 on page 12. Along with its business expansion, theCompany has been hiring about a few dozen new employees every year,
mainly for system engineer positions. The Company is eyeing an increase in
the number of employees in Japan to 920 in FY2027 (from 740 in FY2024).
Regarding the annual sales per employee in Japan, they have gradually
increased over the past three years from 21 to 24 million yen (the goal is 25
million yen in FY2027). Similarly, the annual operating profit per employee
has been increasing over the past ten years since bottoming out in FY2017(Figure 10 on page 12).
With regards to the cost structure, 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 controllingthese two costs may impact its profitability. Resource optimization andproject management will be crucial.
11/44

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: 6/14/2024【Figure 9】Change in the Number of Employees in theGroup(Thousand yen)(+25)
(Persons)

2,500

Number of employees in Japan
Number of overseas employees

1,000
900
800
700
600
500

501
（+59）
28

(+19)

498
（-3）

511
（+13）
38

32

(+6)

(+4)

559
539 （+20）
（+28）
58

(+20)

63

(+5)

588
（+29）

638
（+50）
84

(+14)

70

656
（+18）

694
（+38）

720
（+26）
93

82
85

(+11)

(-3)

(+1)

737
（+17）

781
（+44）

116

( +24)

92
85

830
（+49）

843
（+13）
130

( +14)

473

1,861(+520)

2,000
146( +16)

( +7)

1,500

1,347
(-159)

1,421
(+74)
1,108
(-313)(+7)

1,249(+142)

1,985(+281)
1,713(-148)

1,341
(+91)

2,037
(+52)

2,075
(+38)

FY2023

FY2024

1,704(+233)
1,368(-345)

1,397
(+29)

FY2017FY2018

1,470
(+73)

1,471
(+1)

FY2019FY2020

1,000

300
(+40)

886
（+43）

(-8)

400

200

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

481

496

554

518

466

473

(-7)

(+7)

(+8)

(+15)

(+22)

FY2011FY2012FY2013

FY2014FY2015

627

612

571

(+36)

(+17)

FY2016FY2017

(+15)

(+41)

652

(+25)

714

689

(+25)

(+37)

713
(-1)

740

(+27
)
500

100
0

FY2010FY2018FY2019FY2020

FY2021

FY2022

FY2023

FY20240
FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2021

FY2022(Ref) Figures 9 and 10: Prepared by Alpha-Win Research Dept. based on the financial results materials(11) Agile development: anapproach to project
development. Unlike theconventional waterfall
development, it divides a system
into short phases to conduct
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 these means is limited due to the current
reliance on manpower. The profit margin is also difficult to improve, which
is a characteristic 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, the use of agile development11
and standard platforms, strengthening of organizational project management,
making greater use of its overseas subsidiaries, review of contracts(negotiating and proposing to change from payment based on the number ofstaff and months to payment in return for services), and selective orderacceptance.

◆ 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 FY2024
Finance

Others

32.0%

33.6%
Sales composition(outer circle)

29.9%

36.7%

Operating profit
composition(inner circle)

15.1%

18.1%

14.0%
Transportation &Telecommunication

20.3%

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

Sales breakdown by industry is shown in Figure 11. Sales to the financial
industry, which must process a massive amount of data and must be secureand reliable, still account for a large proportion of the total. Meanwhile, sales
to the other industries (industries other than the three industries of finance,
distribution, and transportation & telecommunication) have grownsignificantly, leading a greater balance in the sales to the four industry
categories (Figure 12 on page 13).
Regarding its competitors HIMACS (TSE Standard: 4299) and Toho System
Science (TSE Prime: 4333), whose businesses are especially similar to theCompany’s, their sales are highly dependent on the financial industry, whichconstitutes about 70% to 80% of their overall sales. In contrast, sales to thefinancial industry are only 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. This demand then leveled off due the financial
industry’s slump in earnings and the completion of consolidation andalliances. However, in addition to the recovery of megabanks, there has
recently been growing demand from credit card companies, online banks, andinsurance-related companies. Regarding the sales to the transportation &12/44This 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: 6/14/2024

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

w Profit margins for eachindustry have been flat or
gradually declining.

Regarding the other industries, in recent years, there has been a significant
growth in businesses with manufacturers, businesses with the government,
energy-related businesses, and cloud-consulting-related businesses thanks tothe acquisition of new customers and orders for new projects. As a result, theCompany appears to have become more balanced and diversified with regards
to industry type, leading to greater business stability.
The breakdown of profit margin by industry tends to change 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 for each industry had been disclosed throughFY2021 and operating margins have been disclosed since then. In recent
years, profit margins have generally remained flat or have shown a gradualdecline (Figure 13).

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

8,000
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
FY
20
25
CE

0

Finance

Distribution

Transportation & Telecommunication

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

【Figure 13】Change in Operating Margin by Industry
14.0%
12.0%
10.0%
8.0%
6.0%
Finance
Distribution
Transportation & Telecommunication
Other
Total

4.0%
2.0%
0.0%
FY2021

FY2022

FY2023

FY2024◆ Stable Customer Base and Business with Long-Term
Viability
w A stable business, themajority of which consistsof continued business with
its current customers.

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 andoperation, 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 on page 14).
13/44

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: 6/14/2024

Note that its prime ratio (percentage of direct contracts made with end users
for system development) is about 20%. Many of its projects are outsourced
indirectly through major 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

11 companies (-1)

Major retailer, bank, general merchandise store, the central government, home improvement center, securities company, etc.

10 to less than 15 years
5 to less than 10 years
Total of the above

15 companies (+5)
19 companies (0)45 companies (+4)

Major credit card company, telecommunication company, manufacturing company, education business company, etc.
Major gas company, life insurance company, telecom carrier, etc.

(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s Integrated Statement for 2022 and 2023. (Note) Numbers in parentheses
are the increase or decrease in client companies compared to the previous fiscal year.

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 FY2024 (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 asprevious years). Thanks to the success of the account strategy (a strategy inwhich 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 generally increasing; sales grew by+2.8% YoY to 10,351 million yen (+281 million yen) in FY2019, by +9.3%
YoY to 11,316 million yen (+965 million yen) in FY2020, by +1.3% YoY to
11,463 million yen (+147 million yen) in FY2021, by +10.9% to 12,718
million yen (+1,254 million yen) in FY2022, and by -1.1% to 12,577 million
yen (-140 million yen) in FY2023. In FY2024, sales grew significantly by
14.1% to 14,361 million yen (+1,784 million yen).
【Figure 15】Sales Breakdown by Customer Group in FY2024
NRI

Fujitsu

Aeon

MizuhoOthers

20.3%
3.3%
6.1%
17.6%

52.7%

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

The rate of growth in sales to customers other than the four main groups has
been high. Meanwhile, the percentage of sales to 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 15).
w The increase intransactions with NRI has
driven sales growth overmany years.

Looking at the long-term changes, sales to the NRI Group have increased byapprox. 8.6 billion yen from approx. 900 yen million in FY2002 to approx.
9.5 billion yen in FY2024, thanks to the expansion of business area from theinitial focus on the distribution industry to other industries including finance.
During this period, the Company’s overall sales grew by 12.4 billion yen from
5.6 billion yen to 18 billion yen. The majority of this growth came from the
NRI Group (69%). As a result, its sales were largely dependent on the NRIGroup (52.7% of total sales) in the previous fiscal year.
The rate of growth (YoY) in sales to NRI in FY2024 was extremely high at
17.0%, indicating that the alliance is positively impacting performance.
14/44

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)(12) e-e Partner: an especiallyclose partner among all
partners of NRI. Of the “ePartners” (approx. 150
companies) with highly
specialized business know-how
and IT skills and high-level IT
security, the “e-e Partners”
cooperate with NRI not onlyin the operation of specificprojects but also in thefollowing: cooperative
promotion of innovative
activities in the Enhancement
Business; the strategic
reinforcement of HR, quality,
and IT security; and thecreation of a mutuallyprosperous business modelthat leverages each other’s
expertise. NRI has only
announced three companies(the Company, HIMACS, andToho System Science) as its ee Partners.

Issued: 6/14/2024

During the same period, Fujitsu Group also accounted for 1.4 billion yen or
11% of the total sales growth, thanks to increased transactions related totelecommunication infrastructure, electrical power infrastructure, and thegovernment. The Company has also been making a certain amount of sales
to the other major corporate groups (Aeon and Mizuho) over the long term,
earning excellent trust from its customers with high contract continuity.
The Company has especially been in a long-term, collaborative relationshipwith NRI as one of the few e-e Partners12. Since the capital and businessalliance was formed, the two companies have set up a council to promote
cooperation and have further strengthened their relationship in terms oftransactions, businesses, and human resource exchange. Regarding thetransaction value between individual companies, NRI has been the largest andFujitsu has been the second largest over the years.
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. It was also awarded the Customer Satisfaction
Improvement Award in February 2024. These awards show how the
Company’s customer satisfaction level is high.
【Figure 16】Change 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)(Million yen)（％）

20,00082

18,00080

16,00078

14,000w Focused on receiving orders
for projects related to newtechnologies and DX13
w Upfront investment madein growth areas such as
the cloud, blockchain,agile development, AI,
and IoT(14) Cloud solution services: atype of service whereapplications are used as a‘service’ via web browsers, etc.

76

12,00074

10,000

72

8,000

70

6,000
4,000

68

2,000

66

0

64

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

(13) 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 useof digital technologies to bringreform to its business model,
operation, processes,organization, and culture.

NRI G

Fujitsu G

Aeon G

Mizuho G

OthersTO 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
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 making investments and preparing for the development ofbusinesses based on next-generation technologies. Since DX13-related IT
investments by corporate users are expected to continue to increase, it has set
the Digital Business as its area of growth and plans to put company-wide
efforts into actively making proposals and responding to demand.
It has been focused on technology investments in cloud solution services14
including Oracle-related services; participation in social experiments of the
15/44This 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)(15) Blockchain: decentralized
network in which information is
synchronized, recorded, andaccumulated across 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.

w NRI is a major blue chipcompany in the industry. It
has built a strong customer
base and is dozens oftimes larger than the
Company in scale.

Issued: 6/14/2024
15

Blockchain Collaborative Consortium; capital and business alliances withcompanies which have expertise in AI technology16, IoT technology17, andblockchain; testing the Smile Share Product18 with the NRI employee union;
and alliances in agile development and maintenance/operation services.
These are aimed at acquiring and sharing expertise and information on
cutting-edge technologies, as well as at developing employees, conducting
joint development and proposals, and establishing new businesses.
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. As a result, NRI’s
shareholding ratio rose from 1.51% to 20.18%. Since then, it has been the
Company’s largest shareholder.
NRI, an SI affiliated with Nomura Securities, is listed on the TSE Prime. It isa major, blue-chip company ranked as one of the top ten companies of theindustry, with a market capitalization of 2.4 trillion yen and forecasted salesof 780 billion yen and net profit of 88 billion yen for this fiscal year (greaterthan the Company’s by 138x, 41x, and 80x, respectively). Providing bothconsulting and IT solutions, it has the top-level profitability in the industry
and also has as a strong customer base particularly in the financial andindustrial sectors.

w In its medium-term plan,
NRI plans for a 5.4%
annual increase in sales
and a 9.0% increase inoperating profit.

In its current medium-term management plan, NRI is targeting sales of 810
billion yen and operating profit of 145 billion yen (operating margin of
17.9%) in FY2026, the final year of the plan. It plans for a sales CAGR of
5.4% and an operating profit CAGR of 9.0% compared to FY2023. NRI’s
high growth will be a positive factor for the Company, too, due to their
alliance.

w Due to deeper
collaboration, theCompany’s financial
performance will most
likely become more linked
to NRI’s performance.

The Company and NRI have been in a long-standing, collaborative
relationship, and NRI is the most important business partner. This
collaboration will most likely deepen in the coming years (e.g. through theintroduction and sharing of projects, sharing of technologies and information,and segregation of customer segments) and the Company’s performance will
most likely become more linked to NRI’s performance.

w Plans to invest a total of
approximately 2.2 billion
yen over four fiscal years,
mainly using the raised
capital. Plans to strengthen
the development bases andproduction system.

Through this capital alliance, the Company raised 1,636 million yen.
Together with its own capital, it will invest a total of 2,180 million yen overthe four fiscal years starting in FY2023 to strengthen its development bases
and production system for further growth (Figure 17 on page 17).
However, no updated information has been disclosed on investment
performance against the (released) plans for FY2023 and FY2024, or on
investment plans for the current fiscal year and beyond.
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
16/44

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: 6/14/2024

fully utilize its production sites, enhance and expand its development
organization and facilities, and exchange talents. The investment and alliancewill mostly likely contribute to the Company’s business expansion and stable
growth over the medium and long term.
w Will commit to increasing
capacity, which has been
its bottleneck. The
investment is essential forstrengthening theCompany toward futuresustainable growth.

At this stage, the Company has not disclosed any projections of future
investment effects (such as the amount of sales growth, contribution to profit,
and the investment’s payback period). However, its plan is commendable inthat it has secured a budget to commit to resolving its current insufficiency incapacity (human resources) and expanding the capacity, which has been thelargest bottleneck to sustainable growth.

w Large amounts ofinvestment planned in theprevious and the current
fiscal years.

Although part of the investment will be recorded as assets, the majority islikely to be deducted as expenses for the period. The costs to be recognized
as deductible expenses associated with this investment are likely to havepeaked in the previous fiscal year or will peak in the current fiscal year, whenlarge amounts of investment are planned.
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 investments (after
expanding capacity and recruiting and developing employees). Therefore, we
expect the investment to begin to contribute significantly to profit starting in
FY2026 or later (Figure 46 on page 37).

w Investment results(significant contribution to
profit) are expected to be
seen starting in FY2026 orlater.

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

Main Use of
CapitalCumulative Sum% of Entire Investment

Total (amount): ①＝➁+③

Units: million yen or %FY2023120

FY2024845

FY2025805

FY2026410

2,180

100.0%

Percent of Entire Investment

5.5%

38.8%

36.9%

18.8%

100.0%Development Bases: Subtotal ②(breakdown shown below)

80

385

125

0

590

27.1%

Nearshore (create new regional site)

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 employee engagement

10

50

270

0

330

15.1%

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

17/44
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: 6/14/2024

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

w “Individuals and others”
hold 60% of shares.
Proportion of shares heldby “overseas corporate
entities” has been
gradually increasing.

Figure 18 shows the shareholder composition by type of shareholder as of theend of March 2024. Due to NRI’s investment in FY2023, the proportion of“other Japanese corporate entities” has increased significantly to 21%.
“Individuals and others” account for the majority at 60%, followed by“financial institutions” at 14%. Neither has changed significantly. On theother hand, over the past three fiscal years, “overseas corporate entities” havebeen gradually increasing each year from 0.8% to 1.2% to 2.9%.

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

100
90
80
70

Individuals andothers60～

2012/3期 2013/3期 2014/3期 2015/3期 2016/3期 2017/3期 2018/3期 2019/3期 2020/3期 2021/3期 2022/3期 2023/3期 2024/3期

25
20

Other corporate
entities

15

FInancial institutions

10
FInancial instrumentbusiness operators

50

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

FY2024

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

w NRI is the largest
shareholder.

w Stable with no large change
to the major shareholders.

w The employee stock
ownership plan andcurrent and former
directors are the mostprominent among theother major shareholders.
w The total of treasury
shares, stock ownershipplan, and shares held bydirectors, employees, andother parties related to theCompany account for
about 25% of all issued
shares.

u

Major Shareholder Composition

The composition of major shareholders is shown in Figure 19 on page 19.
NRI became the largest shareholder after additional investment. Its
shareholding ratio increased from 1.51% to 20.18%, which has not changed
since then.
The other major shareholders and the shareholder ranking have not largely
changed. BNY GCM CLIENT ACCOUNT replaced SMBC Nikko Securities
as the seventh largest shareholder, becoming ranked among the major
shareholders for the first time.
The following is supplemental information.
・Although the Employee Stock Ownership Plan (second place) and some of
the trust banks have increased their holdings, the number of shares held by
the other major shareholders have remained largely unchanged.
・The major individual shareholders are all either current or former directorsof the Company. Note that its representative director, Masahiro Nakanishi,
holds 16.3 thousand shares (shareholding ratio of 0.1%; +1 thousand sharescompared to the fiscal year before the previous).
・Of the top ten shareholders, the Employee Stock Ownership Plan, theCompany’s directors and employees (including former members), and the
director compensation BIP trust account add up to about 25% of the total.
18/44This 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: 6/14/2024

・The third largest shareholder, Osamu Sakiyama (chairman of the Company),
submitted a change report (5% rule report) to the Ministry of Finance on May
16 and has reduced his shareholding to 6.05%.
w Domestic investment trusts
are mainly index types.

・Regarding funds, the Company’s shares are incorporated in mainly Japanequity index funds including those managed by Mitsubishi UFJ AssetManagement, Sumitomo Mitsui Trust Asset Management, and AssetManagement One. Some of these funds are most likely investing under thenames of the trust banks that are ranked as major shareholders.

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

・Treasury shares, which are mostly held by the BIP Trust Account (in thename of the fifth largest shareholder, The Master Trust Bank of Japan),amounted to approximately 586 thousand shares as of the end of FY2024(3.7% of the total number of issued shares; unchanged since the end of
FY2023).

【Figure 19】Current Major Shareholders
Shareholder Name

(units: thousand shares)

Nomura Research Institute, Ltd.
CUBE SYSTEM Employee Stock Ownership Plan
The Master Trust Bank of Japan, Ltd. (trust account)
Osamu Sakiyama (indiv.): CUBE SYSTEM's chairman
The Master Trust Bank of Japan(Director compensation BIP trust: 75824 accounts)
Akemi Onuki (indiv.): CS's former president
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
Custody Bank of Japan (trust account)
Toshio Uchida (indiv.): former executive vice president
Toshikuni Sato (indiv.): CS's former exec. managing director
SMBC Nikko Securities Inc.
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(Actual Number of Treasury Shares Owned by CUBESYSTEM)(Proportion of Treasury Shares to All Issued Shares)

End of
End of
End ofMar. 2015 Mar. 2016 Mar. 2017

End ofMar. 2018

End ofMar. 2019

End ofMar. 2020

End ofMar. 2021

End ofMar. 2022

End ofMar. 2023

End ofMar. 2024

Shareholding
ratio (%)

Shareholder
rankingChange innumber ofshares

1,641
1,775

1,672
1,675

1,663
1,655

1,668
321
1,646

1,565
394
1,638

1,602
485
1,632

214
1,551
456
1,622

1,531
959
1,614

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

3,179
1,484
1,168
1,122

20.18
9.42
7.41
7.12

1
2
3
4

0
16
106
0

-

270

270

262

369

358

358

618

586

586

3.72

5

0

401
475
380
316
258
276
682
241

401
415
340
316
258
276
458
-

401
403
300
316
348
276
1,035
-

401
393
300
316
324
276
1,236
-

401
376
304
316
258
276
1,356
-

401
369
304
316
258
219
-

401
347
288
316
258
-

401
329
239
282
288
258
-

401
202
221
230
290
-

401
254
229
216
200

2.54
1.61
1.45
1.37
1.26

6
7
8
9
10

0
27
-5
-30

682

728

1,306

1,498

1,725

1,692

1,690

1,000

589

589

0

4.5%

4.8%

8.5%

9.8%

11.3%

11.1%

11.1%

6.9%

3.7%

3.7%

0

(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 treasury shares from all issued shares. The proportion of treasury shares includes the director
remuneration BIP trust account. The change in number of shares is the comparison between the end of March 2024 and the end of March 2023.

19/44
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: 6/14/2024

4． ESG and Sustainability◆ Environment
w Working on continuous
improvement ofenvironmental
performance (energy andresource conservation)
w Has joined the TCFD andworks on climate change
mitigation and adaptation,
as well as promoting
appropriate information
disclosures. Has also set
environmental goals as
non-financial targets of the
new medium-term plan.
Received a B-score fromCDP.

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 electricity usage, paper usage, and waste and adopting thecool biz). Also, it has joined the Task Force on Climate-related Financial
Disclosures (TCFD) and has been working on initiatives for mitigating andadapting to climate change and promoting appropriate information disclosure.
Environmental goals (for greenhouse gas or GHG emissions) have also been
added as a non-financial goal of the new medium-term plan (Figure 44 on
page 36). In addition, it received a B-score (third from the top out of eightlevels) from the CDP (one of the world’s leading ESG rating agencies) in the2023 survey on climate change.

◆ SocietyAs part of a key industry necessary to the infrastructure supporting the
economy and the society, the CUBE SYSTEM Group believes its mission is
to contribute to the further development of the IT society and thestrengthening of its customers’ competitive edge. It aims to create a more
prosperous and convenient 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
adopted an executive officer system and is working on strengthening its
corporate governance functions. The management team consists of six
directors (of which three are external directors) and four auditors (of which
three are external auditors). Of the directors, the chairman is a dedicatedmember, and three including the president are NRI alumni (of which, one isan external director). Of the remaining two external directors, one is acertified public accountant and one is a doctor (female occupational physician
specialized in eldercare and mental health). One of the external auditors(female) is an attorney (appointed at the general meeting of shareholders).
Recognizing the enhancement of human capital and the workstyle reform as
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 202419; has received this award for three years in a row).

◆ Sustainability
The Company has formulated its 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 working on
sound corporate management, contribution to the local community,
environmental conservation, promotion of compliance, respect for humanrights, support for next generation development, and enhancement of humancapital (people development and emphasis on people).
20/44

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: 6/14/2024

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, as a company
for software development, system operations, and system management (itsname was changed to the current one in 1990). As Japan evolved into a
computer society, IT investments increased and the system development
market rapidly grew.

w Its main customers areleading blue-chipcompanies of Japan.

Amidst this trend, the Company became specialized in the system integration
business, building its credibility and track record. It made new contracts one
after another with leading Japanese companies, which are its current main
customer groups to date. As these companies increased their IT investment
and outsourcing of system development and operation, the Company steadily
expanded its business areas and scale.

w Changed its listing fromTSE Second Section to
the First Section in March
2014. Moved to the Prime
Market, the new segment,in April 2022.

Regarding its shares, 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.

◆ 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 by companies and the government. The long-term transition in
financial performance is shown in Figure 20. The following are details of its
financial performance in chronological order (pages 22-23).

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

(Million yen)

20,000

1,800

1,650
1,590

Sales (left axis)
Recurring Profit (right axis)

18,000

1,480
1,432

Consolidated since FY2001
16,0001,295
14,000

1,400

1,200

980 960
893

811

10,000

702
8,000
6,000

387

445 432499

550

550 583

643 597 660

606

959

976

14,78814,70813,55912,89912,623
12,527800

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
20
23
FY
2
FY 024
20
25
CE

4,220

4,387

672
533

302 3092,000
0

18,021
16,32516,09912,000

4,000

1,600
18,800(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s estimate/forecast.

21/44
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: 6/14/2024

・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 22 fiscal years. This stable growth trend isnoteworthy.
・During the past 26 years, the annual sales growth rate (simple average ofthe annual rates of increase in sales) was +6.1%. Similarly, the recurring
profit growth rate was +7.6%, showing how the Company has been solidly
improving its financial performance over the long term.
・Although recurring profit decreased in five out of the 22 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 flat but
are starting to increase inrecent years.
w Sales decreased only for 1
fiscal year during the past
26 years.

・Analyzed statistically, the Company has a small standard deviation for therate of change in financial result and also a small variation coefficient (=standard deviation / average; shows relative dispersion; also called therelative standard deviation), indicating that the volatility of the Company’s
fundamentals is low (see Figure 21 for the comparison with similar-sizedcompetitors during the most recent 20 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 23), 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 Financial Performance Volatility over the Past 20 Years(YoY rate of change in sales and recurring profit)
Target of Analysis
FY2005 - FY2024
Market: TSE Primen = 20 fiscal years
Standard deviation
Average
Coefficient of variation% Change in Sales (% YoY)
CUBE SYSTEM

HIMACS
2335
4299
CS (consolidated) HM (consolidated)
5.75
7.11
5.32
3.12
1.08
2.28

% Change in Recurring Profit (% YoY)

CUBE SYSTEM
Toho System Science
HIMACS
4333
2335
4299
4333
TS (standalone)
CS (consolidated) HM (consolidated) TS (standalone)
16.06
13.37
29.42
291.53
8.36
6.82
7.72
77.57
1.92
1.96
3.81
3.76

Toho System Science(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
described earlier (pages 14-15), it has strengthened its relationship with thefour major groups NRI, Fujitsu, Aeon, and Mizuho. This strong relationshiphas enabled the Company to continue to receive more orders from thesegroups, driving its growth.
Financial performance during the most recent 15 years or so is as follows.
・In FY2009 when the Lehman’s collapse occurred, the economy faced adownturn and customers became more cautious with IT investments.
However, the Company was able to continue to increase sales due 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 business expansion.
・The economic recession continued into FY2010 and FY2011. Systemdevelopment plans continued to be postponed, cancelled, or scaled down.
22/44This 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: 6/14/2024

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

･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 26 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 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. Thanks to thisrecovery, as well as the recent trend of significantly investing in digitalization,
the Company’s sales growth trend became distinct.

w Hitting record-high profits
for four consecutive fiscal
years since FY2021.

・Regarding profit, in FY2015, sales increased due to business expansion
through the development of businesses with existing customers and theacquisition of new customers. Productivity also improved due to strengthened
project management. As a result, record highs of the time were achieved for
operating and recurring profits. In FY2021, record profits were again
achieved. Every fiscal year since then to FY2024, it has been consecutively
achieving record highs for sales (for 12 consecutive fiscal years) and profits.

w Sales have been hitting
record highs for 12 fiscal
years in a row.
w Profit growth had beenslow due to increased
costs, but in the previous
fiscal year, profits reachedrecord highs for theconsecutive year thanks tosales growth.

・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).
・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 it began to improvestarting in FY2018.
・Last fiscal year (FY2024), the gross margin fell (from 21.9% in FY2023 to
21.8% in FY2024; the same order applies to the rest) and the SG&A expense
ratio increased (from 13.0% to 13.2%), resulting in a deterioration in theoperating margin (from 8.9% to 8.5%). However, due to increased sales, it
achieved record highs for each of the profits for the consecutive year.

【Figure 22】Change in the Company’s Gross
Margin, SG&A Expense Ratio, and Operating
Margin Over the Long Term

Gross Margin

Operating Margin

24.5

25.0
21.4 21.9 21.8

20.0

17.1 17.1

15.9

16.6 16.7 16.7

18.3 17.7

19.2
16.7 16.7

10.0
5.0

16.2

15.5 15.5

8.7

9.0

8.5 8.2

9.6
8.4 8.7

9.3

7.9

7.4

7.5

7.1

10.3 10.0

8.0

7.7

9.4

9.4

7.3

7.2

9.3

9.0

6.2

6.5

7.9

8.5
7.7

5.9

17.3 17.1 17.0

17.0

16.0

15.4

13.9

15.0

9.5

7.5

9.3

6.1

11.0 10.7 10.5

6.3

6.4

6.5

11.3

7.9

12.6 13.0 13.2

8.8

8.9

8.5

8.5

0.0
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
FY
20
25
CE

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

SG&A Expense Ratio

（％）

30.0

23/44
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: 6/14/2024

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). As outsourcing of systemdevelopment became common in Japan, system integrators have stably grownby undertaking system development projects.

w As the outsourcing ofsystem development
became common, SIs grewby undertaking theseoutsourced systemdevelopment projects.

w As the COVID-19 outbreaksettled down to a certain
degree, Japan’s SI market
recovered to a growth trend
in 2021. Growth rate wasaccelerated in 2023.

According to the same data, from 2011 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 at anaccelerated pace from +3.1% in 2021 and +3.6% in 2022 to +9.3% in 2023
(Figure 24).

w Growth trend has been
maintained for monthly SI
sales (YoY) for 24
consecutive months sinceApril 2022.

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, growth has been stably maintained for 24
consecutive months (+8.4% YoY on average).

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

【Figure 24】Both Market’s Rate of Change(rate of YoY change in sales: %)(100 million yen)（％）

120,000

25.0

100,000

20.0
15.0

80,00010.0

60,0005.0

40,0000.0

20,000-5.0

Make-to-order software

Of which, system integration

Make-to-order software

Of which, system integration【Figure 25】SI Market’s Monthly Sales on a YoY Comparison(Ref) Figures 23-25: Prepared and reworked by
Alpha-Win Research Dept. based on data from the“March 2024 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 does not have continuity with the rest
due to changes in the survey target size. However, therate of change in Figure 24 has been adjusted by the
Ministry to have continuity.

(units: %)
(%)

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
May
July
Sept
Nov
Jan
Mar

-15
2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

24/44
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.

FY2023

FY2022

FY2021

FY2020FY2019FY2018FY2017FY2016FY2015FY2014FY2013

FY2012FY2011FY2010FY2009FY2008FY2007

FY2006

FY2005

FY2004

FY2003

FY2002

FY2001

FY2000

FY1999FY1998FY1997

FY1995

FY1996-10.0

FY2023

FY2022

FY2021

FY2020FY2019FY2018FY2017FY2016FY2015FY2014FY2013

FY2012FY2011FY2010FY2009FY2008FY2007

FY2006

FY2005

FY2004

FY2003

FY2002

FY2001

FY2000

FY1999FY1998FY1997

FY1996

FY1995

FY19940Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)
w Software investment is
expected to increase by 6.0%
(YoY) in 2024.

Issued: 6/14/2024

Bank of Japan (BOJ) Tankan Survey
According to the BOJ Tankan Survey in March 2024, the amount of software
investment in FY2024 (plan) by companies of all sizes and industries(including financial institutions) is expected to rise solidly by +6.6% YoY,
albeit at a slower rate than before (the plan in 2023 was +11.0% YoY).

w BOJ Tankan’s DI for

Compared to the December 2023 survey, the business sentiment (the March2024 survey’s DI) of all companies of all sizes and industries has remainedlargely unchanged (in December and March, the recent sentiment was +13
and +12, respectively; similarly, the future sentiment was +8 and +9).

w Large companies expect a

The business sentiment of large companies, which are the Company’s main
customers, also has not largely changed. Their recent sentiment remained at+22 and the future sentiment changed from +17 to +19. The sales andearnings plan of large companies (surveyed in March 2024) forecast a slightincrease of +0.9% in sales and a decrease of -3.7% in recurring profit in
FY2024 (however, their plans may be on the cautious side since these
forecasts were made at the beginning of the fiscal year). The employment
conditions DI was -27, indicating that there is still a labor shortage.

w In the JISA-DI survey, theforecast DI (outlook) for
sales of make-to-ordersoftware has remained at a
double-digit, positive value,
although the momentum
has somewhat declined.

Data from the Industry Association
According to the JISA-DI Survey (March 2024) by the Japan Information
Technology Services Industry Association, the forecast DI for the 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) has been largely positive, at +29.6% in April to June of 2023
and +45.5, +39.7, and +41.5 in the following quarters, respectively. However,most recently in April to June of 2024, the DI was still positive but shrunk to+21.7.

companies has mostly notchanged, but is positive andsolid.

slight increase in sales anda slight decrease in profit in
FY2024.

w The forecast DI for sales tothe wholesale and retailindustry and the service
industry is strong.
w Shortage of IT engineers interms of both quantity andqualityIn the information service industry as a whole, the forecast DI for major client
sectors was strong for the wholesale and retail industry and the service
industry, while it remained flat for the financial and insurance industry andthe electricity and gas industry and was weak for information andcommunication, manufacturing, and the government.
The employment conditions DI (DI: employee sufficiency = shortage minus
excess) has fallen slightly from its peak of 80.3 points at the end of December
2022, but still indicates a significant employment shortage at 74.0 points asof the end of March 2024 (74.6 points in the same period of the previous
fiscal year). There continues to be a shortage of IT engineers both in number
and quality, making the recruitment of talented employees for systemdevelopment difficult.

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

w 当部の中期の業績見通し
を、マクロ環境の変化や
リスクファクターを考慮
w High demand related to
し改定。
DX

Market Outlook
IT investment by companies and the government is expected to increasesolidly (the Digital Agency’s promotion and acceleration of IT investment),
along with increasing structural labor shortages and operational efficiency
needs. In various industries and business areas, companies have been actively
investing in strategic areas and developing technologies to raise theircompetitive edge.
Also, listed companies in Japan are continuing to show growth trends forprofit. Combined with systems becoming increasingly advanced, as well as
the demand for DX, we predict that the market size will grow at a pace ofabout 2-5% per year.
25/44

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 中期的には、年率 6～10％

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

Issued: 6/14/2024◆ 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%.

w
ww Its benchmark companies

The Company’s competitors, or similar companies, are thought to be the twocompanies HIMACS (TSE Standard: 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), with about
the same size and at very similar market positions as the Company (Figure 28
on page 27).

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

Concerning several of the largest SI players in the market, such as NRI and
Fujitsu, they are in cooperation or partnership with the Company rather thandirect competition.
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

margin is somewhat low
compared to its twocompetitors.

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

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

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). Since FY2023, though, its ROE became the lowest
instead due to the capital increase in the previous fiscal year’s Q3. Note that
the Company is also working on improving capital efficiency and profitability,with a goal of achieving and maintaining a ROE of at least 13% (it aims toachieve 14% in FY2027, the final year of the medium-term plan).

w The Company’s goal is tomaintain an ROE of atleast 13% and to achieve
14% in FY2027.

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

10.1

7.7

7.7

7.6

7.5

HM

10.3

7.7

7.3
6.1

5.9

8.9

9.6
7.5

6.3

8.1
6.6
6.4

7.8
6.6

7.9

9.3
8.8

10.6
9.8
8.9

9.7

9.6

9.9
8.5

9.6

8.8

8.5

18.0

10.0
8.0

4.0

6.0
4.0

2.0

2.0
FY2009FY20100.1

FY2011FY2012TS

17.2 16.8
15.4 15.5 15.3

14.0

16.3
14.6

14.2

13.8
11.3

11.1

10.9

10.0

12.4

8.6

6.7
5.2
4.3

8.6

8.7

8.8

8.5

9.2
6.2 4.4
5.4
3.8

4.3

8.4

13.5

12.1 13.2

9.8

9.1 11.9
8.0

14.0 13.8

13.2
13.4 13.1 11.9
9.8 9.6 11.2 12.0 11.8 11.1
10.8
9.1 10.2
9.8
8.8

11.6 11.4 11.4
10.7
9.0

7.1

14.1

9.6

5.3
0.2

3.0

0.0
FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

FY2024FY2025
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
FY
20
24

0.0

16.4

16.0
12.0

6.5

HM

20.0

14.0

5.5

4.9

CS

22.0

TS

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

26/44
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: 6/14/2024【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
Code

CUBE SYSTEM (CS)HIMACS (HM)

2335

4299

Independent. Mainly sys. dev. for finance, distribution,
telecom, and other industries (industries excluding theIndependent. 70% of sales comes from the financeabove 3 industries such as makers & gov.). Sales to financeindustry. Sales to insurance companies are espciallyaccount for 30% of total sales. Sales to the "otherhigh, at a little more than 30% of total.
industries" category are the largest, at a little over 30% of
total sales.

Characteristics

Toho System Science (TS)Reference: Nomura Research Institute
(NRI)

4333

4307

Began as Toho Mutual Life Insurance Co.'s
affiliate but is now indep. Specialized in finance
Merger between Nomura Research Institute and Nomura(insurance, securities, etc.) which accounts for 80% Computer Systems in 1988. Sales to finance account forof total sales. Also develops software for the telecom 50% of the total.
industry.

Date of Founding

July 1972

May 1976

June 1971

April 1965

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

Oct. 2002 → Nov. 2006 → Mar. 2014 → TSE Prime

Mar. 2001 → Mar. 2004 → Mar. 2015 → Apr. 2022
→ Oct. 2023 TSE Standard

June 2001 → Mar. 2007 → Mar. 2014 → TSE
Prime

TSE 1st Section (Dec. 2001) → TSE Prime

・System Integration 78%
・System Outsourcing 9%・Professional 13%

Sales Categories/Breakdown (FY2024)

・System Solutions Services 34.1%
・System Maintenance Services 65.9%

・Consulting 7.1%
・Financial IT Solutions 47.5%
・Industrial IT Solutions 37.5%
・IT Infrastructure Services 7.6%
・Others 0.4%

・Software Development 97.7%
・IT System Services, etc. 2.3%

・Directors (6; of which, 3 external & 1 woman [14.3%])
・Directors (7; of which, 3 external and 1 woman)
・Auditors (4; of which, 3 external and 1 woman [25.0%]) ・Auditors (4; of which, 2 external)
・Executive officers (13; no woman)
・Executive officers (11; no woman)

・Directors (7; of which, 3 external and 1 woman)
・Auditors (3; of which, 2 external)
・Executive officers (10; of which, 1 woman)

・Directors (9; of which, 3 external and 1 woman)
・Auditors (5; of which, 3 external and 1 woman)
・Executive officers (34; of which, 2 women)

Major Clients / Customer Sectors (FY2024)(sales = million yen; % of total sales = %)・NRI Group 9,486 (52.7%)
・Fujitsu Group 3,177 (17.6%)

・66% from finance (of which 33% is frominsurance)

・Nomura Research Intsitute 4,138 (25.4%)

・Nomura Holdings 9.5%
・Securities: Nomura Securities, Mizuho Securities, etc.
・Insurance: Japan Post Insurance, Sony Life Insurance,
etc.
・Banks: Seven Bank, Nomura Trust and Banking, etc.
・Others: distribution, manufacturing, services, etc.

Sites (including consolidated subsidiaries)

・Main office: Shinagawa-ku, Tokyo・West Japan Solutions Office in Osaka & Nagoya &Fukuoka・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 and overseas)

Director Composition (as of the end of March 2024)

First Medium-Term Management Plan: Final year
New medium-term management plan NEXT C⁴
FY ended Mar. 2024: Sales of 18 billion yen (actual: 18.02 FY2024 - FY2026
billion yen), operating profit of 1.62 billion yen (actual:
FY ended Mar. 2024: Sales of 18.15 billion yen
1.54 billion yen), operating margin of 9.0% (actual: 8.5%), (actual: 17.36 billion yen), operating profit of 1.68
and ROE of 11% (actual: 10.8%).
billion yen (actual: 1.72 billion yen), operating
Second Medium-Term Management Plan: FY2025 margin of 9.3% (actual: 9.9%), and ROE of 10.8%.
FY2027
FY ending Mar. 2025: Undisclosed.
FY ending Mar. 2025: Sales of 18.8 billion yen and
FY ending Mar. 2026: Sales of 20.6 billion yen,operating profit of 1.6 billion yen (operating margin ofoperating profit of 2.06 billion yen (operating
8.5%).
margin of 10%), and ROE of 11.5%.
FY ending Mar. 2026: Sales of 20.6 billion yen andoperating profit of 1.95 billion yen (operating margin of
9.5%).
FY ending Mar. 2027: Sales of 23.0 billion yen andoperating profit 2.41 billion yen (operating margin of
10.5%).

Management Goals (indicators)

New medium-term management plan: plans for
Medium-term management planeach final year
・FY ended Mar. 2024: Revenues of 735 billion yen (actual:
FY ending Mar. 2025 (1st period): Sales of 16.5
736.5 billion yen), operating profit of 120 billion yen
billion yen, operating profit 1.58 billion yen(actual: 120.4 billion yen), and operating margin of 16.3%(operating margin of 9.6%), and ROE of 11.4%.
(actual: 16.3%).
FY ending Mar. 2028 (2nd period): Sales of 20.0
・FY ending Mar. 2025: Revenues of 780 billion yen andbillion yen, operating profit of 2.0 billion yen
operating profit of 132 billion yen (operating margin of(operating margin of 10%), and ROE of 12.5%.
16.9%)FY ending Mar. 2031 (3rd period): Sales of 25
・FY ending Mar. 2026: Revenues of 810 billion yen andbillion yen, operating profit of 2.5 billion yen or
operating profit of 145 billion yen (operating margin of
more (operating margin of 10% or more), and ROE 17.9%)of 15% or more.

Business Foundation
Long-Term Management Vision 2030
Basic strategy
・Strengthening of the production system: (1) Area
・Create the future with customers
・Expand the conventional contract-dev. businessexpansion and (2) Quality improvement.
・Stably expand business, solve society's issues,(core business): maintain businesses with the・Enhancement of quality: (1) Establishment of a quality nonfinancial sector and end users at 30% of the total and create a sustainable future society
management system for business model transformation, (2) ・Actively work on receiving orders for DX projects Priority Strategies
Establishment of a quality management system forthat are based on digital technologies: Raise the sales ・Change the business portfolio
expansion of the production system, and (3) Qualitative
proportion of DX projects from 20% to 25%
・Focus on the digital business
improvement of the system development meetings.
・Continue investment in human capital: increase
・Build the service business・Greater collaboration: (1) Strengthening of development the number of DX engineers by 30%, raise the・Establish the DX Development Centersystem, (2) Provide one-stop services, (3) Greater utilization percentage of employees with DX-related certification ・Develop human resources, raise liquidity ofof offshore bases, and (4) Strengthening of collaborative
to more than 90%, and increase the number ofshares, and strengthen governanceconsultation.
project leaders by 20%
・Research investment: (1) R&D and product development ・Increase the number of development staffand (2) Production innovation.
・Conduct M&As and form capital/business
Management Foundation
alliances for further development of business・Enhancement of human capital: (1) Recruitment(quantitative expansion), training (qualitative
improvement), and engagement (motivational enhancement)
・Maximise shareholder value: ROE of 14% or more andconsolidated dividend payout ratio of 50%.
・Reform of corporate culture: (1) Value investment and (2)Risk response

Medium-Term Management Policy/Strategy (summary)Main Pillars of the Growth Strategy:
・Deeper development of the core businesses (greater
market reach in Japan):
Sales growth rate (growth rate from FY ended Mar. 2023 to
FY ending May 2026): (1) consulting business at morethan +5 billion yen, (2) Industrial IT Solutions at morethan +40 billion yen, (3) Financial IT Solutions at morethan +40 billion yen, and (4) IT Infrastructure Services atmore than +5 billion
・Evolving the core businesses (fundamental
transformation of production): (1) fundamental
transformation in production through modernization of
the existing IT assets, renewal of the development
framework, and utilization of AI in development processes,and (2) planning to invest about 20 billion yen during the
span of the current medium-term plan to improve
productivity

Sales (million yen), CE for FY2025

18,80018,60017,800780,000

Sales Growth Rate, YoY (%), CE

4.3
1,600
4.2
3.1
5.4

7.2
1,780
3.5
3.6
4.8

9.3
1,700
8.0
9.5
8.0

5.9
132,000

107.0

125.5

122.9

117.5

141.2
75.1
886
20.3
1.7
10.8
5.9
1.4

281.2
80.5
930
18.7
1.8
11.1
6.8
1.3

343.4
69.5
681
23.9
2.3
11.9
6.6
1.2

200.4
43.3
16,708
44.1
7.2
19.9
10.8
0.8

Operating Profit (million yen), CE
Operating Profit Growth Rate, YoY (%), CE
EPS (CE) for FY2025, YoY (%)
DOE (%), Actual
Past 14 Years’ Sales Growth Rate (FY2024's result divided by
FY2010's result: %)Operating Profit Growth Rate (same condition as above)
Equity Ratio (%), Actual
Number of Domestic/Overseas Employees, Actual
Sales Per Employee (million yen / person)
Operating Profit Per Employee (million yen / person)
ROE (%), Actual for FY2024

A=B×C×D

Net Profit Margin (net profit for the year / sales : %)Total Asset Turnover Ratio (sales / ave. total asset)

B
C

9.6
11.6
7.8

1.3

1.2

1.4

2.2

ROA (recurring profit / total asset : %)

E=F×G

12.2

13.1

12.0

13.3

Recurring Profit Margin (%), Actual

F

8.8
1.4

10.0
1.3

9.7
1.2

15.7
0.9

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

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

DG(Ref) Prepared by Alpha-Win Research Dept. based on each company’s securities report, financial results materials, website, notice of convocation of thegeneral meeting of shareholders, etc.
(Note) The companies’ forecasts for FY2025 are italicized; the rest are actual values of FY2024. The highest values among the three companies (excluding
NRI) are highlighted in yellow. The highest values among the four companies including NRI are highlighted in orange. For the ROA (E) and recurring profit
margin (F) of NRI, net profit before tax was used instead of recurring profit. NRI is based on the IFRS (the other three companies are based on the JapaneseGAAP).

27/44
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: 6/14/2024

7． Last Fiscal Year’s Results and This Fiscal
Year’s Company Forecast◆ Full-Year Financial Results for FY2024 (last fiscal year)
Summary
Consolidated results for FY2024 (previous fiscal year) were as follows: salesof 18,021 million yen (+10.4% YoY), operating profit of 1,536 million yen(+5.8% YoY), recurring profit of 1,590 million yen (+7.5% YoY), and net
profit attributable to owners of the parent of 1,067 million yen (+7.8% YoY;
hereinafter, “net profit”). Sales reached the target of the initial plan (+0.1%
compared to the plan), while operating and net profits fell slightly short by
5.2% and 1.2%, respectively. However, the results were overall strong(Figure 29).

w In the previous fiscal
year, the results were inline with the Company’splan that was made at the
beginning of the fiscal
year. No surprises.

w Record-high sales for the
12th consecutive year andrecord-high profits forthe 4th consecutive year.
Dividends increased.

Sales have hit a record high for the 12th consecutive fiscal year starting in
FY2013 and each of the profits has also hit a record high for the fourthconsecutive fiscal year. Also, the annual dividend per share was increased
from the initial forecast of 30 yen to 35 yen (announced during the fiscal year).

w Somewhat below AlphaWin's forecasts due to a
slowdown in the rate ofsales growth in Q4 and adecrease in profit causedby higher costs.

For the previous fiscal year, we had forecasted sales of 18,200 million yen(+200 million compared to the company plan) and the same amounts ofprofits and dividends as the Company’s forecasts. We analyze that the main
reasons for the deviation from the results were the smaller increase in salesin Q4 (Jan-Mar 2024) and the decrease in profits caused by a lower grossmargin and higher SG&A expenses.
There were no unprofitable projects or extraordinary losses in the previous
fiscal year, so the increase in operating profit resulted in an increase in net
profit.

【Figure 29】Comparison of Forecasts and Results in FY2024 (last fiscal year)
Units: million yen

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

InitialCompany Plan

RevisedCompany Plan

Alpha-Win's
Initial Forecast

Alpha-Win's
Revised Forecast

Result

A

B

C

D

E

18,50018,000

1,480
8.0%

1,620
9.0%
1,635
1,080
30.00

17,800
3,900
21.9%
2,300
12.9%
1,600
9.0%
1,615
1,065
30.00

18,200
3,980
21.9%
2,360
13.0%
1,620
8.9%
1,635
1,080
30.00

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

18,021
3,922
21.8%
2,386
13.2%
1,536
8.5%
1,590
1,067
35.00

G＝F/B

21

0.1%

-84
-0.0
-45
-13
5.00

-5.2%
-2.8%
-1.2%
16.7%

Comparison with AlphaWin's Revised Forecast(Diff.)

Comparison with AlphaWin's Revised Forecast(% Diff.)

H＝E-D

I＝H/D

-179
-58
-0.1%
26
0.3%
-84
-0.0
-45
-13.0
5.00

-1.0%
-1.5%
-0.5%
1.1%
-5.2%
-2.8%
-1.2%
16.7%

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

and the order backlog
increased, but the increasein order backlog was
small.

w The SI Business
contributed to orders.

Orders Received and Order Backlog
From FY2023 to FY2024, orders received increased by 1,475 million yen(+8.9%) from 16,620 million yen to 18,096 million yen. Similarly, the orderbacklog (at the end of each fiscal year) was solid and increased by 75 million
yen (+1.6%) from 4,572 million yen to 4,647 million yen.
By business model, orders in the SI Business were strong (resources were
shifted to address this). By industry, the financial industry and others
contributed to the increase in orders.
28/44This 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 SIS contributed to thesales and profit growth.

w The profit margin declined
for each service segment.

【Figure 30】Comparison of the Past
Two Fiscal Years’ Sales (FY2023 andFY2024) by Service Segment
YoY
Change(Million yen)

20,00018,021
18,000(+1,695)

12,00012,06813,998

・The Company’s overall operating margin fell from 8.9% in FY2023 to 8.5%
in FY2024 (-0.4 percentage point). The margin also fell for each service
segment, with relatively large declines for ProS and SOS; ProS’s margin fell
from 10.7% to 9.6% (-1.1 percentage point) and SOS’s margin fell from 7.2%
to 6.7% (-0.5 percentage point). Meanwhile, in the SIS, whose sales
accounted for 80% of the total, the margin declined only slightly from 8.8%
to 8.6% (-0.2 percentage point).

(+1,930)

Operating Profit(units: million yen)

8,000
6,000

2,000

・The overall increase in operating profit was 83 million yen. By service
segment, only the SIS, whose sales grew, saw an increase in profit (+141
million yen). This offset the decline in the profit of ProS (-41 million yen)and SOS (-16 million yen) (Figure 31).

【Figure 31】Comparison of the Past Two Fiscal Years’ Operating Profit
by Service Segment

14,0004,000

Sales and Profit by Service Segment
・Of the Company’s overall sales growth (+1,695 million yen or +10.4%
compared to FY2023; the same point of comparison applies to the rest), salesof each service segment were as follows: sales of SIS grew (+1,930 million
yen or +16.0%), while sales declined for ProS (-127 million yen or -5.1%)
and SOS (-107 million yen or -6.2%) (Figure 30).

16,32516,00010,000Issued: 6/14/2024

Operating Margin(units: %)
1,743

1,636

(-107)

2,513

2,386

(-127)FY2023

FY2024

Total
SIS
SOS
ProS
Total
SIS
SOS
ProS

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

FY2024
1,536
1,198
109
228
8.5%
8.6%
6.7%
9.6%

Diff.
83
141
-16
-41
-0.4%
-0.2%
-0.5%
-1.1%

% Diff.
5.8%
13.4%-13.2%-15.3%(Ref) Figures 30 and 31: Prepared by Alpha-Win Research Dept. based on the financial results materials

0

SIS (System Integration Services)
SOS (System Outsourcing Services)
ProS (Professional Services)w By industry, profits

declined for thetransportation &telecommunication anddistribution industries,
but the financial
industry and others
contributed to resultswith double-digit
increases in sales andprofits.

Sales and Operating Profit by Industry
・ By industry, sales and profits made from the transportation &telecommunication industry fell by double digits, while there were a small
increase in sales and decline in profits for the distribution industry. In contrast,
the financial industry and other industries both contributed to results withdouble-digit increases in sales and profits (Figure 34 on page 30).
・Compared to the overall increase in sales (+1,695 million yen YoY), sales
to transportation & telecommunication fell (-354 million yen or -12.3% YoY)
and profit declined (-54 million yen or -19.1% YoY) due to a reduction insystems-related projects.
・Regarding the distribution industry, sales rose by 102 million yen (+2.9%
YoY) due to projects for a wholesaler and an apparel company, but profit fellby 16 million yen (-5.4% YoY).
・ On the other hand, regarding the financial industry, business toward
regional banks, online banks, and a megabank was strong, partly due to theeffects of the alliance with NRI. Sales to this industry increased by 1,206
million yen (+24.8% YoY) and profit increased by 96 million yen (+20.7%
YoY), driving the Company’s overall performance.
・Sales to others also increased by 741 million yen (+14.7% YoY) and profit
rose by 57 million yen (+14.2% YoY) due to a growth in sales to the central
government, the service industry, and the manufacturing industry.
・Compared to the initial plan (for sales), the financial industry exceeded theplan, while the remaining three industries fell short (Figure 33 on page 30).
29/44

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 33】Comparison between Initial Forecasts and Resultsfor Sales of Each Industry【Figure 32】Comparison of the Past Two
Fiscal Years’ Sales by Industry

Industry
Finance
Distribution
Transportation &Telecommunication
OthersTotal(+1,695)

18,021

18,000

FY2024 Sales

YoY
Change(Million yen)

20,00016,32516,000(+1,206)

6,064

14,000Finance

4,857

12,000Distribution

10,000(+102)

3,656

3,554

8,000
2,883

6,000

2,528

(-354)

5,771(+741)

5,029

2,000
0

FY2023

FY2024(Ref) Figures 32-34 were prepared by Alpha-Win Research
Dept. based on the financial results materials

Operating profit(units: million yen)

【Figure 35】Comparison of the Past Two
Fiscal Years’ Sales by Business Model(Million yen)

18,00016,00016,32518,021（+1,695)

563

（-38)

4,183

6,670

DigitalBusiness

SI Business
10,0008,000(-753)
11,53910,786

Enhancement
Business

4,000
2,000
0
FY2023

FY2024(Ref) Figures 35-37: Prepared by Alpha-Win
Research Dept. based on the financial resultsmaterials.

w By business model,
increased sales andprofits of the SI Businessoffset the decreased sales
and profits of theEnhancement and Digitalbusinesses.
w Profit maintained in the
Digital Business

FY2023

FY2024

Diff: %
9.3%
-7.5%

2,575

-47

-1.9%

5,771
18,021

5,993
18,000

-222
21

-3.8%
0.1%

Industry
Finance
Distribution
Transportation &Telecommunication
OthersManufacturing
Government
Others

Total
Finance
Distribution
Transportation &Telecommunication
OthersManufacturing
Government

FY2023467
294

FY2024
564
278

Diff.
96
-16

% Diff.
20.7%
-5.4%

287

232

-54

-19.1%

402
86
72
244
1,452
9.6%
8.3%

460
107
138
214
1,536
9.3%
7.6%

57
21
66
-30
83
-0.3%
-0.7%

14.2%
24.6%
91.3%
-12.2%
5.8%

10.0%

9.2%

-0.8%

8.0%
5.5%
7.8%
9.6%
8.9%

8.0%
6.6%
12.3%
7.1%
8.5%

-0.0%

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 FY2024, the Enhancement Business accounted for 60% of total sales
and 59% of total operating profit, making up the majority. This business saw
a 6.5% fall in sales and a 16.1% fall in profits YoY, which were due to shifting
resources to the SI Business where demand is strong and large profits can be
expected (Figures 35-36).
・The SI Business was extremely strong with a sales growth of 59.5% and a
profit growth of 86.7%, thanks to the expansion of systems-related projects
for finance, manufacturing, retailers, and the government.
・The Digital Business, which is small in scale (accounting for 3% of sales
and 0.5% of operating profit), saw sales fall by 38 million yen YoY (-6.4%)
due to the reduction in a project for a home improvement center. Its operating
profit also fell from 34 million yen to 8 million yen (-76.6% YoY).
・Sales of the SI Business were significantly higher than initially forecasted,while sales of Enhancement and Digital fell short (Figure 37).

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

Initial Forecast Diff: million yen
5,501
563
3,931
-275

2,528

Total

12,000

6,000

6,064
3,656

Others602(+2,487)

14,000Operating margin(units: %)YoY Change

20,000Result【Figure 34】Comparison of the Past Two Fiscal Years’
Operating Profit and Margin by Industry

Transportation &Telecommunication

Others4,000

Issued: 6/14/2024

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

8
614
913
1,536
1.4%
9.2%
8.5%

Difference
-26
285
-175
83
-4.2%
1.3%
-1.0%

8.9%

8.5%

-0.4%

% Diff.
-76.6%
86.7%-16.1%
5.8%【Figure 37】Comparison between Initial Forecasts andResults for Sales of Each Business Model
Units: million yen or %Sales
Digital Business
SI Business
Enhancement BusinessBusiness Model

DigitalSI
Enhancement
Total

FY2023
16,325602
4,183
11,539FY202418,021563
6,670
10,786

Difference
1,696
-38
2,487
-753

% Diff.
10.4%
-6.4%
59.5%
-6.5%

FY2024 Sales
ResultInitial Forecast Diff: million yen
563
920
-357
6,670
5,850
820
10,786
11,230-444
18,021
18,00019

Diff: %
-38.8%
14.0%
-4.0%
0.1%

30/44
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 First disclosure of sales bybusiness style. SI
Contracting projects
accounted for around 80%of the total.

【Figure 38】Breakdown of Sales by
Business Style
Service Providing Business2.8%
Direct Contract
Business

18.3%

SI Contracting
Business

FY2024

78.9%(Ref) Prepared by Alpha-Win Research Dept.
based on the financial results materials.

w Operating profit increasedslightly since sales growthof the SI Business offset
the sales decline of theother businesses and theincrease in various costs.

Issued: 6/14/2024

Sales and Operating Profit by Business Style
・Since the previous fiscal year, sales have been disclosed for each of thethree business styles – SI Contracting (contracts with system integrators orSIs), Direct Contract, and Service Providing (Figure 38). Note that there is
no retrospective disclosure of sales or profits for past periods.
・In terms of the sales breakdown, SI Contracting projects accounted for mostof the sales, at 78.9% of the total. This was followed by Direct Contract
projects (direct transactions with end users) at 18.3%, in which the Company
aims to expand in its areas of expertise through its accumulated technologies
and know-how.
・Direct Contract projects are generally well profitable, but its profitability
depends on the capability at managing projects. The weight of the Service
Providing business (solutions, etc.) is currently small.
Analysis of Factors that Increased or Decreased Operating Profit
An analysis of the factors that increased or decreased operating profit in theprevious fiscal year is shown in Figure 39. The decrease in profit caused by
the reduction of projects in the Digital and Enhancement businesses, as wellas the increase in costs associated with the expansion of the development
organization and facilities the early introduction of a new HR system, and thedevelopment of the management foundation, was offset by the increase inprofit due to the SI Business’ sales growth and resource consolidation. As aresult, company-wide operating profit increased by 83 million yen.
【Figure 39】Factors that Contributed to Operating Profit Growth in
FY2024 (last fiscal year) (units: million yen)
Increase

Profit growth due toincreased orders for the
SI Business (Lift & Shift)
and resource
consolidation

Decrease(Million yen)

+425
-73
-147

1,452
Profit decline
due toreduction ofprojects in the
Digital andEnhancementbusinesses

1
FY2023

2

3

Expansion of
production
system (greater
recruitment,
peopledevelopment,
and site
expansion)

4

YoY Change: ＋Y83 million

1,536
-72
Increase inpersonnel
expenses due tothe early
introduction of
the new HR
system, whichstarted in April
2024

5

-49
Development ofmanagementfoundation(strengthening
governance)

6

7
FY2024(Ref) Prepared by Alpha-Win Research Dept. based on the financial results materials

w Gross margin declined
slightly and the SG&A
expense ratio worsened
due to higher costs,
including those forstrengthening themanagement foundation.
As a result, the operating
margin declined.

The gross margin fell by 0.1 percentage point from 21.9% to 21.8% (fromFY2023 to FY2024; the same order applies to the rest). On the other hand,
the SG&A expenses increased by 12.7% YoY and exceeded the sales growthrate of 10.4%, so the SG&A expense ratio rose by 0.2 percentage point from
13.0% to 13.2%. Personnel expenses rose by only 2.9% YoY (+29 million
yen) and their ratio to sales fell from 6.1 % to 5.7 %. However, rent expense,
commissions expenses (such as recruitment agent fees), and other expenses
increased.
As a result, the operating margin fell by 0.4 percentage point from 8.9% to
8.5%. However, operating profit increased by 5.8% due to sales growth.
31/44This 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: 6/14/2024◆ CUBE SYSTEM’s Financial Forecast for FY2025 (thisfiscal year)
Summary
For this fiscal year, the Company forecasts sales of 18,800 million yen(+4.3% YoY), operating profit of 1,600 million yen (+4.2% YoY), recurring
profit of 1,650 million yen (+3.7% YoY), and net profit of 1,100 million yen(+3.1% YoY). Although the momentum in sales and profit growth will slow
down, the Company expects to achieve record highs for sales and each of the
profits for the consecutive year.

w Single-digit sales andprofit growth expected
this fiscal year. The
momentum will decline,
but it plans to achieve
record-high results.

It does not plan to record a large amount of non-operating or extraordinary
profit/loss during this fiscal year either. Note that the Company plans to work
significantly on increasing the recruitment of new graduates and mid-careerhires, mainly in Japan.
【Figure 40】The Company’s Financial Forecast for FY2025 (this fiscal year) (units: million yen)
Units: million yen
Sales
Gross Profit
Gross Margin
SG&A Expenses
SG&A Expense Ratio
Operating Profit
Operating Margin
Recurring Profit
Net Profit

Last FY's Results
FY202418,021
3,922
21.8%
2,386
13.2%
1,536
8.5%
1,590
1,067

This FY's Company Plan
FY202518,800

1,600
8.5%
1,650
1,100

FY2024First Half

FY2025First-Half PlanYoY Change
(%)

9,015
1,960
21.7%
1,166
12.9%
794
8.8%
788
501

8,800

-2.4%

600
6.8%
650
440

-24.4%-2.0%-17.6%-12.2%FY2024
Second Half
9,006
1,962
21.8%
1,220
13.5%
742
8.2%
802
566

FY2025
Second-Half PlanYoY Change(%)

10,000

11.0%

1,000
10.0%
1,000
660

34.8%
1.8%
24.8%
16.7%

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

w First-half sales and profits
are expected to fall YoY,
while second-half sales
and profits are expected torise by double-digits.

Financial Forecast for the First and the Second Half
In the first half, the Company plans for sales of 8,800 million yen (-2.4%
YoY), operating profit of 600 million yen (-24.4% YoY), and net profit of
440 million yen (-12.2% YoY) (Figure 40). Subtracting the first-half planfrom the full-year plan, the second-half forecasts come out to be 10,000
million yen (+11.0% YoY), 1,000 million yen (+34.8% YoY), and 660
million yen (+16.7% YoY), respectively.
In past years, operating margins have tended to increase in the second half ofthe fiscal year compared to the first half due to higher sales, improved
productivity, and seasonality (in the first half, recruitment costs are greaterand new employees cannot engage in revenue-generating work yet, but in thesecond half, not only does this situation improve but also delivery dates tend
to concentrate toward March).
This fiscal year, the operating margin is planned to be 6.8% in the first half,
and then rise by 3.2 percentage points to 10.0% in the second half (last fiscal
year or FY2024 was irregular with margins of 8.8% in the first half and 8.2%
in the second half, due to increased investment in the second half). In thissecond half, sales and operating profit are expected to increase by 13.6% and66.7%, respectively, compared to this first half (in the previous fiscal year,
sales and operating profit decreased by 0.1% and 6.5%, respectively).

w Regarding the sales forecasts
by business model, sales areplanned to increase for eachbusiness. The Enhancement
Business is expected tocontribute significantly tosales growth due to resource
reallocation.

Assumptions Regarding Sales Growth
The Company expects the following measures and factors to lead to sales
growth for this fiscal year.
・In terms of sales by business model, sales are expected to increase in all
three businesses. By realigning resources in Japan and overseas, it plans tofocus on the Enhancement Business and increase its sales by 413 million yen
32/44This 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)(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 SIs.
w By business style, theamount of sales growth isexpected to be large for the
SI Contracting and Service
Providing business.
w By industry, financial andother industries will be thegrowth drivers.

【Figure 41】Sales Forecast by Business
Model in FY2025 (this fiscal year) (CE:the Company’s plan)(Million yen)

YoY Change

20,00018,00018,021563

18,800800(+778)(+236)

6,800(+129)

Issued: 6/14/2024(53% of the planned company-wide increase in sales of +778 million yen).
・In the Digital Business, sales are expected to increase by 236 million yen(+42% YoY) due to the development of the consulting collaboration model21
and the expansion of services based on AI technologies.
・In terms of business style, sales growth is expected in all three businesses.
The SI Contracting Business is expected to see the largest amount of increasein sales (+379 million yen or +2.7% YoY), while the Service Providing
Business (providing solutions, etc.) is expected to have the largest sales
growth rate of 44.0% (+220 million yen YoY). Sales of the Direct Contract
Business are also expected to grow firmly at +5.5% (+180 million yen YoY).
・In terms of industry, based on the current state of orders, the Company
expects an increase in sales to the financial and other industries and a decreasein sales to the distribution and transportation & telecommunication industry,
like the previous fiscal year’s trend. Of the planned increase in company-widesales of 778 million yen, the other industries are expected to make the largest
contribution with an increase in sales of 928 million yen (119% of overallsales growth; +16.1% YoY). Regarding the other industries, growth isexpected from manufacturing, the government, and AI-related industries. In
the financial industry, since IT investment by banks and other financial
institutions is expected to be robust, an increase in sales of 235 million yen is
expected (30% of overall sales growth; +3.9% YoY) (Figure 42).
【Figure 42】Sales Forecast by Industry in FY2025 (this fiscal year)(the Company’s plan)＋16.1% YoY（＋928）＋3.9% YoY（＋235）(Million yen)

7,000

6,700

6,300

6,064

5,771

6,000

16,00014,0006,670-1.1% YoY
（-28）

3,656

4,000

12,00010,000

3,000

8,000

2,000

6,000

-9.8% YoY（-356）

5,000

11,20010,786(+413)

4,000

3,300
2,528

2,500

FY2024(result)

FY2025(plan)

1,000
0
FY2024(result)

2,000

FY2025(plan)

Finance0
FY2024
Enhancement B usiness

FY2025 CE
SI Business

Digital Business

w Planning to improve
profitability by working on
digitalization, improving
productivity, and shiftingto high value-added
businesses
w Will continue to invest for
future growth. Operating
margin is expected toremain flat, while operating
profit is forecasted toincrease due to sales
growth.

FY2024(result)

FY2025(plan)

Distribution

Transportation &Telecommunication

FY2024(result)

FY2025(plan)
Others(Ref) Figures 41 and 42: Prepared by Alpha-Win Research Dept. based on the financial
results materials.

Assumptions Regarding Gross Margin and Operating Profit Growth・The gross margin is expected to improve significantly (from 21.8% in theprevious fiscal year to 24.5% this fiscal year) since the Company will work
on digitalization, improving productivity (such as building its development
system to optimize resources), and shifting to high value-added businesses.
・ As the Company continues to make strategic investments to achieve
exponential growth in the future, personnel expenses and other costs
associated with improving employment conditions will increase. Since this is
expected to offset the improvement in profitability, the operating margin isplanned to remain at 8.5%, the same level as in the previous fiscal year.
・However, due to sales growth, operating profit is expected to rise by 64
million yen or 4.2% YoY (reference: operating margin was 6.5% in FY2020,
7.9% in FY2021, 8.8% in FY2022, 8.9% in FY2023, and 8.5% in FY2024).
33/44This 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: 6/14/2024

8． Growth Strategy◆ VISION 2026: The Medium-Term Management Plan
w The First Medium-Term
Management Plan ofV2026 ended in theprevious fiscal year.

w Numerical targets forsales, operating profit,
and ROE were notachieved, mainly due toinsufficient production
capacity.

The Company has announced VISION 2026, a medium-term vision for thesix years from FY2022 to FY2027, of which the First Medium-Term
Management Plan (the first three fiscal years of the VISION that ended in
FY2024) has been completed.
Results of the First Medium-Term Management Plan
Figure 43 compares the numerical targets and actual results of the First
Medium-Term Management Plan. The actual results for the final year
(FY2024) were somewhat below the target figures (for consolidated sales andprofits).
Sales (in the order of the upwardly revised target announced in May 2022 to
the actual result) were 18 billion yen (result) compared to the plan of 19
billion yen, falling short by 1 billion yen (-5.3% compared to the plan).
Similarly, operating profit was 1.53 billion yen compared to 1.71 billion yen(-0.18 billion yen or -10.5%), operating margin was 8.5% compared to 9.0%(-0.5 percentage point), and ROE was 10.8% compared to 13.0% or more (atleast -2.2 percentage points), each falling short of the target.
The main reason for this was insufficient production capacity (as in,opportunities were lost due to staff shortages since recruitment could not keep
up with the increase in demand and workload despite already having
increased the number of staff).

w A certain level ofachievement made, withsome of the goals
achieved.

However, the SI Business achieved its sales and per-capita sales targets.
Progress was also generally made toward targets in terms of sales
composition by business model, as well as in addressing the themes andchallenges. A certain level of achievement seems to have been made.

【Figure 43】The Goals and Results of the First Medium-Term Management Plan (V2026):
Past Three Fiscal Years’ Results (FY2022 – FY2024)

Sales

Difference from Target

The First Medium-Term Management Plan

FY2021Results

FY2022

14.7

16.0

B yen

FY2023B yen

16.3

Numerical
Targets2

FY2024
B yen

18.0

B yen

19.0

Diff. (amount)Diff. (%)

B yen

-1.0B yen

-5.3％
-44.0％

0.06B yen

0.35B yen

0.60B yen

0.56B yen

1.0B yen-0.44B yen

SI Business

2.5B yen

4.64B yen

4.18B yen

6.67B yen

5.7B yen

0.97B yen

17.0％

Enhancement
Business

12.1B yen

11.1B yen

11.53B yen

10.78B yen

12.3B yen

-1.52B yen-12.4％

Sales CAGR
(since FY2020)

−

8.9%

5.3%

6.8%

8.7%

-1.9％

―％

Operating Profit

1.17B yen

1.41B yen

1.45B yen

1.53B yen

1.71B yen

△10億円
-0.18
B yen

△10
-10.5億円
％

9.0%

−0.5％

―％

-2.2％

―％

Digital Business

7.9%

8.8%

8.9%

8.5%

ROE

14.0%

13.8%

11.8%

10.8% 13.0% or more

Sales per Person1

Operating Margin

At least

21M yen

22.5M yen

22.9M yen

24.3M yen

23M yen

1.3M yen

5.7％

Number of Employees(in Japan)

689

714

713

740

ー

―

―

Number of Employees(Consolidated)

781

830

843

886

ー

―

―

（Ref) Financial results materials（Notes) 1 Calculated based on the number of employees (in Japan). 2 Target figures for the First Medium-Term
Management Plan are those announced on May 11, 2022 (“News Regarding Revision of Financial Targetsof Medium-Term Management Plan”).

34/44
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 The Second MediumTerm Management Plan ispositioned as the second
founding of the Company,
with the aim of achieving
exponential growth andmaximizing corporate
value.

Issued: 6/14/2024

Basic Strategy of the Second Medium-Term Management Plan
The Second Medium-Term Management Plan (FY2025 to FY2027) is
positioned as the Company's ‘second founding’, with the basic strategy of“Staying True to the Basics and Growing by Leaps and Bounds.” It intends
to “Turn Change into Success and Accelerate Growth.”
Specifically, the Company aims to achieve the following three goals.
・Maximize corporate value by achieving exponential growth while staying
true to the basics
・Improve profitability as a business・ Become a rewarding company for its employees through well-being
management
Direction of Business (No change; continuation)
The Company has created the following two guidelines to respondproactively and flexibly to the expected shift in society toward the newnormal as soceital themes and workstyles change.

w Will ambitiously develop
business through theproposal-based businessas well as the conventional
contract-based business.

w Aiming to achieve growthby focusing on investmentin the SI and the Digitalbusinesses, based on thefoundation of
Enhancement Business.

・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, which are proposed tothe customers/industries and then provided as services) and the contractbased business (a business model in which the Company conducts contractdevelopment of information systems as requested by its customers).
Succeeding the First Medium-Term Management Plan, the current plan aims
to achieve growth by shifting to the proposal & contract based business. The
Company will actively make proposals, start new businesses, and build astable and sustainable 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 foundation of theEnhancement Business.
The Company’s current business is categorized into three business models:
Enhancement, SI, and Digital. The proportion of each business 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 from now). As reference,in FY2024, the proportions were 60%, 37%, and 3%, respectively.
Priority Strategies and Plans
The Company plans to pursue business strategies based on the current threebusiness models as well as the three business styles.
In addition, it has set out priority strategies and plans to solidify the four
foundations of business (promoting collaboration, strengthening the
production system, enhancing quality, and investing in research) andstrengthen the three foundations of management (enhancing human capital,
stnregthening internal control and governance, and transforming thecorporate culture). It is currently working on these in line with the plan.

35/44
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)

Key Performance Indicator (KPI)
Like the First Medium-Term Management Plan, the Company has announced
goals for the Second Medium-Term Management Plan that are based on bothfinancial and non-financial perspectives (Figure 44; the items themselves are
the same in both plans).

w Five financial and five nonfinancial KPIs have been set
in the medium-term plan.
w The KPIs of the Second
Medium-Term Management
Plan are the same as those of
the First Medium-Term
Management Plan, but withhigher targets.
w The five financial KPIs are
ROE, sales per person, sales
proportion, sales CAGR, andoperating margin.
w The non-financial KPIs are
items related to people andthe environment.

Issued: 6/14/2024

The Company has clearly set five items as its financial KPIs, which consistof the ROE, operating margin, and three items related to sales (sales perperson, sales proportion, and sales CAGR). In the Second Medium-Term
Management Plan, goals have been set to all exceed the goals of the First
Medium-Term Management Plan.
Regarding non-financial indicators, the Company believes respect for thepeople (enhancement of human capital) and the environment is essential forachieving sustainable growth through sustainability management. Based on
this idea, it has set the following five items as its KPIs: diversity promotion,
workstyle reform, communication vitalization, people development, andenvironment (goals for the amount of GHG emissions).

【Figure 44】The Second Medium-Term Management Plan for FY2025 to FY2027 (V2026):
Financial and Non-Financial Goals (KPIs)

Capital Efficiency
Productivity
FinancialBusiness Model
Transformation

FY2021 Results

Results of the First
Medium-Term
Management Plan

Goals of the Second
Medium-Term
Management Plan

ROE

14.0%

10.8%

14.0%

Sales per person
Sales proportion

21M yen

24M yen

25M yenSI Business

SI BusinessDirect Contract +1B yen1

2.5B yen+

4.1B yen (since FY2020)

Service Providing +0.5B yen

Sales CAGR

－

6.8%

Profit Indicator

Operating margin

7.9%

8.5%

10.5%

Diversity Promotion

Percentage of female
employees amongsection-chief positions

18.3％

18.6%

30.0%

Workstyle Reform

Hours of overtime
work2

－

33.6 hours/month

25 hours/monthCommunication
Vitalization

Engagement Score3－

Fulfillment score:64

71 or greater

Days of training or
education per employee－

5.1 MD

10.0 MD

Scope 1 & 2: 287t-CO2

Scope 1 & 2: 234t-CO2

Scope 1 & 2: 227t-CO2

Growth Rate

NonFinancial

Key Performance
Indicators (KPI)

People Development
Environment

GHG emissions goal
(Scope 1, 2, and 34)(Compared to FY2021)

Scope 3: 4,576t-CO2

About

Scope 3: 5,399t-CO2

8.7%

Scope 3: 4,004t-CO2（Ref）Financial results materials(Footnotes for the figure)1
Amount of increase compared to the end of March 2024
2
The number of hours exceeding the scheduled working hours (7.5 hours); average of all employees including
those under the discretionary labor system and managers/supervisors
3
Evaluated using Atrae’s engagement analysis tool “Wevox” for all employees of CUBE SYSTEM INC. alone.
4
Scope 3 covers category 1 (purchased goods and services).

w The targets for the final
fiscal year (FY2027) of theSecond Medium-Term
Management Plan are
sales of 23 billion yen,operating profit of 2.41
billion yen, and ROE of
14%.

Financial Goals of the Second Medium-Term Management Plan
The targets for FY2027, the final year of the Second Medium-Term
Management Plan, are sales of 23 billion yen (CAGR +8.5% from FY2024),
operating profit of 2.41 billion yen (similarly, +16.2%), operating margin of
10.5% (+2.0 percentage points compared to FY2024), and ROE of 14% (+3.2
percentage points compared to FY2024) (Figure 45 on page 37).
Judging from the Company’s track record to date, the sales growth rate is asomewhat ambitious target (Figure 47 on page 38; simple-average sales
growth rate of +6.1% over the past 26 years).
36/44

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: 6/14/2024

w High growth of the Digital
Business and stable growthof the Enhancement
Business are expected.

The Company expects a sharp increase in sales in the Digital Business (from
560 million yen in FY2024 to 2.5 billion yen in FY2027, which is a +1.94
billion yen or 4.5x growth), albeit by a small amount. It also expects growthof the Enhancement Business (from 10.78 billion yen in FY2024 to 13 billion
yen in FY2027, which is a +2.22 billion yen or 1.2x growth).

w Ambitious plan to increase
operating margin from
8.5% in the previous fiscal
year to 10.5% in the final
fiscal year

High targets are set for operating profit and operating margin. While theoperating margin is forecasted to remain unchanged YoY at 8.5% in FY2025,
it is expected to improve by 1.0 percentage point each year after that to 9.5%
in FY2026 and 10.5% in FY2027. Note that the Comapny’s highest operating
margin since FY2002 was 8.9% in FY2023.

【Figure 45】V2026: Financial Goals of the Second Medium-Term Management Plan (FY2025 – FY2027)

Sales

The第２次中期経営計画
Second Medium-Term Management Plan

FY20242024年3⽉期
実績
Results

FY2025
2025年3⽉期

FY2026
2026年3⽉期

FY20272027年3⽉期

Compared
to FY2024
2024年3⽉期⽐

18.0

18.8

20.6

23

CAGR 8.7%
B yen

+8.5%

B yen

Digital Business

0.56

SI Business

6.67

Enhancement
Business
SI Contracting
Business
Direct Contract
Business
Service Providing
Business

10.78
14.22
3.3
0.5

Operating Profit

Sales per Person*

B yen(+11.6% YoY)

- B yen- B yen

2.5

B yen

- B yen- B yen

7.5

B yen

- B yen- B yen

13

B yen- B yen- B yen

17.5

B yen

- B yen- B yen

4.5- B yen

B yen

1.53
8.5
740
24

%

Number of Employees(in Japan)

B yen(+9.6% YoY)

B yen

B yen

Operating Margin

B yen(+4.4% YoY)

M yen

1

- B yen

B yen

B yen

B yen

B yen

B yen

B yen

CAGR since FY2024+5+1.94B yen+64.7%+0.83B yen+4.0%+2.22B yen

+6.4%

+3.28
B yen
CAGR
7.5%

+7.2%

1.2B yen
CAGR+10.9%+10.9%

0.5B yen
CAGR+26.0%+26.0%

CAGR
1.6
1.95
2.41 +0.88
22.5%＋1.5pt8.5
9.5
10.5 +2.0−ー800
920 +180
−
ー
23
25
+1

+16.2%

B yen

B yen

B yen

B yen

%

%

%

pt

M yen

M yen

M yen

M yen

percentage
point

―
+7.5%
+1.4%

*Calculated based on the number of employees in Japan(Ref) Excerpt from the financial results materials, with partial edits and additions by Alpha-Win.

【Figure 46】Medium-Term Financial Forecasts (The Company’s plan and Alpha-Win’s forecasts)
Units: million yen, %Sales
Digital Business
SI Business
Enhancement Business
Gross Profit
Gross Margin
SG&A Expenses(% to sales)

Operating Profit(% to sales)

Recurring Profit(% to sales)

Net Profit(% to 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)

FY2024 Results
18,021563
6,670
10,786
3,922
21.8%
2,386
13.2%
1,536
8.5%
1,590
8.8%
1,067
5.9%

FY2025 CE
18,800800
6,800
11,200
4,600
24.5%
3,000
16.0%
1,600
8.5%
1,650
8.8%
1,100
5.9%

FY2025 New E
18,800800
6,800
11,200
4,500
23.9%
2,900
15.4%
1,600
8.5%
1,650
8.8%
1,100
5.9%

10.4%
-0.1%
12.7%
5.8%
7.5%
7.8%

4.3%
2.7%
25.7%
4.2%
3.7%
3.1%

4.3%
2.2%
21.5%
4.2%
3.8%
3.1%

FY2025 Old E FY2026 Medium-Term Plan
19,00020,6001,200
6,200
11,600
4,150
21.8%
2,425
12.8%
1,725
1,950
9.1%
9.5%
1,755
9.2%
1,155
6.1%
5.4%
0.1%
1.6%
12.3%
10.4%
8.2%

9.6%

21.9%

FY2026 New E
20,0001,300
7,000
11,700
4,800
24.0%
2,950
14.8%
1,850
9.3%
1,900
9.5%
1,250
6.3%

FY2026 Old E
20,5001,700
6,800
12,000
4,500
22.0%
2,650
12.9%
1,850
9.0%
1,870
9.1%
1,235
6.0%

FY2027 Medium-Term Plan
23,0002,500
7,500
13,000

6.4%
0.1%
1.7%
15.6%
15.2%
13.6%

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

11.6%

2,410
10.5%

FY2027 New E
21,7002,200
7,200
12,300
5,300
24.4%
3,150
14.5%
2,150
9.9%
2,200
10.1%
1,450
6.7%

23.6%

8.5%
0.4%
6.8%
16.2%
15.8%
16.0%

(Ref) Excerpt from the financial results materials. “CE” and “Medium-Term Plan” are the Company’s forecasts. “Old E” is Alpha-Win’s previous forecast
and “New E” is its current forecast.

37/44
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: 6/14/2024◆Alpha-Win Research Dept.’s Financial Forecast for
FY2025 (this fiscal year)
w We reviewed our previous
forecasts for this FY andrevised sales and profits
downward to the samelevel as the Company’s
plan.

w The Company’s forecasts
seem to be within an
achievable range.

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. However,
the Company tends toannounce somewhat
ambitious forecasts.

Revised Financial Forecasts
We have reviewed our forecasts for this fiscal year and have revised our sales
forecast from the previous 19,000 million yen to 18,800 million yen (Figure
46 on page 37). We also lowered our operating profit forecast from 1,725
million yen to 1,600 million yen, which is the same as the Company’s forecast.
This fiscal year’s company forecast for the sales growth rate (YoY) is largely
as we have expected. On the other hand, in our previous forecast, we had
expected the operating margin to improve to 9.1% in the current fiscal year.
We now expect the margin to remain at 8.5%, which is the same as theprevious fiscal year, due to higher-than-expected costs associated with thestrengthening of upfront investments for the next stage of growth. This is themain reason for the difference between our previous and current forecasts.
Customers’ appetite for strategic IT investment has been strong and theCompany’s orders have been firm. If investment and cost control are carriedout properly, the planned profit is likely to be achievable. There are concerns
about the constraints in HR capacity and about costs such as personnel
expenses and subcontracting costs increasing due to further investments for
growth. However, judging from their rate of increase and the profit margins,
the Company’s assumptions and forecasts for sales and profits seem
generally reasonable and the downside risks seem to be limited. Therefore,
upon also taking into account the risk factors to a certain extent, we havemade forecasts of the same amount as the Company’s forecasts.
Financial Forecast and Track Record of Financial Performance
We have analyzed the deviations between the Company’s forecasts
announced at the beginning of each fiscal year and the actual results over thelong term (Figure 47). The simple average of the deviation rate during thisanalyzed period is 1.8% for sales and 4.0%, 2.6%, and 3.0% for operating,recurring, and net profit, respectively, with the actual results being lower than
the initial forecasts. However, the deviation rates are small, and neither
operating nor recurring profit has ever been more than 30% lower than theinitial forecast in any fiscal year. The Company generally tends to announce
targets that are ambitious but within a realistically achievable range.

【Figure 47】Comparison of (the Company’s) Initial Forecast Made at the Beginning of the Fiscal Year vs.
Consolidated Results over the Years
Consolidated

Sales

Operating Profit

Recurring Profit

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

Units: million yen Initial Forecast Results
Initial Forecast
Results Initial Forecast
Results
Initial Forecast
Results
FY2001
4,806
387
FY2002
5,598
485
445
246
FY2003
6,244
510
432
235
FY2004
6,900
6,575
491
522
500
284
280
FY2005
7,000
7,100
558
532
551
287
315
FY2006
7,800
7,767
549
600
551
340
312
FY2007
8,300
7,923
590
570
584
330
324
FY2008
8,300
8,109
605
645
610
643
336
342
FY2009
8,500
8,507
680
652
685
597
350
308
FY2010
8,800
8,706
660
637
670
660
350
349
FY2011
9,200
9,166
675
662
680
672
263
208
FY2012
9,300
8,431
665
524
675
533
350
118
FY2013
9,000
9,242
620
601
630
606
350
338
FY201410,00011,217
700
665
700
702
380
387
FY201512,00012,527
840
964
840
981
480
594
FY2016
13,00012,623
1,000
949
1,020
960
600
629
FY2017
14,00012,899
920
781
940
811
450
551
FY201814,30013,559
1,060
855
1,080
893
650
567
FY201914,70014,325
1,010
922
1,010
960
640
597
FY202015,50014,708
1,090
959
1,090
976
684
525
FY2021
16,00014,788
1,120
1,174
1,120
1,295
700
844
FY2022
16,00016,099
1,230
1,417
1,250
1,432
850
944
FY2023
17,30016,325
1,530
1,452
1,545
1,480
1,000
989
FY202418,00018,021
1,620
1,536
1,635
1,590
1,080
1,067
FY2025 CE
18,800
1,600
1,650
1,100
Reference: Simple average of the difference (%), calculated for the longest period with data available for both sales and profits(excl. FY2025 and periods with loss posted) →Green highlight:
all-time highPink highlight: second
highest in history

Yellow highlight: third
highest in history← All excl.
FY2025's forecasts

Number of times revised up:down from initial forecast →

Sales

O.P.

R.P.

N.P.

Sales

O.P.

R.P.

N.P.

% Diff. from Initial Forecast
-4.7%
-4.3%
-1.5%
1.4%
3.5%
9.7%
-0.4%
-8.2%
-8.3%
-4.5%
2.4%
-1.8%
-2.3%
6.6%
5.4%
1.9%
0.1%
-4.1%
-12.8%-12.1%
-1.1%
-3.5%
-1.5%
-0.3%
-0.4%
-1.9%
-1.2%
-20.9%-9.3%-21.2%-21.0%-66.4%
2.7%
-3.1%
-3.8%
-3.5%
12.2%
-5.0%
0.3%
1.7%
4.4%
14.8%
16.7%
23.8%
-2.9%
-5.1%
-5.9%
4.8%
-7.9%
-15.1%-13.7%
22.4%-5.2%-19.3%-17.3%-12.8%
-2.5%
-8.8%
-5.0%
-6.8%
-5.1%
-12.0%-10.5%-23.2%
-7.6%
4.8%
15.6%
20.6%
0.6%
15.2%
14.6%
11.1%
-5.6%
-5.1%
-4.2%
-1.1%
0.1%
-5.2%
-2.8%
-1.2%
FY2025 forecast vs. FY2024's result ⇒% YoY Change for Actual Results
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%
10.4%
5.8%
7.5%
7.8%
4.3%
4.2%
3.7%
3.1%

-1.8%

6.1%

7 ： 14-4.0%
4 ： 13

-2.6%

-3.0%

7 ： 14↑ Reference: simple average of all fiscal years
8 ： 13(excl. FY2025)

6.2%

7.1%

12.9%

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

38/44
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: 6/14/2024◆ Alpha-Win Research Dept.’s Forecast of Medium-Term
Financial Performance
We have revised our previous medium-term forecasts and prepared forecasts
for the three fiscal years starting this fiscal year, including a new forecast for
FY2027 (Figure 46 shown previously on page 37; note that our forecasts do
not anticipate the occurrence of M&A or unprofitable projects, or therecording of any specific non-operating or extraordinary profit or losses).
w We revised our mediumterm forecasts. We believethat sales and profits willcontinue to increase overthe medium term, hitting
their record highs
consecutively.

w The risks include thesecuring of humanresources, rise in costs, andearnings trends ofcompanies.

w We predict the mediumterm profit growth rate to
be about 10-20% per year.
w A high sales growth rate of
6-8% per year is expected
due to new orders forstrategic IT investment
projects and the alliancewith NRI.

w Over the medium term,
profit growth is expected
due to sales growth andthe improvement in profit
margin.

We have made the following assumptions regarding the medium-term
financial performance and have taken into account the risk factors. As a result,
our forecasts for both sales and profits are somewhat cautious compared to
the Company’s medium-term targets. The Company’s targets are a highhurdle, but we believe they are achievable if favorable conditions are met(such as securing employees, increasing sales through collaboration with NRI,
winning direct-contract projects, improving productivity, controlling costs,
and preventing unprofitable projects). In any case, we expect the Company
to continue to increase sales and profits in the next fiscal year and beyond,with the potential to continuously post record-high sales and profits.
Risk Factors and Medium-Term Profit Growth・Regarding the macroeconomic environment, there are concerns that thebusiness performance of Japanese companies may be impacted over the
medium term by rising geopolitical risks, the depreciating yen, inflation,interest rates rising and remaining high to control inflation, and thesubsequent risk of a global recession.
・ Factors that are hard to predict at the moment include the earnings
environment of its main end users, IT investment trends, recruitment situation,
the impact of its upfront investments, and the increase in costs.
・Based on the current strong demand for systems and the following factors
and assumptions, we predict that sales and profits will continue to increase
annually by about 10-20% over the medium term.
Sales Growth: Factors and Assumptions
・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
6-8% per year over the medium term, especially with significant contribution
from the alliance with NRI.
・ The Company is expected to expand the Digital Business, the SI
Contracting Business (toward its major customers), the Direct Contract
Business, and the new Service Providing Business through the technologicalexpertise and credibility that it has built over the years.
Profit Growth: Factors and Assumptions
・In the previous fiscal year, the increase in costs was offset by various
measures, resulting in only a slight decline in the gross margin. We predict a
gradual improvement from the next fiscal year onwards, when the upfront
investment is planned to peak out.
・The Company is expected make upfront investments, such as strengthening
its business foundation for future growth (will expand and strengthen its
development bases 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.
・However, due to a shift to high value-added projects, improvement inproductivity, and a lower SG&A expense ratio due to higher sales, we expect
the improvement in operating margin, in addition to sales growth, tocontribute to profit growth starting in the next fiscal year or later.
39/44This 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: 6/14/2024

9． Analyst’s Views◆ SWOT Analysis
The Company’s SWOT analysis result is shown in Figure 48.
w Its strengths are its
collaboration with NRI
and financial strength. It
has growth opportunities
in DX, direct contracts,
and services.

Major strengths of the Company lie in the strengthening of the relationshipwith NRI in recent years through the capital and business alliance, as well as
the strengthening of the development base and production system and thefinancial strength to back these.
In addition, as future opportunities, we have added the growing demand forthe Digital Business (DX), Direct Contract Business, Service Providing
Business, and information security services for cyber-security measures.

【Figure 48】SWOT Analysis

Strength

Weakness

Opportunity

Threat・ 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/riskmanagement)
・ Entry barrier essentially high; business model with long-term viability
・ 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
bases and production system)
・ Consulting-based sales through direct sales activities
・ Quality people development and training system
・ Development system based on low-cost development by overseas subsidiaries (offshore) and development at regional bases in Japan (nearshore)
・ Relies heavily on certain customers (majority of sales are to NRI)・ IT-related labor market is tight and retaining/recruiting talented employees is difficult (bottleneck to further growth)
・ 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 IT systems market due to labor shortage and the need to streamline operation
・ Increased strategic demand for systems
・ Projects for upstream processes, niche areas, and large-scale development
・ Improvement of productivity through agile development and AI
・ Business expansion following the global entry of customers
・ Development and strengthening of the Direct Contract Business, Service Providing Business, and Digital Business・ Growing demand for information security services as a cyber security measure
・ 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 (penetration by AI or packaged business software), delayed product development, and product defects
・ Information management and leakage risks
・ Increase in personnel expense and subcontracting cost(Ref) Prepared by Alpha-Win Research Dept. (Note) Words in red are new additions made in this Report.

w Challenges include
improving profit margins
and retaining/recruiting
talents.

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 for the Company. Further
improvement of the margin will be the challenge.
Development of new areas of business and new customer acquisition are also
crucial to continuous growth (increasing sales), but the shortage of employees,
especially for project manager positions, has been the bottleneck to further
growth.

w Focused on strengthening
project management, but
the occurrence of
unprofitable projects isstill a potential risk.

Also, not only the Company but the entire SI industry in general tends toexperience temporary profit declines upon the occurrence of unprofitableprojects, such as during the development of new areas of business, despite thestrengthening of preventive measures and project management over many
years. The Company has been working on further improvement of quality
control and has seen positive results in recent years, but this point should still
be noted as a constant risk factor.
40/44This 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: 6/14/2024◆ Shareholder Return and Shareholder Benefit Program
The Company’s policy is to raise the shareholder asset value by improving
its financial results to make stable dividend payments and increase market
capitalization.
The consolidated dividend payout ratio has changed from 46.5% in FY2020
to 32.2% in FY2021 and 32.9% in FY2022, and then rose to 71.1% in FY2023
due to commemorative dividends (37.0% for ordinary dividend alone). In
FY2024, this ratio was still high at 49.7% and the dividend on equity ratio(DOE) was also adequate at 5.4%.

w The consolidated dividend
payout ratio target was
raised from 35% to 40%,and then raised further to50%. It is continuing toraise dividends (ordinary
dividend) consecutively.

The Company’s consolidated dividend payout ratio target was previously
raised from 35% to 40%. It has raised this further to 50% starting in thecurrent fiscal year.

w Plans to increase
dividends again this fiscal
year (ordinary dividend by+5 yen). Dividend hikes
are also possible over the
medium-term.

Due to these changes, ordinary dividend per share has steadily risen from 23
yen in FY2022 to 26 yen in FY2023, 35 yen in FY2024, and 40 yen in
FY2025 (plan; consolidated dividend payout ratio of 55.1%) (Figure 49).
Since profit growth is expected over the medium term, we believe that
dividends may be increased further in the next fiscal year onwards.
【Figure 49】Change in Dividend and Dividend Payout Ratio (units: yen or %)(Y)

Dividend (left axis)

60.0

Commemorative dividend (left axis)

（ %）

80.0
71.1

Dividend payout ratio (right axis)

70.0

50.0
55.1
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

8.3

8.3

8.3

8.5

2.5

8.5

8.5

50.0
40.0

32.2 32.9

50.0
35.0

2.5

60.0

52.2
37.0

20.0
10.0

52.3

49.7

18.0 20.0
14.0 14.0 14.0 16.0 16.0

23.0

40.0

43.0

30.0
20.0

26.0

10.0

0.0

0.0
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
E
E
E(Ref) Prepared by Alpha-Win Research Dept. Estimates/forecasts (E) were made by Alpha-Win.

w Actual annual (maximum)
yield including theshareholder benefit
program is about 4.1%.

Dividend yield is 3.6% when calculated based on a stock price of 1,108 yen(closing price on June 7). Many of the Company’s investors are individual
investors, for whom the Company has a shareholder benefit program where
JCB gift cards are given to shareholders based on the number of shares theyown (Figure 50 on page 42). When this benefit program is taken into account,the dividend yield essentially rises to 4.1% at maximum (based on the
optimum number of shares owned). The Company plans to continue to stably
pay dividends, while raising the EPS, to increase the return of profit toshareholders.
The actual annual yields of its competitors that include their shareholder
benefit programs are around the same level as the Company, at 4.0% for
HIMACS and 4.2% for Toho System Science (these two companies have a
QUO Card granting program; as reference, NRI does not have a shareholder
benefit program and its dividend yield is 1.4% based on dividend only).
41/44This 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: 6/14/2024【Figure 50】Shareholder Benefit Program and Actual Net Yield (shareholder benefit vesting date: end of Sept.)
Number of Shares Owned
Shareholder Benefit(less than)
Dividend: Y Actual Net Yield: %(greater than or equal to)(JCB Gift Card: Y)
200
400
1,000
40
4.1
400
1,000
2,000
40
4.1
1,000
3,000
40
3.9
Actual net yield = (dividend + shareholder benefit value) / (share price)*Calculated for the min. (optimum) number of shares owned in each range
Share price assumed to be 1,108 yen (closing price on June 7, 2024). Dividend is based on this FY's company forecast.
(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s website

w Its competitors’ DOE anddividend payout ratios arealso high.

Dividend on equity ratio (DOE = total dividend / shareholder’s equity) in
FY2024 was 5.4% for the Company, 4.8% for HIMACS, 8.0% for Toho
System Science, and 7.8% for NRI (as reference and IFRS-based; ratio for
dividends attributable to owners of the parent company), which are all highcompared to the general level (no commemorative dividend for each).
The Comapny’s dividend payout ratio based on this fiscal year’s forecast is
55.1%, which is high within the industry; the ratio is 41.7% for HIMACS,
61.6% for Toho System Science, and 38.2% for NRI.

w Proactively returning
profit to shareholders.

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.

w Essentially debtless andrich in cash; may conduct
share buybacks and stock
splits in the future as well.

The Company has a solid financial standing, being essentially debtless andrich in cash. Therefore, depending on the level of share price, additional sharebuybacks are possible in the future.

42/44
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: 6/14/2024◆Stock Characteristics, Stock Price, and Valuation
Comparison

w A defensive, domesticdemand-oriented growthstock. Share price increased
by approx. 5.8x over the
past approx. 15 years,
largely outperforming the
TOPIX.

The Company is a defensive, small-cap, and domestic-demand-oriented
growth stock. Over the past approximately 15 years, the Company’s shareprice has risen by about 5.8x, largely outperforming the TOPIX by +250%(calculated with stock splits taken into account; based on the closing price onJune 7, 2024; Figure 51). This rise most likely reflects the Company’s strong
fundamentals and firm financial growth over the long term.

w Stable growth is expected
to continue. It may be seen
as an attractive candidate
for medium/long-term
investment.

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 51】Long-Term Return of the Company’s Shares (CS) and TOPIX(change in monthly share price over the past approx. 15 years)
700%

Past approx. 15 years' growth rate (%)
CS
TPX
Relative return
478.1
228.8
249.2

CS%

500%

TPX%

End of April 2009
CS*
192
TPX
837.79300%

6/7/2024
CS
1,108
TPX
2,755.03*Retroactively adjusted
for the stock split

100%

-100%
4/20094/20104/20114/20124/20134/20144/20154/20164/20174/20184/20194/20204/20214/2022

4/20234/2024

Note: CS's share price and TOPIX at the end of April 2009 are set to 0% as the starting point(Ref) Prepared by Alpha-Win Research Dept. The most recent share price and TOPIX price are theclosing prices on June 7, 2024.

w Underperforming the
TOPIX and its
competitors over the past
12 months.

Over the past 12 months, the Company has underperformed TOPIX as wellas its two competitors (HIMACS and Toho System Science) and NRI, partly
because the point of comparison is when share prices had risen in responseto strong performance. The main reason for this underperformance, though,seems to the relatively small fluctuation in the financial performance ofdefensive and domestic-demand-oriented stocks like the Company comparedto the current market environment dominated by economically sensitive,
large-cap, and high-tech stocks.

w Regarding valuation, it issomewhat undervalued
compared to the TSE
Prime’s average and in
the middle range
compared to the twocompetitors. Valuation
does not seem expensive.

Based on the key valuation measures, we have made a comparison of all
stocks listed on the TSE Prime, the two competitors, and the Company (NRI
is for reference only). The Company seems somewhat undervalued comparedto all TSE Prime stocks based on the current fiscal year’s forecasts (excludingP/B), with a slightly low P/E and a high dividend yield. Compared to its twocompetitors, it is generally in the middle range (Figure 52 on page 44).

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

When defensive, small-cap, and domestic-demand-oriented growth stocks
gain attention in the market, the Company’s share price will likely startoutperforming the indices again. Also, since its valuation does not seem
expensive, the share price will most likely be generally linked to financial
performance.

43/44
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: 6/14/2024

Note that the Company’s historical weekly beta to TOPIX over the past five
years is 1.18, which is relatively high for a defensive business and incomparison with its competitors.
【Figure 52】Comparison of Valuation and Liquidity
Company Name

CUBE SYSTEM(CS: consolidated)

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

Refernce:
Nomura ResearchInstitute2335

4299 S

4333

4307

Code
Stock Price (at 6/7 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)

1,108
17,451
15.27
1.66
3.61
6.60
0.93
16
1.18

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

1,343
16,671
12.73
1.42
3.28
3.75
0.90
12
0.57

1,424
29,618
21.92
2.77
2.81
11.42
1.66
29
0.64

All TSE Prime Stocks 25 SI Companies Listed(average)on TSE Prime (average)-

4,158
2,414,954
27.23
6.00
1.39
13.92
3.10
5,779
0.84

Past 5 Years' Weekly Beta (β: relative to TOPIX)
Market cap= (shares outstanding) x (market share price [at 6/7/2024 closing])
The companies' planned EPS and dividend values for FY2025 were used in all P/E and dividend yield calculations. Actual BPS values of FY2024 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 2024
P/S=market cap / sales [the companies' forecasts for FY2025]-

1,418.11-

593,555
20.10
2.70
2.54

16.14
1.38
2.31
-

-

(Ref) Figures 52 and 53: Prepared by Alpha-Win Research Dept. based on each company’s securities report, financial results summary, and stock data.

The total market capitalization of the leading 25 system integrationcompanies listed on the TSE Prime (including the Company, the twocompetitors mentioned earlier, and NRI) is approx. 14.8 trillion yen, their
total sales are about 9.8 trillion yen, total operating profit is 952.3 billion yen,and operating margin is 12.6% on a simple average and 10.0% on a weighted
average.

w Compared to the 25companies of the same
industry, its valuation issomewhat low.

Comparing to this universe (Figure 53; as reference, the universe’s simple
average of P/E is 20.1, P/B is 2.7, dividend yield is 2.5%, and P/S is 2.1 andthe weighted average of P/S is 1.6), the Company seems slightly undervalued.

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

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

【Figure 53】Comparison of Major Stocks in the SI Sector
CodeCompany Name

9613
4307
4684
4716
4768
9719
3626
8056
2327
9749
4812
1973
9759
9682
9692
4674
9739
4719
4725
9600
9640
4333
4662
2335
4299

NTT DATA
Nomura Research Institute
OBIC
Oracle Japan
Otsuka Corporation
SCSK
TIS
BIPROGY
NS Solutions
Fujisoft
ISID
NEC Networks & System Int.
NSD
DTS
CEC
CRESCONIPPON SYSTEMWARE
ALPHA SYSTEMSCAC Holdings
I-NET
Saison Technology
Toho System Science
Focus Systems
CUBE SYSTEM
HIMACS
Simple Average

Market Cap.
3,309,199
2,414,954
2,011,920
1,465,075
1,087,952
958,055
704,212
469,031463,910448,210340,253
327,163
258,430
185,889
67,34250,49046,56342,36839,78936,67529,646
29,61818,02017,451
16,671
593,555

Share Price
2,360
4,158
20,20011,420
2,863
3,063
2,981
4,277
5,070
6,650
5,220
2,191
3,005
4,210
1,791
2,295
3,125
3,015
1,937
2,258
1,830
1,424
1,106
1,108
1,343

Sales

Operating
ProfitOperatingMargin4,430,000
780,000
122,800
233,721
1,026,000
510,000
555,000
385,000
330,000
315,000
153,000
365,000
107,000
125,000
56,50058,50052,00037,50051,50040,42025,50017,80032,50018,80018,600336,000
132,000
78,000Not disclosed
68,50062,00066,50035,50036,00022,00022,50029,00015,80013,300
6,280
5,900
6,000
4,400
Not disclosed
3,250
2,200
1,700
2,100
1,600
1,780

7.6%
16.9%
63.5%
Not disclosed
6.7%
12.2%
12.0%
9.2%
10.9%
7.0%
14.7%
7.9%
14.8%
10.6%
11.1%
10.1%
11.5%
11.7%
Not disclosed
8.0%
8.6%
9.6%
6.5%
8.5%
9.6%
12.6%

Actual ROE(%)

Est. P/E

Actual P/B

8.4
19.9
16.0
37.0
14.3
14.1
16.0
11.5
11.1
9.2
18.7
10.4
17.5
14.2
11.6
14.3
13.6
7.5
8.2
11.7
4.2
11.9
10.7
10.8
11.1
13.4

24.1
27.2
28.2
27.7
22.8
21.5
15.5
17.5
37.9
19.9
21.6
18.1
22.2
19.3
14.0
23.6
11.2
13.9
13.7
19.8
21.9
11.7
15.3
12.7
20.1

1.9
6.0
4.5
8.3
3.3
3.2
2.2
2.6
2.0
3.3
4.1
2.1
3.7
2.8
1.5
1.7
1.4
1.0
1.0
1.8
2.1
2.8
1.2
1.7
1.4
2.7

Est. Dividend
Yield

Est. Dividend

1.1%
25.00
1.4%
58.00
1.6%
320.00- Not determined
2.4%
70.00
2.2%
68.00
2.3%
68.00
2.3%
100.00
1.3%
67.00
1.3%
84.00
2.1%
108.00
2.6%
56.00
2.5%
74.00
2.6%
110.00
3.1%
55.00
1.7%
38.00
2.7%
85.00
3.3%
100.00
4.1%
80.00
2.5%
56.00
4.9%
90.00
2.8%
40.00
3.4%
38.00
3.6%
40.00
3.3%
44.00
2.5%

Est. EPS
97.72
152.71
716.12412.00125.71142.42
192.55243.72133.89333.80241.28120.83135.27217.67127.91
97.09
280.21217.25
Not disclosed
164.22
92.60
64.95
94.66
72.55
105.51

Actual BPS
1,226.23
693.334,531.90
1,375.86
868.62967.36
1,333.32
1,654.93
2,588.51
2,014.30
1,284.67
1,024.09
811.26
1,489.17
1,212.54
1,343.78
2,226.53
2,981.81
1,937.15
1,257.26
877.85513.18888.09668.41
945.72

P/S

Dividend Payout
Ratio

0.7
3.1
16.4
6.3
1.1
1.9
1.3
1.2
1.4
1.4
2.2
0.9
2.4
1.5
1.2
0.9
0.9
1.1
0.8
0.9
1.2
1.7
0.6
0.9
0.9
2.1

25.6%
38.2%
44.7%
Not determined
55.7%
47.7%
35.3%
41.0%
50.0%
25.2%
44.8%
46.3%
54.7%
50.5%
43.0%
39.1%
30.3%
46.0%
Not disclosed
34.1%
97.2%
61.6%
40.1%
55.1%
41.7%
45.6%

44/44
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