Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE Prime)● SummaryIssued: 6/13/2022

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

Business Description
・CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent, mid-tier system integrator (SI) listed on
the TSE Prime Market. Its main customers are four major corporate groups including the Nomura ResearchInstitute and the Fujitsu Group. It develops systems and provides services mainly for the finance, distribution, andtelecommunication industries. Founded in 1972, it has 50 years of history.
Performance Trends
・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 21
years (including the period during which its results were nonconsolidated). During this period, its annual sales
growth rate (simple average of the rate of increase in sales) was +6.1% and its annual recurring profit growth rate
(simple average) was +7.3%; the Company has been steadily expanding its business and keeping its businessprofitable over many years. Thanks to its committed efforts in business development and management reform, therecurring margin has been stable at around 7% (7.2% on average) and the increase in sales has been contributing
directly to increases in profit, dividend, and market capitalization.
・The Company had made upward revisions to its initial forecast for the previous fiscal year (FY 2022; note that theCompany’s fiscal year is March ending, i.e., FY 2022 ended in March 2022) upon the announcement of financial
results for the first half. The fiscal year’s results came out to be mostly as expected. Sales were Y16.1 billion, an
increase of +8.9% YoY. Operating profit was Y1.42 billion, a significant increase of +20.7%. Sales hit a record
high for the 10th consecutive fiscal year, and operating, recurring, and net profit all hit their record highs. Dividend
was increased for the third consecutive fiscal year to an annual dividend of Y23 per share (+3 yen YoY).
・This fiscal year (FY 2023), it plans to achieve sales of Y17.3 billion (+7.5% YoY), operating profit of Y1.53 billion(+7.9% YoY), and net profit of Y1 billion (+5.9% YoY) and consecutively hit record-high sales and profits. It alsoplans to increase annual dividend by 3 yen to Y26 per share.
・Although the macroeconomy is unforeseeable, the Company expects to increase sales by successfully receiving
orders for projects related to strategic IT investments (Digital and SI businesses). In addition to sales growth, itplans to grow profit by working on its own digitalization, resource optimization, and productivity improvement.
・IT investments such as those related to DX have been strong, and strong orders can be expected. Also, the Company
has made a somewhat cautious prediction that its profit margin will be about the same as the previous fiscal year.
Therefore, Alpha-Win Research Department predicts that the Company’s planned sales and profits for this fiscal
year should be mostly achievable.

Business Strategy
・The Company made upward revisions to its consolidated target figures for FY2023 (current fiscal year) and FY
2024 in the First Medium-Term Management Plan of V2026. For the final year of the plan or FY 2024, it increased
sales from Y18.5 billion to Y19 billion, operating profit from Y1.48 billion to Y1.71 billion, and operating margin
from 8.0% to 9.0% (has not changed its goal to achieve ROE of 13% or more).
・The Company has been successfully and actively developing its business in the area of proposal-based business aswell as contract-based business and shifting toward the SI Business and the Digital Business based on the
Enhancement Business. The upward revision of medium-term numerical goals seems to reflect the Company’s
increasing confidence in its business performance and strategy.
・It has also been actively engaged in in-house development/enhancement of new technologies and services and joint
development with other companies. It has been building the foundation for such development by conducting
investments, providing financing, and forming alliances.
・In the new medium-term plan, it has declared to pursue sustainability management and set non-financial goals fordiversity promotion, workstyle reform, and people development which it plans to achieve through IT.
1/40
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: 6/13/2022

・Going forward, the key points will most likely be recruitment/training, collaboration with major system integrators,
development of proposal-based businesses targeting end users, improvement of project management skills,
continued improvement of profit margins, monetization of businesses in new business areas, acquisition of new
customers, M&As and alliance strategies, expanding and leveraging overseas offices, and incorporation of newtechnologies.
Forecast of Medium-Term Financial Results・Despite the unforeseeable economic environment caused by global inflation and monetary tightening to control it,
the situation in Ukraine, and COVID-19, the impact on the Company has been relatively small since its businessis centered on domestic demand. In addition, there has been a polarization in IT investment among Japanesecompanies, which are its customers. This may be a business chance for the Company as it plans to receive moreorders from customers who are strategically increasing system investments. On the other hand, risks include thesecuring of employees and the occurrence of unprofitable projects.
・ Over the medium to long term, IT and DX investments by the Company’s corporate users are expected tocontinuously increase. We believe that this trend will allow the Company to stably increase both sales and profit
by about 6-10% per year through the development of the new Digital Business and the SI Business based on the
Enhancement Business, expansion into new business areas, acquisition of new customers, and improvement of
productivity.
Shareholder Return
・The Company has been proactively returning profit to shareholders through share buybacks, stock splits, andsequential dividend hikes. When benefits from the shareholder benefit program are added to the dividend, thedividend yield essentially comes out to be about 3.4% at maximum. The planned dividend payout ratio for thisfiscal year has been raised 35% and it plans to increase dividend for the fourth consecutive year. Its DOE (basedon the most recent actual values of FY 2022) is 4.6%, which is about average compared to its competitors but highcompared to the market average of 2.0-2.5%. With solid financial performance and ample cash, shareholder returnmeasures such as share buybacks and dividend hikes can be continued to be expected.
Stock Characteristics and Stock Price
・Over the past 13 years or so, its stock price has increased by about 4.8x and has been largely outperforming the
TOPIX. Based on this fiscal year’s forecasted values, valuation is somewhat lower than the average of all stocks
listed on the TSE Prime, but about average compared to its competitors. Its current stock price therefore seems to
be mostly at the fair value.
・Since it is a domestic-demand-oriented, defensive stock and stable profit growth is expected to continue, it is most
likely seen as a potential medium/long-term investment target. In terms of stock price, key points going forward
will be its progress with this fiscal year’s financial performance and the IT investment trends of companies, as wellas the contribution of businesses in new digital-related technologies/areas to the financial results and the return ofprofit to shareholders.
【 2335 CUBE SYSTEM

Sector: Information & Communication 】

FY

2020
2021
2022
2023
2023
2023
2024
2024
2024
2025

Initial mid-plan CE
Revised mid-plan CE
E
Initial mid-plan CE
Revised mid-plan CE
E
E

Figure A

Sales

YOY

O.P.

YOY

R.P.

YOY

N.P.

YOY

EPS

BPS

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

(%)

(Y)

(Y)

(Y)

38.69
62.11
69.82

411.96476.52531.14

18.0
20.0
23.0

14,70814,78816,09917,20017,30017,20018,50019,00018,70019,600

2.7
0.5
8.9
7.5
6.8
7.6
9.8
8.7
4.8

959
1,174
1,417
1,340
1,530
1,520
1,480
1,710
1,700
1,800

4.1
22.5
20.7
7.9
7.3
10.4
11.8
11.8
5.9

976
1,295
1,432

1.7
32.7
10.6

525
844
944

-11.9
60.7
11.9

1,545
1,535

7.8
7.2

1,000
1,000

5.9
5.9

73.91 Not disclosed
74.08
579.20

26.0
26.0

1,715
1,820

11.7
6.1

1,100
1,180

10.0
7.3

81.48
87.41

28.0
30.0

634.69694.10(Note) CE = the Company’s estimate/forecast. “Initial mid-plan” is the forecast announced on June 11, 2021. “Revised mid-plan” isthe forecast announced on May 11, 2022. E = Alpha-Win Research Dept.’s estimate/forecast. Note that the Company’s fiscal year is
March-ending.
(Note 2) In this report, decimal places have been rounded off in principle in the calculations or for the values shown, and therefore
values may differ from those disclosed by the Company.

2/40
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: 6/13/2022【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】
6/10/2022

Item
Stock Price (Y)Item

Figure B
P/E

P/B

Dividend Yield

Dividend Payout Ratio

925

Last FY (actual)

13.2

1.7

2.5%

32.2%

Shares Outstanding (thou.)

14,500This FY (est.)

12.5

1.6

2.8%

35.1%

Market Capitalizatoin (million yen)

13,413

Next FY (est.)

11.4

1.5

3.0%

34.4%

71.2%

Last FY's ROE

13.8%

0

Dilutive Shares (thou.)Equity Ratio at Last FY-End(Note) Estimates were made by Alpha-Win Research Dept.

【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
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

Stock Price (left axis)(Note) From the first week of September 2016 to the second week of June 2022

02
/2
2
(M
M
/Y
Y
)

09
/2
1

04
/2
1

11
/2
0

06
/2
0

01
/2
0

08
/1
9

03
/1
9

10
/1
8

05
/1
8

12
/1
7

Price Relative to TOPIX (right axis)

02
/1
7
07
/1
7

09
/1
6

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

【Performance】
PeriodReturn vs. TOPIX
1 month-1.9%-3.5%
3 months
-0.8%
-0.6%
6 months-11.5%-9.0%
12 months-11.6%-11.5%(Note) Reflects stock price and index
values through the closing price on
6/10/2022. Return for the 1-month
period is the comparison of the closing
price on the last day of May and on June
10. The same applies to the otherperiods. Prepared by Alpha-Win
Research Dept.

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

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital
Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not beliable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use ofor reliance on this Report. Investors who read this report must make their own decisions on all investment
matters and take full responsibility regarding their investment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis of generally accessible
public information and supplemental information including interview(s) by the analyst. Alpha-Win, the writer,
and/or other persons involved in the publication of this Report may already hold, or buy and sell in the future, thestock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject to change
without notice. For the latest (updated) report, please see our website (http://www.awincap.com/). We also do
not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied, cited, ortranslated without our consent. For inquiries regarding this Report, please send us an e-mail to info@awincap.com.
However, Alpha-Win and the writer of this Report do not have any obligation to reply to inquiries. PFV2022-0620-1000

3/40This 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: 6/13/2022

Contents
1．Company Overview ........................................................................................................................ P5
Independent, Mid-Tier System Integrator ......................................................................................... P5
Business Philosophy and Basic Management Policy ........................................................................ P7
Message from CUBE SYSTEM to the Investors ................................................................................ P7
2．Business Description and Business Model .................................................................................... P8
Three Lines of System Services ........................................................................................................ P8
Labor-Intensive Business Model in which Human Resources Are Key ......................................... P10
Sales and Profit Composition Well-Balanced by Industry .............................................................. P11
Stable Customer Base and Business with High Continuity ............................................................. P12
Future Areas of Growth and Foundation for Next-Generation Technologies ................................. P14
3．Shareholder Composition ............................................................................................................ P16
Change in Composition by Type of Shareholder ............................................................................ P16
Major Shareholder Composition ..................................................................................................... P16
4．ESG and Sustainability .................................................................................................................. P18
Environment, Society, Governance, and Sustainability .................................................................... P18
5．History of Growth ......................................................................................................................... P19
Company History ............................................................................................................................. P19
Past Transition in Financial Results ................................................................................................ P19
6．Business Environment .................................................................................................................. P22
Trends of Japan’s System Integration Market ................................................................................. P22
CUBE SYSTEM’s Position and Comparison with Competitors .................................................... P24
7．Last Fiscal Year’s Results and This Fiscal Year’s Company Forecast ................................... P26
Full-Year Financial Results for FY 2022 (last fiscal year) ............................................................... P26
CUBE SYSTEM’s Financial Forecast for FY 2023 (this fiscal year)............................................... P30
8．Growth Strategy ............................................................................................................................ P32
VISION 2026: The First Medium-Term Management Plan ............................................................. P32
Alpha-Win Research Dept.’s Financial Forecast for FY 2023 (this fiscal year)............................... P35
Alpha-Win Research Dept.’s Forecast of Medium-Term Financial Results ................................... P36
9．Analyst’s Views ............................................................................................................................. P37
SWOT Analysis ............................................................................................................................... P37
Shareholder Return and Shareholder Benefit Program ................................................................... P38
Stock Characteristics/Price and Valuation Comparison .................................................................. P39
Note: 1) Upon translating to English, when the page numbers differed from the original Japanese version, they were
adjusted to those of the English version of this Report. 2) The Company’s fiscal year is March-ending; i.e., FY 2023
ends in March 2023.
4/40
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: 6/13/2022

1. Company Overview◆ Independent, Mid-Tier System Integrator
CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent
system integrator1 (a.k.a. SI). It is listed on the Prime Market of the TSE andis a mid-tier player in the system integration industry. Often as a
subcontractor for major SIs, the Company mainly develops the systems oflarge companies in the finance, telecommunication, and distribution
industries, as well as for the government. Its customer base is firm, having
expanded its business with its main customers over many years. Its main
customers are the four corporate groups of Nomura Research Institute, Fujitsu,
Aeon, and Mizuho, whose summed sales account for about 80% of theCompany’s total sales. The Company also receives outsourced jobs from theTokyo Stock Exchange, indicating its technological expertise and strong trust.

w An independent system
integrator with 50 years ofhistory in the industry.
Specialized and mid-tier.
Stable customer base withseveral blue-chip companies
as its customer.
(1) System integrator: a company
that conducts system integration.
Abbreviated as “SI” or “SIer.” A
general term for companies that
plan, design, develop, operate, andprovide other solutions for the IT
operation systems of customers
including companies and thegovernment.

Founded in 1972 at the outset of the software industry, the Company has 50
years of history. Osamu Sakiyama, chairman and representative director, is
one of the founding members. Masahiro Nakanishi became representative
director, president, and CDO (Chief Digital Officer) in June 2020. Nakanishi
previously worked as vice manager of Nomura Research Institute’s Chubu
Branch and then 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. 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. For the purpose of raising efficiency of group management.)
2. CUBE SYSTEM VIETNAM CO., LTD.
(Ho Chi Minh City, Socialist Republic of Vietnam; founded by theCompany as a wholly owned subsidiary)
3. CUBE SYSTEM SHANGHAI CO., LTD.
(Shanghai, China; the Company established a joint company and thenacquired all shares in 2017)
The Company established its overseas subsidiaries mainly for the purpose ofoffshore development3.

w The Company’s group ismade of the Company andthree subsidiaries.
HOKKAIDO CUBE SYSTEM
became its wholly owned
subsidiary.
(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 using overseas/offshore
sites【Figure 1】Locations of CUBE SYSTEM Group’s Subsidiaries and Offices
HOKKAIDO CUBE SYSTEM INC.
● Head office: Chuo-ku, Sapporo City
● Founded: December 1990
Sapporo

CUBE SYSTEM INC.

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

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

Shanghai

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

CUBE SYSTEM SHANGHAI CO., LTD.
Ho Chi Minh

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

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

As of June 6, 2020

(Ref) Notice of convocation of theordinary general meeting ofshareholders

As of the end of May 2022

5/40
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: 6/13/2022

The consolidated-to-parent-company sales ratio has stayed around 1.08 forthe past 20 years, with the parent company’s results having a large weight(Figure 2). Although the individual subsidiary’s profit/loss is not disclosed,
the consolidated-to-parent-company recurring profit ratio has been around0.98-1.17 (simple average of 1.05) during the same period.

w Consolidated sales andprofit have been on an
increasing trend.
Consolidated
subsidiaries have beenstably profitable in sum.
Consolidated-to-parentcompany ratios havebeen a little greater than
1 for both sales andprofit.

The total profit/loss of the three subsidiaries, calculated by subtracting theparent company’s recurring profit from the consolidated recurring profit, hasbeen a surplus excluding the two periods FY 2011 and FY 2012 (Figure 3).
During the three fiscal years from FY 2017 to FY 2019, sales and profit of
the subsidiaries (= consolidated minus parent company) grew, but in FY 2020,
their sales and profit declined due to the completion of the subsidiaries’ major
system development projects. However, business was generally solid both in
FY 2021 and FY 2022 with a slight sales decline but a growth in profit, due
to the solid performance of the subsidiary in Vietnam.

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

18,0001.08 1.08 1.08 1.07 1.11

1.10

1.10

Consolidated sales minus parent company's sales

1.08 1.06

1.06 1.08

1.08

1.08

1.07 1.09

1.09

1.13

1.09

16,00014,000857 1,084

921
12,000

8,000
6,000

15,21013,843
13,529785

10,000

439

478

534

504

784

751

777

679

506

458

Consolidated
to parent
company ratio

1,179 945

1,601

1,151

1.07 1.08889

12,724678

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

5,805 6,097

6,566 7,172 7,139

7,358 7,730

10,432
8,027 8,660 7,974 8,564

2,000
0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(Ref) Both Figures 2 and 3 were prepared by Alpha-Win Research Dept. based on the securities report.

【Figure 3】Ratio of Consolidated to Parent Company Recurring Profit(ratios shown on upper portion of graph)(million yen)

1,600

R.P. of parent company

1.06 1.07 1.07

1.06

1.07

1.03

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

1.03

0.99

0.98 1.01 1.03

1.05

1.02

1.04

1.06 1.17

1.07 1.07

Consolidated
to parent

1.05 company ratio

100

1,400

80
1,200

43

1,000

31

800

600

23

33

35

33

39

22

19

409

467

0

-200

516

518

545

578

639

1,332

61
1,215

7
938

621

48

19

21

400

200

140

21

680

(8)
-8

542

599

683

939
781

845

819

915

(9)
-9

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022

w 社名に込められた想い。

6/40

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)

The Company’s finance is strong with essentially no debt. Its free cash flow(FCF) has also been stably positive, and cash and deposits have been
gradually accumulating (Figure 4). The Company has approximately Y5.06
billion in cash and deposits on its balance sheet (Y4.47 billion at the end of
the fiscal year before the previous) in addition to Y1.28 billion in investment
securities (high-liquidity stocks and bonds), totaling more than Y6.3 billion
in highly liquid assets (equivalent to 60% of its total assets of 10 billion anda little less than 40% of its sales of 16.1 billion). In comparison, its debt is
Y240 million. Its financial ratios are also stably high, with an equity ratio of
71% (69% at the end of the fiscal year before the previous) and current ratioof 355% (similarly, previously 308%) (values as of the end of March 2022).

w Essentially debt-less andrich in cash. Financiallysolid.

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

FY 2010
283
-1
-144
282
1,619

FY 2011
622
309
-173
931
2,376

Issued: 6/13/2022

FY 2012
101
54
-125
155
2,405

(Note: FCF stands for free cash flow. Unit = million yen)
FY 2013
451
-321
-151
130
2,383

FY 2014
317
-172
-188
145
2,339

FY 2015
503
-307
-439
196
2,099

FY 2016
534
25
-241
559
2,408

FY 2017
936
94
-610
1,030
2,822

FY 2018
388
28
-392
416
2,846

FY 2019
773
46
-531
819
3,131

FY 2020
747
25
-339
772
3,557

FY 2021
1,043
58
-215
1,101
4,448

FY 2022
1,015
-134
-324
881
5,016

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary(Note) “Cash and cash equivalents” are not “cash and deposits” on the B/S but are from the “Statements of Consolidated Cash Flows” in the financial resultssummary.

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

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

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

◆Message from CUBE SYSTEM to the Investors“In July of this year, we will reach our 50th anniversary since foundation. We
thank everyone for the 50 years that we have been able to continue our businessand constantly grow, including not only our employees for their ardent efforts,
but also their families, our partners, our customers who have continued tosupport us and believe in our potentials, and most of all our shareholders fortheir truest support. We will continue to strive to meet the expectations of all
our stakeholders.”

7/40
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: 6/13/2022

2． Business Description and Business Model◆ Three Lines of System Services
w Business is classified into
three service categories.
System Integration
Services, which are mainly
system development,
account for 70% of the total
sales. Profit margins of thethree categories are about
the same.
(5) System solutions: solving
issues related to systems throughhardware, software, and services

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

System Operation/Evaluation

System Building

Requirement
Definition

Basic
DesignSystemProgramming

Testing＜System Integration Services＞

SystemOperation/Evaluation

Migration＜System Outsourcing Services＞

Business System Design/Development Services

Business Application Management

System Migration / Downsizing

System Operation/Management

Offshore Development

Offshore Enhancement＜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 (screen,
method of operation, security,etc.). The workflow is as follows:
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 end users such as companies and the government(hereinafter collectively referred to as “corporate users”). Includes
requirement definition6, basic design7, programming, and testing (Figure 5).
・While the time it takes from receiving an order to delivering the productcan range from a few months at the shortest to about three years, many of the
projects are completed in the order of a few months. Most orders are received
and delivered during the same fiscal year. The price can also range fromseveral million yen to several hundred million yen, but projects priced lessthan Y50 million are by far the most common.
・In general, engineers are stationed at the corporate user’s site and conduct
system development for each project in teams. However, to cut down on costand secure the necessary number of engineers, a part of the development is
outsourced to subsidiaries in Japan and overseas, or other companies in thesame business, under the supervision of the Company’s project manager.
・Since the system development business is, in general, based on contract
agreements, the SI (the Company), who is the contractor, bears responsibility
for the products (systems). Therefore, management of the risks and the
8/40

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 System Integration

Services are based oncontracts. Project
management isimportant in controlling
the risks and profit/loss.

(8) Standard development
framework F@CE: The
Company’s unique generalframework for standardizing andstreamlining application
development. A tool for carryingout projects efficiently by
preventing operation errors oromissions.
(9) Enhancement services:
Providing not just system
maintenance, management, anddevelopment services but also
improving system performanceand quality to increase the valueof the system. Or proposing
ideas for new businesses.
Customer satisfaction can be
improved. For the Company,
this service essentially means
continued business with thecustomer.
(10) Business related to Oracle
Cloud: Cloud-related services
and proposals based on Oracle’s
database. The Company plans tocontinue to strengthen thisbusiness by increasing thenumber of employees with
Oracle-related certifications.
Current annual sales are several
hundred million yen.

【Figure 6】 Breakdown of Sales (outercircle) and Operating Profit (inner circle)
by Service Category in FY 2022
Prefessional
Services

16.7%

SystemOutsourcing
11.4%
Services
9.6%

SystemIntegration
Services

14.3%

Sales composition(outer circle)

74.3%

73.7%

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

Issued: 6/13/2022

profit/loss of projects and products is important.
・Orders for projects are often received through proposals or by bidding.
Estimates are generally calculated based on [number of staff] x [number ofmonths]. After receiving an order, in building a system, the Company
employs knowledge, know-how, and fundamental technologies pertaining tovarious industries, companies, and businesses that it has accumulated over
the years, as well as its standard development framework F@CE8, to reduce
the risk and improve quality, profitability, and efficiency.
・Since unexpected changes in specifications, additional work exceeding theinitial estimate, etc., can negatively impact profitability and make a project
unprofitable, the Company has created a new, specialized department to workon improving its project management. The Company has also been actively
working on providing the Enhancement services9, in which the Company
works closely with corporate users to make various proposals that will leadto new businesses (compact system development).
2. System Outsourcing Services (SOS)・Services related to the operation and evaluation of systems. It provides two
solution services: system operation & management (building, managing, andevaluating components of a system such as hardware, basic software,
database, and network environment) and business application management(maintenance, management, and improvement of business applications andevaluation of management processes). The Company has also established aseamlessly linked service structure in which new challenges found andproposed during system maintenance and operation (SOS) can lead to a new
Enhancement project (SIS).
3. Professional Services (ProS)
・Services that utilize the Company’s technologies to solve everything related
to the informatization cycle from planning, designing, and building
infrastructure to operating/monitoring systems,
including consulting,database improvement for greater efficiency, system monitoring,
management support, and informatization strategies. High performance isrealized through development tools and the skills of certified experts. The
Company is especially strong in database technologies, for which it has expert
engineers (business related to Oracle Cloud10).
Breakdown of sales and operating profit in terms of the three categories andtheir transition over the years are shown in Figure 6 and Figures 7-8 on page
10. Regarding sales breakdown, SIS accounts for about 70% of the total, andSOS and ProS almost equally share the remaining 30% (outer circle of Figure6). Over the past 20 years, total sales have grown by 2.9x. Specifically, salesof SIS grew by 4.0x, SOS grew by 1.8x, and ProS grew by 1.5x; SIS has been
the main driver of business growth (Figure 7 on page 10).
Breakdown of operating profit is shown in Figure 6 (inner circle). The
breakdown is not largely different from that of sales. Previously, the grossmargin of each category had been disclosed, but starting in FY 2022, thedisclosure was changed to operating margin per category (currently only
disclosed for two fiscal years). Regarding the gross margin of the categories
over the last 20 years, all have been within a boxed range of about 15% to21%. However, in recent years, they have all been generally improving. The
operating margin of each category is also improving (see Figure 32 on page
27 for details).
9/40

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】Sales of Each Service Category

Issued: 6/13/2022【Figure 8】Change in Gross Margin of Each Service Category(million yen)

18,00025.0%

16,00014,00012,00020.0%

10,000
8,000

15.0%

6,000
4,000
2,000

10.0%

FY

20
FY 0 220
FY 0 320
FY 0 420
FY 0 520
FY 0 620
FY 0 720
FY 0 820
FY 0 920
FY 1 020
FY 1 1
20
FY 1 2
20
FY 1 320
FY 1 420
FY 1 520
FY 1 620
FY 1 720
FY 1 820
FY 1 920
FY 2 020
FY 2 1
20
22

0

SIS

SOS

ProS

Total

5.0%

SIS (System Integration Services)
SOS (System Outsourcing Services)0.0%
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

ProS (Professional Services)(Ref) Figures 7 and 8 were prepared by Alpha-Win Research Dept. based on the financial results briefing materials.

◆

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

w The number of employees
has been steadily
increasing. Sales per
employee in Japan havestayed about the same, but
operating profit per
employee has been
improving.
(11) DX (Digital
Transformation): Thetransformation brought about
by the penetration of IT(information technology)
everywhere in the society. Not
only businesses, but theindustrial structure and social
infrastructure are said to also
become affected. For
companies, the use of digitaltechnologies can bring reform to
its business model, operation,
processes, organization, andculture.

Labor-Intensive Business Model in which Human
Resources Are Key

Since most of the Company’s business is based on made-to-order, contractdevelopment of systems, its business is strongly characterized as a laborbased, single-product production model. Therefore, the acquisition 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 are especially crucial
in managing system quality, cost, deadlines, and profit/loss.
Currently though, due to recent years’ labor shortage, it has not been able tohire 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 as well as further
improving the work environment and training system to raise the retention
rate of its employees (turnover rate has been about 8% per year, which issomewhat low compared to the industry’s average).
The change in the number of employees of the entire CUBE SYSTEM Groupis shown in Figure 9 on page 11. In line with its business expansion, theCompany has been hiring about a few dozen new employees every year,
mainly for system engineer positions (for new areas such as DX11). Over the
medium to long term, it is also considering expanding its group to around
1,000 employees in total. Regarding sales per employee in Japan, they havestayed about the same at 22-23 million yen per year. However, operating
profit per employee has been increasing since the most recent low in FY 2017
(Figure 10 on page 11).
With regards to cost structure, labor cost and subcontracting cost paid tobusiness partners (essentially, mostly personnel expense) account for about
90% of the cost of sales. Therefore, the Company’s skill in controlling those
two costs may impact its profitability, and resource optimization and project
management will be crucial.

10/40
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: 6/13/2022【Figure 9】Change in the Number of Employees
in the Group(persons)

800
700
498
（-3）

501
（+59）

600

(thousand yen)

Number of employees in Japan
Number of overseas employees

900

500

28

32

(+19)

(+4)

539
（+28）

511
（+13）

63

58

38

(+6)

(+20)

(+6)

559
（+20）

588
（+29）

638
（+50）
84

70

(+7)

(+14)

656
（+18）
85
(+1)

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

694
（+38）
82
(△3)

720
（+26）
93
(+11)

737
（+17）
85

781
（+44）
92

( +7)

830
（+49）
116
( +24)

2,500

1,861
(+520)

2,000

( △8)

1,500

1,347
(-159)

1,421
(+74)

FY 2010

FY 20111,108(-313)

1,249(+142)

1,986(+ 282)
1,704(+ 233)

1,713(-148)
1,368(-345)

1,341
(+91)

1,397
(+29)

1,470
(+73)

1,471
(+ 1)

FY 2019

FY 2020

400
300
473

200

466

( -7)

(+40)

496

481

473

(+8)

(+7)

(+15)

518

(+22)

554
(+36)

571
(+17)

612
(+41)

627
(+15)

652
(+25)

689
(+37)

714
(+25)

1,000

500

100
0

FY 2010

FY 2011

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

FY 20220
FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2021

FY 2022(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials(12) Agile development: anapproach to project
development. Unlike theconventional waterfall
development, it divides a system
into short phases and conducts
repeated implementation(programming) and testing to cut
down on development time.
“Agile” means dexterous andquick.
w Breakdown of sales interms of the fourindustries is becoming
balanced
w Increasing diversification
by industry through thedevelopment of new areasof business and newcustomers【Figure 11】Sales Breakdown by
Industry in FY 2022

Finance

Other

In response to these challenges, the Company plans to continue to improve
its profit margin by carrying out various measures such as the shift to highprofit projects, optimization of its resources, use of agile development12 andstandard platforms that do not rely heavily on manpower, strengthening oforganizational project management, increased use of overseas subsidiaries,
and review of contracts (negotiating and proposing to change from payment
based on the number of staff and months to payment in return for services).

◆ Sales and Profit Composition Well-Balanced by Industry
Sales breakdown by industry is shown in Figure 11. Sales from the financial
industry, which must process a massive amount of data and must be secureand reliable, had been the largest by industry type in the past. However, while
the sales from finance had declined, sales from the other industries (industries
other than the three industries of finance, distribution, and telecommunication& transportation) had grown significantly, creating a balance between thefour industries (Figure 12 on page 12).
HIMACS (TSE Prime: 4299) and Toho System Science (TSE Prime: 4333),
competitors whose business is especially similar to the Company, specialize
in business for the financial industry, with sales from the financial industry
constituting about 70% or 80% of the total, respectively. On the contrary,sales from finance are about 24% of the total for the Company, showing how
the Company has been diversifying its sales among industries by expanding
its business with the non-financial industries.

24.3%

28.3%

20.9%

22.0%
Sales Composition(outer circle)
Operating Profit
Composition(inner circle)

37.6%
Telecommunication& Transportation

Generally, the nature of the system integration business makes it difficult torapidly expand business through unique products and services. Additionally,
although the sharing and leveraging of expertise are possible to some extent,
productivity improvement through those means is limited due to the current
reliance on manpower. The difficulty in improving the profit margin is acharacteristic of the entire industry rather than just the Company.

19.4%
20.8%

Distribution

26.6%(Ref) Prepared by Alpha-Win Research Dept. based on
the financial results briefing supplemental materials

Concerning business for the financial industry, systems demand from mostly
megabanks had been the Company’s financial growth driver for many years.
However, this demand has leveled off due to weak earnings and thecompletion of consolidation and alliance phases in the financial industry. Thisdecline, though, has started to be offset by increased demand from companies
in the business of credit cards, cashless payment, insurance, and other relatedareas, helping the industry’s demand bottom out. Meanwhile, regarding thesales from telecommunication & transportation, business with shipping
companies in the transportation industry has been expanding, although with
11/40

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: 6/13/2022

some fluctuations due to the system investment cycle of telecom carriers, etc.
In recent years, regarding the other industries, business with manufacturers,
the government, energy-related businesses, and cloud-consulting-related
businesses have grown significantly thanks to the acquisition of new
customers and orders received for new projects. As a result, the Company
appears to have become more balanced and diversified with regards toindustry type, creating greater business stability.
The breakdown of gross margin by industry changes somewhat every year,
but we believe that this is because the difference in the profitability of eachindividual project, rather than the difference in the characteristics of eachindustry, is reflected in the margin (margins disclosed through FY 2021). In
addition to the general improvement of gross margin for all industries (Figure13), the operating margin has also been improving over the past two fiscal
years for which information is disclosed (Figure 14).
【Figure 12】Transition in Sales by Industry（百万円）yen)(million

6,000
5,000
4,000
3,000
2,000
1,000
0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
CE
Finance

Distribution

Telecommunication & Transportation

Other(Ref) Figures 12-14 were prepared by Alpha-Win Research Dept. based on the financial results
briefing materials and financial results briefing supplementary materials. CE: the Company’s plan.

【Figure 13】Change in Gross Margin by Industry
24.0%

Operating Margin
Finance
Distribution
Telecommunication & Transportation
Other
Manufacturing
Government
Other
Total

Telecommunication &Transportation

22.5％

22.0%

Finance

20.0%

19.2％
Distribution

19.1％

18.0%

【Figure 14】Change in Operating Margin by Industry

Other 17.2％

16.0%

14.0%

FY 2021

7.9%
7.6%
11.3%
6.1%
6.6%
8.0%
5.1%
7.9%

FY 2022

7.6%
8.2%
12.4%
6.8%
4.2%
7.6%
7.9%
8.8%

Difference

-0.3%
0.6%
1.1%
0.7%
-2.5%
-0.4%
2.8%
0.9%

12.0%

10.0%
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Finance
Distribution
Telecommunication & Transportation
Other

w A stable business, themajority of which consistsof continued transactions
with the existingcustomers.

◆

Stable Customer Base and Business with HighContinuity

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, user-friendly,
secure, and sustainable solutions. Moreover, for system development andoperations, accumulation of business knowledge and know-how is necessary.
Consequently, the Company has high contract continuity and long-term
relationships with its existing customers (Figure 15 on page 13). Note that its
prime ratio (percentage of direct contracts made with end users for systemdevelopment) is about 10%, and many of its projects are outsourced
indirectly through major SIs.
12/40

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: 6/13/2022【Figure 15】Number of Client Companies by Duration of Relationship (FY 2021)

Years of Continued Transaction
15 years or more
10 to less than 15 years
5 to less than 10 years
Total of above
Total number of customers (approx.)

Number of End Users
12 companies
8 companies
18 companies
30 companies
50 companies(Ref) Prepared by Alpha-Win Research Dept. based on “Integrated Statement 2021” and interview.

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

As shown by the sales breakdown by customer group in FY 2022 (Figure 16),
Nomura Research Institute (hereinafter, “Nomura Res. Inst.” or “NRI”) is thelargest customer, followed by Fujitsu, Aeon, and Mizuho. These four
corporate groups account for about 80% of the total. Thanks to the success of
the account strategy (a strategy in which marketing activities are conductedin a concentrated manner by the designated person in charge) toward the fourmain customer groups, total sales of the four groups have been steadily
increasing: by +2.8% YoY to Y10,351 million (+Y281 million) in FY 2019,by +9.3% YoY to Y11,316 million (+Y965 million) in FY 2020, by +1.3%
YoY to Y11,463 million (+Y147 million) in FY 2021, and by +10.9% toY12,718 million (+Y1,254 million) in FY 2022.
【Figure 16】Sales Breakdown by Customer Group in FY 2022
NRI G

Fujitsu G

Aeon G

Mizuho G

Other

21.0%
3.6%
4.6%

51.5%

19.3%

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

Previously, the sales growth rate for customers other than the four maingroups had been high, and the percentage of sales of the four groups had been
gradually decreasing after the peak in FY 2011. However, since FY 2020, theproportion of the four groups has been starting to increase again (Figure 17
on page 14).
w Increase in transactions
with the Nomura ResearchInstitute Group has driven
sales growth over many
years

Looking at long-term changes, sales from the Nomura Res. Inst. Group had
increased by approx. Y7.4 billion from approx. Y900 million in FY 2002 to
approx. Y8.3 billion in FY 2022, partly thanks to the expansion of businessarea from its initial focus on the distribution industry to other industries suchas finance. During this period, the Company’s overall sales grew by Y10.5
billion from Y5.6 billion to Y16.1 billion. However, the majority of thisgrowth came from the NRI Group (70%), increasing the dependency on thisGroup to more than half of the entire sales (51.5%) in the previous fiscal year.
13/40

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)(13) e-e Partner: an especially close
partner among all partners of
NRI. Of the “e Partners” (approx.
150 companies) with highly
specialized business know-how andIT skills and high-level IT security,“e-e Partners” cooperate with NRI
not only in the operation of
specific projects but also in thecooperative promotion of
innovative activities in the
Enhancement Business; in thestrategic reinforcement of HR,
quality, and IT security; and in thecreation of a mutually prosperous
business model that takes
advantage of each other’s
expertise. NRI has only
announced three companies (theCompany, HIMACS, and Toho
System Science) as its e-e Partners.

Issued: 6/13/2022

Similarly, the Fujitsu Group accounted for Y1.4 billion or 13% of the total
sales growth, thanks to increased transactions related to telecommunicationand electrical power infrastructure and the government. Having increased
sales over the long term with each of the major corporate groups, theCompany has earned excellent trust from its customers and has high contract
continuity.
The Company especially works closely in partnership with Nomura Res. Inst.
as one of the few e-e Partners13. In this partnership, the Company not only
cooperates in business but also makes mutual investments and exchanges
employees. Looking at the Company’s transactions with each company, we
can see that NRI has also been the largest by transaction size every year, andthe second largest has been Fujitsu.
In addition, in February 2019, the Company was awarded the Best Partner
Award by AEON IBS, with whom the Company has been in a business
relationship for 30 years. This also shows how the Company’s customer
satisfaction level is high.

【Figure 17】Transition in Sales by Customer Group (G) and Share of the Top 4 Groups(Note: information on sales of Mizuho G before FY 2003 and of Aeon G before FY 2007 is not disclosed)（％）(million yen)

16,00082

14,00080

12,00078
76

10,000

74

8,000

72

6,000

70

4,000

68
66

0

64

FY
20
FY 0 220
FY 0 320
FY 0 420
FY 0 520
FY 0 620
FY 0 720
FY 0 820
FY 0 920
FY 1 020
FY 1 1
20
FY 1 2
20
FY 1 320
FY 1 420
FY 1 520
FY 1 620
FY 1 720
FY 1 820
FY 1 920
FY 2 020
FY 2 1
20
22

2,000

NRI G
Aeon G
Other

Fujitsu G
Mizuho G
TO P 4G share (right axis)（(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials
and financial results briefing supplemental materials◆ Future Areas of Growth and Foundation for NextGeneration Technologies

w Focused on acquiring orders
for projects related to newtechnologies and DX

Alongside its own R&D, the Company has been forming alliances withcompanies which possess advanced, new technologies. Also, it has received
various awards and certification from major companies as their partners (seeFigure 18 on page 15 for the past year’s situation).
It has been conducting investments and preparing for the development ofbusinesses that utilize next-generation technologies. Since DX-related IT
investments by corporate users are expected to rapidly increase, the Company
has set the Digital Business as its area of growth and plans to put companywide efforts into actively making proposals and responding to needs.
14/40

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investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
CUBE SYSTEM INC. (2335 TSE Prime)w Upfront investment ingrowth areas such as
cloud, blockchain, agile
development, AI, and IoT(14) Cloud solution services: atype of service whereapplications are used as a“service” via web browsers, etc.
(15) Blockchain: distributed
network where information is
synchronized, recorded, andaccumulated among many
computers(16) AI: artificial intelligence(17) IoT: Internet of things. A
system that connects all devices
around us by the Internet.

Issued: 6/13/2022

The Company has especially been focused on technology investments incloud solution services14 including Oracle-related services; participation insocial experiments of the Blockchain15 Collaborative Consortium; capital andbusiness alliances with companies which have expertise in AI technology16,
IoT technology17, and blockchain; and alliances in agile development andmaintenance/operation services. These are aimed at acquiring and sharing
expertise and information on advanced technologies, developing its
employees, conducting joint development and proposals, and establishing
new businesses.
Also, in 2016, it created the Technology Strategy Office within its
organization. The Office has dedicated members as well as members who
concurrently work for the sales department. The role of the Office is to catchup on leading-edge technologies and conduct R&D and businessdevelopment based on the newest core technologies. Furthermore, throughinvestment partnership as well as direct investments in private companies, theCompany has been working on strategically collecting information on newtechnologies and searching for promising companies. The results of theseinvestments had contributed positively to financial results in the fiscal year
before the previous as gain on investment or gain on sales under nonoperating
profit.

【Figure 18】Summary of Recent Alliances and Key Points
Date of Announcement

Announced Information

Details

April 2021

Obtained patent for the touchless payment settlment service based on AI face recognition that CUBE
Obtained patent for touchless payment SYSTEM (hereinafter, the "Company") provides in its DX Business. This patented technology is usedsettlement based on AI face recognition in its original non-contact payment settlement service, Smile Cash Register, and will also be used inother new products/services that it will develop.

April 2021

New certified partnership formed with
ServiceNow

Formed a certified partnership with ServiceNow (parent company is ServiceNow, Inc., based in
California, USA, with Bill McDermott as president and CEO; the Japanese subsidiary is ServiceNow
Japan, headquartered in Minato-ku, Tokyo, with Masashi Murase as executive officer and president)
for the purpose of transforming the operation/maintenance service to a new operation style.
Through ServiceNow, it will create a new working style for the new normal by transforming from an
operation style relying on full-time operators and operation managers at data centers to an
operation style based on remote operation and a single platform allowing the streamlining ofprocesses.

May 2021

The Company started the verification testing of the self-gift function for its in-house virtual currency
Started verification testing of the self(Cubecoin). The function linked Cubecoin with "giftee for Business" (e-gift service for companies)
gift function for the Company's in-house provided by giftee Inc. (headquartered in Shinagawa-ku, Tokyo), an e-gift platform company
virtual currency (Cubecoin) that is(provides service for everything from creating e-gifts that can be sent online through SNS and emails
linked with "giftee for Business"
to managing their logistics). It enables exchange with approx. 700 kinds of e-gifts provided by"giftee for Business."

October 2021

October 2021

Certified as "AWS 50 APN Certification The Company was certified as "AWS 50 APN Certification Distinction" by Amazon Web Services
Distinction"
Japan (hereinafter, "AWS") for obtaining more than 50 AWS Certifications.

Presented an exhibition at Tokyo Big
Sight's Second Blockchain EXPO
Autumn (also presented at the spring
EXPO in March 2021)

With the theme of "Smiles to all employees through digital technology," the Company presented an
exhibition on products that support the enhancement of non-contact communication and engagement
between employees during this remote-work era. It was a joint exihibition with Tripleize Co., Ltd.,
one of its main business partners.
1. Smile Share Product・ Thanks Connect: Service that visualizes everyday feelings of "thanks" using online communication
tools
・ Cubecoin: engagement enhancement service using blockchain technology
・ Smile Cash Register: Non-contact and cashless payment settlement service using AI image
recognition technology; "non-contact" payment method based on face recognition and "peace signs"
2. AIZE (face-recognition AI): joint development between Tripleize Co., Ltd. and Smile CashRegister(Ref) Prepared by Alpha-Win Research Dept. based on the news release on the Company’s website

15/40
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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: 6/13/2022

3． Shareholder Composition◆ Change in Composition by Type of Shareholder
With regards to shareholder composition by type of shareholder as of the endof March 2022 (Figure 19), “individuals, etc.” is by far the largest, owning
approx. 74% of the total. Second to this is “financial institutions, etc.,”
owning 19%. Together, these two types of shareholders possess 93%, owning
most of the outstanding shares. “Overseas corporate entities, etc.” is small,
owning 0.8%. Since FY 2014, shares of “individuals, etc.” have somewhat
decreased and shares of “financial institutions, etc.” have been increasing.

w “Individuals, etc.” ownslightly less than 80% of
all shares.

【Figure 19】Change in Shareholder Composition by Type of Shareholder(unit: %) (as of the end of each period)
（％）

100
90
80
Individuals, etc.

70

～ 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
25
20

Financial institutions, etc.

15

Financial instrumentbusiness operators
Other corporate entities

10
50Overseas corporate entities,
etc.
FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

FY 2022(Ref) Prepared by Alpha-Win Research Dept. based on the notice of convocation of the ordinary general meeting ofshareholders and the securities reportuMajor Shareholder Composition

The Company’s major shareholder composition has been stable and has not
greatly changed. The major shareholders as of the end of March 2022 areshown in Figure 20 on page 17. The following is supplemental information.
w The employee stock
ownership plan andcurrent and former
directors are the mostprominent among the
major shareholders.

w Incorporated in several
index funds.

・Due to the decrease in the amount of shares owned by the Employee Stock
Ownership Plan, in March 2019, its ranking among major shareholders was
switched with Osamu Sakiyama, the chairman (previously president), whobecame the largest shareholder instead. Possessing a little less than 12% of
all shares as of the end of March 2022, he owns just slightly more than the
Employee Stock Ownership Plan at second place. Also, Masahiro Nakanishi,
president, owns 19.1 thousand shares (0.13% of all shares).
・The Master Trust Bank of Japan (trust account) is at third place, but thename of its final investors and its purpose are unknown (note that Mitsubishi
UFJ Trust and Banking Corporation is investing with a more than 40% stakein this trust bank).
・The Company’s stock is incorporated in Japan equity index funds managed
by Sumitomo Mitsui Trust Asset Management, Mitsubishi UFJ Kokusai
Asset Management, Asset Management One, etc. A part of these funds is
16/40

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: 6/13/2022

likely investing under the names of trust banks.
・The fourth largest shareholder, The Master Trust Bank of Japan, is the BIP
trust account for the Company’s director remuneration (stock-compensation
director incentive plan).
・The fifth largest shareholder, Akemi Onuki, is one of the Company’s
previous presidents. The sixth largest shareholder, Toshio Uchida, is theCompany’s current director. The tenth largest shareholder, Toshikuni Sato, is
the Company’s former executive managing director.

w The total of treasury
shares, stock ownershipplan, and shares held bydirectors, employees, andother related parties
account for about
associations, and related
officers and employees
accounts for about 35% of
all outstanding shares.

・SMBC Nikko Securities, the eighth largest shareholder, has joined in as amajor shareholder (top 10) for the first time, but its purpose of holding is
unknown (most likely investing on behalf of its customers).
・The ninth largest shareholder MUFJ Bank is the Company’s bank. Nomura
Research Institute had been the tenth largest shareholder as of the end of FY
2021, but is no longer listed among the major shareholders for the most recent
fiscal year. However, it most likely still possesses shares of the Company.
・Of the top ten shareholders, the Employee Stock Ownership Plan, thedirectors and employees (including former members), and treasury shares add
up to about 35% of the total.

【Figure 20】Current Major Shareholders
Shareholder Name

(unit: thou. shares)

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

FY 2015
year-end

FY 2016
year-end

FY 2017year-end

FY 2018
year-end

FY 2019
year-end

FY 2020year-end

FY 2021year-end

FY 2022year-end% of Total
SharesRanking

1,775
1,641
-

1,675
1,672
-

1,655
1,663
-

1,646
1,668
321

1,638
1,565
394

1,632
1,602
485

1,622
1,551
456

1,614
1,531
959

11.43
10.85
6.79

1
2
3

-

270

270

262

369

358

358

618

4.38

4

401
475
316

401
415
316

401
403
316

401
393
316

401
376
316

401
369
316

401
347
316

258
380
276
682
241
682
4.5%

258
340
276
458
728
4.8%

300
348
276
1,035
1,306
8.5%

300
324
276
1,236
1,498
9.8%

258
304
276
1,356
1,725
11.3%

258
304
219
1,692
11.1%

258
288
214
1,690
11.1%

401
329
288
282
258
239

2.84
2.33
2.04
2.00
1.83
1.69

5
6
7
8
9
10

1,000
6.9%

(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 there were no data available on the major shareholder in the securities report, and does not necessarily mean zero.
Shareholding ratios were calculated after subtracting the treasury shares (approx. 383 thousand shares) from all outstanding shares.

w Conducted cancellationof treasury sharesequivalent to 5.1% of all
outstanding shares.
Currently essentiallyowns 6.9% of all
outstanding shares.

On May 31, 2021, the Company conducted a stock cancellation of 779,840
treasury shares (5.1% of all outstanding shares before the cancellation) toenhance the return of profit to shareholders and improve capital efficiency.
The total number of outstanding shares after cancellation is 14,500,000, of
which about 1 million shares are treasury shares (including shares in the BIP
trust account) as of the end of FY 2022 (6.9% of all outstanding shares). Thismeans that the Company is essentially its third largest shareholder.
The Company has not decided on how to use of its remaining treasury shares,
but some possibilities include using them for stock compensation as anincentive for its directors, stock cancellation, or a stock-swap in a tie-up or
an M&A.
17/40

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: 6/13/2022

4． ESG and Sustainability◆ Environment
w Working on continuous
improvement ofenvironmental
performance (energy andresource conservation)

w Joined the TCFD and will
work on mitigating andadapting to climate change
and promoting appropriate
information disclosure
w Actively engaged in
activities that support theeducation of nextgeneration talents

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, paper usage, and waste and adopting “cool biz”).
Also, in November 2021, it joined the Task Force on Climate-related
Financial Disclosures. It will work on initiatives for mitigating and adapting
to climate change and promote appropriate information disclosure.

◆ SocietyAs a key industry necessary to the infrastructure supporting the economy andthe society, the CUBE SYSTEM Group believes its mission is to contributeto the further development of the IT society and the strengthening of its
customers’ competitive edge. It aims to create a more prosperous andconvenient society through the power of IT systems. It also supports theeducation of next-generation talents in Japan and overseas and has started ascholarship for students in Vietnam. It is engaged in cleaning andbeautification activities as well.

◆ Governancew Of the 10 directors andauditors, 6 are fromoutside the Company.
w Will focus onsustainability management(18) Health & Productivity
Management Outstanding
Organizations: health &productivity management
outstanding organizations
recognition program in which
companies that worked on
initiatives to solve health issuesof the society or improve healthare jointly selected and awarded
by the Ministry of Economy,
Trade, and Industry and the
Nippon Kenko Kaigi(19) 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.

As a company with auditors, the Company has set up the Nomination andCompensation Advisory Committee and the Internal Control and Integrated
Risk Meeting (which directly controls the Compliance Committee, theInternal Control Committee, the Security Committee, the Working Style
Reform Committee, and other committees). The Company has also adopted
the executive officer system (11 officers) to strengthen corporate governance.
It has also set up an internal hotline system for compliance-related matters. It
has not adopted any anti-takeover measures.
The management team consists of seven directors (of which three are outside
directors) and three full-time auditors (all are outside auditors from
Mitsubishi Corporation). Two of the directors including the chairman are
dedicated members, three including the president are from Nomura ResearchInstitute (of which one is an outside director), and of the remaining two
outside directors, one is a lawyer and one is a doctor (female doctor) (all will
be candidates for reappointment according to the shareholders’ meeting
proposal).
Since the enhancement of human capital and the workstyle reform will be its
key challenges going forward, the Company has appointed an occupational
health physician with expertise in nursing care and mental health as its
director. Under the health management policy, it is working on improving
and maintaining the mental and physical health of its employees and creating
a comfortable working environment (certified as a Health & Productivity
Management Outstanding Organizations 202218). It has also been chosen as
one of the “Top Hundred Telework Pioneer of 2021” chosen by the Ministryof Internal Affairs and Communications.

◆ Sustainability
It formulated the basic policy on sustainability in November 2021 and has
been focusing on sustainability management. To solve society’s problems
and contribute to achieving the SDGs19, it is fully leveraging its unique valuecreation model to continuously improve corporate value and contribute to thecreation of a sustainable society.
18/40

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: 6/13/2022

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

w Founded under theprediction that theimportance and potentialof computer systems willgrow in the future.
Specialized in the system
integration business.
w Its main customers areleading blue-chipcompanies of Japan.
w Changed its listing fromTSE Second Section to
the First Section in March2014

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

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

◆ Past Transition in Financial Results
Since foundation until now, the Company has been improving its financial
performance as a specialist (SI) in the development and operation of systems
outsourced from companies and the government. Long-term transition in
financial performance is shown in Figure 21. The following are details of thefinancial results in chronological order.

【Figure 21】Long-Term Transition in Financial Results(million yen)(million yen)

20,0001,800

Sales (left axis)
Recurring Profit (right axis)

18,0001,545 1,600
1,432

Consolidated since FY 2001
16,0001,295
14,0001,200

980 960

702
8,000
6,000

387

445 432499

550

550 583672
643 597 660

4,220

4,387

976

14,78814,70813,55912,527800

600

11,217
9,241
9,166

6,244
4,806 5,598

1,000

14,325

12,89912,623606
533

302 309

2,000

959

893

811

10,0000

1,400

16,09912,0004,000

17,3006,575 7,100

7,767

7,923 8,109

8,507

8,706

400

8,431

200

0

FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
CE(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s
estimate/forecast.

19/40
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: 6/13/2022

・On a consolidated basis, with the exception of only a single fiscal year (FY2012), the Company has being achieving an year-on-year increase in sales
every fiscal year for the past 20 fiscal years. This stable growth trend isnoteworthy.
・During the past 21 years, the annual sales growth rate (simple average ofthe annual rate of increase in sales) was +6.1%, and similarly the recurring
profit growth rate was +7.3%, showing how the Company has been steadily
improving its financial performance over the long term.
・Although recurring profit decreased in five out of the 20 fiscal years, thelargest annual drop stayed within the range of approx. -20%, and theCompany has been able to maintain a net profit for each year.

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

・Analyzed statistically, the Company’s standard deviation for the rate ofchange in financial result and its variation coefficient (= standard deviation /average; shows relative dispersion; also called relative standard deviation)
are small, indicating that the volatility of the Company’s fundamentals is low(see Figure 22 for the comparison with similar-sized competitors during themost recent 18 fiscal years).
・Furthermore, because the Company’s operating margin has stably been ataround 7% (Figure 23 on page 21), sales growth has been directly
contributing to increases in profit, dividend, and market capitalization.

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

【Figure 22】Analysis of Performance Volatility over the Past 18 Years (% YoY change for sales and R.P.)
Target of Analysis
FY 2005 - FY 2022
Market: TSE Prime
n=18 fiscal years
Standard deviation
Average
Coefficient of variation% Change in Sales (YoY %)CUBE SYSTEM

HIMACS
2335
4299
CS (consolidated) HM (consolidated)
5.87
7.46
5.26
3.25
1.12
2.30

% Change in Recurring Profit (YoY %)CUBE SYSTEM

HIMACS
4333
2335
4299
TS (standalone)
CS (consolidated) HM (consolidated)
16.91
14.07
30.83
8.50
6.97
8.52
1.99
2.02
12.76

Toho System Science

Toho System Science4333
TS (standalone)
306.3485.20
3.60(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 Increased transactions
with the major 4 groups
have helped the Company
grow significantly.

w Even right after the
Lehman shock, 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, earn trust from its
customers, and build a strong customer base to consistently deliver positive
results. Although it is an independent company, it has strengthened its
relationship with the four major groups NRI, Fujitsu, Aeon, and Mizuho as
described earlier. This strong relationship has enabled the Company tocontinue to increase the number of orders received from those groups, which
has been the major growth driver.
Financial performance during the most recent 13 years or so is as follows.
・ In FY 2009 when the Lehman shock occurred, the economy faced adownturn and customers became more cautious about IT investments.
However, the Company was able to continue to increase its sales owing tocontinued business with the existing customers, mainly for systems in thefinancial and distribution industries, as well as due to the entry of companies
into the banking business leading to projects for operation expansion.
・The economic recession continued into FY 2010 and FY 2011. Systemdevelopment plans continued to be postponed, cancelled, or scaled down.
Companies continued to hold off IT investments, and competition over priceand between companies became intense. However, thanks to the businesswith the existing customers and the expansion of business with life insurance
20/40

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: 6/13/2022

companies, banks, and manufacturers, the Company was able to continue toincrease sales. With increasing sales, fluctuation in operating profit during
the three fiscal years following the Lehman shock was limited to a small range.
･The Great East Japan Earthquake, though, had a large negative impact in FY
2012. 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 instance, during theperiod from FY 2002 to the previous fiscal year, in which sales had decreased.
Operating profit also decreased by -20.9%, the largest drop during the same
period, but a net profit was maintained.

w In FY 2012, due to theGreat East Japan
Earthquake, sales
decreased for the first timesince becoming listed.
Operating profit decreased
by 20%.

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

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

・Regarding profit, in FY 2015, sales increased due to business expansion
from the development of businesses with existing customers and theacquisition of new customers, and productivity improved due to strengthened
project management. As a result, record-high operating profit and recurring
profit of Y964 million and Y980 million were posted, respectively (net profit
also hit a record high in the following year or FY 2016, at Y629 million).
Since then, the Company has been consecutively posting new record-highsales every fiscal year through FY 2022.

w Record highs achieved forboth operating profit andrecurring profit in FY 2015

・Meanwhile, due to increased cost and intensified price competition, theCompany’s gross margin and operating margin have been gradually
decreasing over the long term (Figure 23).
・The operating margin had decreased mainly due to the increased cost of
sales (subcontracting cost and labor cost), upfront investments, and increased
SG&A expenses (especially personnel expense; as reference, see Figure 23
for the SG&A expenses ratio), but then began to improve starting in FY 2018.
In the previous fiscal year (FY 2022), due to the sales growth and theimprovement of gross margin (19.2%→21.4%), each of the profits hit theirrecord highs for the consecutive fiscal year despite the increase in the SG&A
expense ratio (11.3%→12.6%).

w Sales have been hitting
record highs for 10 fiscal
years in a row. Profit
growth had been slow due
to increased cost, but hit
record highs consecutively
in the previous two fiscal
years.

【Figure 23】Long-Term Transition in the Company’s Gross Margin, SG&A Expenses Ratio, and Operating Margin
Gross Margin

Operating Margin

SG&A Expenses Ratio

（％）

25.0
21.4

20.0
17.1 17.1

18.3
15.9

16.6 16.7 16.7

19.2
17.7

16.7 16.7

5.0

17.3 17.1 17.0

17.0
15.4

13.9

15.0

10.0

16.2

15.5 15.5

8.7

9.0

8.5

8.2

8.4

8.7

7.5

7.9

9.6

7.1

9.3

7.4

10.3 10.0

8.0

7.7

9.4

7.3

9.4

7.2

9.3

9.0

6.2

6.5

7.9

8.5
7.7

5.9

9.5

9.3

11.0 10.7 10.5 11.3

7.9

7.5
6.1

6.3

6.4

12.6

8.8

8.8

6.5

0.0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(CE)(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s estimate/forecast.

21/40
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: 6/13/2022

6． Business Environment
w As the outsourcing ofsystem development
became popular, SIs grewby taking those outsourced
system development jobs.

◆ Trends of Japan’s System Integration Market
Survey of Selected Service Industries
Looking at the “Sales by category of business for the information services
industry” of the “Survey of Selected Service Industries” by the Ministry of
Economy, Trade, and Industry, we find that the sales of make-to-ordersoftware, as well as the sales of system integration (SI) which make up morethan half of make-to-order software sales, have been increasing with the
exception of the few years after the Lehman shock (Figures 24 and 25). In
Japan, outsourcing of system integration has become popular, and system
integrators (SIs) have steadily expanded their business as the contractor of
those outsourced projects.

w With COVID-19
temporarily settling down,
Japan’s SI market
recovered to growth in 2021

According to the same data, from 2010 to 2019, sales of system integration
had increased by about 2.1% per year on a simple average. In 2020, COVID19 had caused a negative growth of -2.7%, but the market recovered to a
+3.1% growth in 2021.

w Monthly SI sales (YoY) hadrecovered to a growthtrend, but then started adecline again in 2022.

Monthly analysis of the same data (YoY change; Figure 26) shows thatgrowth had been negative from March 2020 to February 2021. However, theYoY trend then became positive again and remained so until the Russian
invasion of Ukraine began in January 2022 caused a declining trend again.
【Figure 24】Change in the Make-to-Order Software andSystem Integration Markets (annual sales: unit = 100 million yen)

【Figure 25】Both Market’s Rate of Change(rate of change in sales: %)100,000（％）

25.0

90,00080,00020.0

70,00015.0

60,00050,00010.0

40,0005.0

30,0000.0

20,0000-10.0

Make-to-order software

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

19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21

10,000-5.0

Make-to-order software

Of which, system integration

Of which, system integration(Ref) Figures 24-26 were prepared and reworked by Alpha-Win Research Dept. based on data from the “March 2022 Survey of Selected Service
Industry” by the Ministry of Economy, Trade, and Industry. Part of the original data used for market size (sales) in Figure 24 do not have continuity
with the rest due to changes in the survey target size. However, the rate of change in Figure 25 has been adjusted by the Ministry to have continuity.

【Figure 26】SI Market’s Monthly Sales on a YoY Comparison (unit: %)
(%)
20.0

15.0

10.0

5.0

0.0

-5.0

-10.0

Jan

Mar

Nov

July

2021

Sept

Jan

Mar

May

Nov

July

2020

Sept

Jan

Mar

May

Nov

July

May

2019

Sept

Jan

Mar

Nov

July

2018

Sept

Jan

Mar

May

Nov

July

2017

Sept

Jan

Mar

May

Nov

July

2016

Sept

Jan

Mar

May

Nov

July

2015

Sept

Jan

Mar

May

-15.0

2022

22/40
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of thecompany presented in this Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of
investment. Contents of this Report are based on information current as of the issue date and are subject to change without notice. We do not warrant or represent thatthe information in this Report is accurate, reliable, complete, appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not
be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use of or reliance on this Report. Investors who read this reportmust make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual property of this Report belongs to AlphaWin and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

w Software investment is
expected to increase by 8.4%
in 2022
w BOJ Tankan’s DI for large
companies turned positive
but the momentum issomewhat declining,reflecting the worsening
economic environment.

Issued: 6/13/2022

Bank of Japan (BOJ) Tankan Survey
According to the BOJ Tankan Survey in March 2022, the amount of software
investment in FY 2022 (planned) by companies of all sizes and all industries(including financial institutions) is expected to increase by +8.4% YoY, in an
improvement from FY 2021’s +6.5% YoY.
The business sentiment of all companies of all sizes and industries slightly
worsened from +2 in the December 2021 survey (“recent”) to 0 in March
2022, and “outlook” also worsened from 0 to -3. The business sentiment oflarge companies, which are the Company’s main customers, also changed
from +14 to +11 for “recent” and +10 to +8 for “outlook,” indicating how the
momentum is declining due to the worsening global situation and economy.
Data from the Industry Association
According to the JISA-DI Survey (March 2022) by the Japan Information
Technology Services Industry Association, the DI for the expected sales of
make-to-order software (sales outlook: the comparison between theupcoming three months and the first three months of this fiscal year = growthminus decline) had used to be a large positive value, but then suddently fell
to -43.8 in April-June 2020 in its largest drop ever.

w In the JISA-DI survey, too,
the DI (outlook) for expectedsales of make-to-ordersoftware has remained at a
double-digit positive value.
w The DI for expected sales
has been high for businesses
toward the finance, andinsurance, and information& communicationindustries.
w Shortage of IT engineers
both in number and quality

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

w High demand related toDX

The DI for expected sales had stayed at double-digit, negative values for awhile after this, but then recovered to +8.2 in Jan-Mar 2021. The outlook thenimproved more, and double-digit, positive DIs have been maintained sincethen. However, after the peak of +29.6 in Oct-Dec 2021, the most recent dataof April-June 2022 show that it has declined to +19.6. With regards to major
customers, the DI for expected sales has been strong especially for theindustries of finance and insurance, as well as information & communication,
manufacturing, and the government.
The employment situation index (DI: employee sufficiency = shortage minus
excess) had temporarily dropped from the most recent peak of 77.6 to 28.3.
However, it then rose to 41.8 by the end of March 2021 and to 63.2 by theend of March 2022, indicating an increasing sense of labor shortage again.
In particular, there has been a shortage of IT engineers both in number andquality, and the acquisition of talented employees for system development
continues to be difficult.
Market Outlook
The structurally inherent labor shortage, demands for improvement in
operation efficiency, and IT investments by companies and the government(promotion and acceleration of IT investments by the Digital Agency) will
likely continue to steadily increase. In various industries and business areas,
companies have been actively investing in strategic areas and developing
technologies to raise their competitive edge.
As systems become more advanced and the demand for DX increases, AlphaWin predicts that the market size will grow at a pace of about 2-3% per year
once economic activities return to normal.

23/40
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 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%.

Issued: 6/13/2022

CUBE SYSTEM’s Position and Comparison with
Competitors

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

w Its benchmark companies
are HIMACS and Toho
System Science. Both are
Nomura ResearchInstitute’s e-e Partners andtheir market positions arevery similar.

The Company’s competitors include HIMACS (TSE Prime: 4299) and Toho
System Science (TSE Prime: 4333), which the Company uses as its
benchmark. They are both e-e Partners of Nomura Research Institute and areabout the same size and at very similar market positions as the Company(Figure 29 on page 25). Several of the largest SI players in the market, suchas Nomura Research Institute and Fujitsu, are in cooperation or partnershipwith the Company rather than direct competition.

w The Company’s O.P.
margin is slightly low
compared to its
competitors, but its ROE
has significantly
improved. Its ROE has
been the highest among
the three companies overthe past five fiscal years.

Comparison of 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) is shown in Figure 27. Compared to the other two companies,
the Company’s operating margin is slightly low since its SG&A expenses
ratio is high, but it has been improving due to the rise in the gross margin.
Similarly, comparison of the return on equity (ROE) (Figure 28) shows that
the Company’s ROE has been the highest of the three companies over the
past five years (same for ROA; although the profit margins are about the sameas the other two companies, its total asset turnover is high). Its ROE has
improved greatly from one point in time and has been around 9-14% since
FY 2014. Its ROE goal over the medium term, including this fiscal year, is
13% or greater.

【Figure 27】Comparison of Operating Margin between
Three Mid-Tier, Listed Companies【Figure 28】Change in ROE of the Three Companies

（％）

12.0

（％）

CS

11.3

HM
10.1

10.0

9.2
8.0

8.0

7.3
7.7

6.0

5.9

7.7

7.3

7.6

7.7

7.7

7.6
6.5

8.8

8.1

5.5

7.6

10.3

20.0

9.3

18.0

7.3

7.5
6.1

4.0

6.3

6.4

10.0

6.6

8.0

6.5

6.0
4.0
2.0

2.0

0.0

0.1
0.0

FY 2009

FY 2010

FY 2011HMTS

17.2 16.8
15.4 15.5 15.3

16.3
14.6

14.2

13.8

14.0
12.0

7.9
6.6

16.4

16.0

7.8

7.7

8.8

5.9

CS

22.0

8.9

9.6
7.5

8.4

24.0

6.9

6.2

7.2

4.9

TS

11.3

11.1

10.9

10.0

12.4

8.6

6.7
5.2

8.6

8.7

8.8

8.5

9.2
6.2
5.4

8.4

12.1
9.1

13.2

7.1

8.0

14.1
11.6

11.9

4.4
4.3

13.5

10.7
9.0

11.4
11.4
9.8

9.8

9.6

9.8

14.0 13.8
9.6
9.1
8.8

13.4
11.2 12.0
10.2

5.3
4.3

3.8
0.2

3.0

FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

FY 2022(Ref) Figures 27 and 28 were prepared by Alpha-Win Research Dept. based on the financial results summary and securities report

24/40
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: 6/13/2022【Figure 29】Company Overview and Management Indicator Comparison for Three Mid-Tier, Listed
Companies (the Company, HM, and TS)
Company Name

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

Code

2335

4299

4333

Characteristics

Independent. Mainly sys. dev. for finance,
distribution, telecom, and other industries(makers & gov. excluding the above 3
industries). Sales for finance are a little lessthan 30% of total sales. "Other industries"
category is the largest, at a little over 30% of
total sales.

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

FoundedJuly 1972

May 1976

June 1971

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

10/2002→11/2006→03/2014→04/2022

03/2001→03/2004→03/2015→04/2022

06/2001→03/2007→03/2014→04/2022

Sales Categories/Breakdown (FY 2022)

・System Integration 74.0%
・System Outsourcing 12.0%
・Professional 14.0%

・System Solution 39.9%
・System Maintenance 60.1%

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

Director Composition (as of May 2022)

・Directors (7; 3 outside & 1 woman = 14.3%)
・Auditors (3)・Executive officers (11; no woman)

・Directors (7; 3 outside)・Auditors (4; 2 outside)・Executive officers (10; no woman)

・Directors (7; 3 outside)・Auditors (3; 2 outside)・Executive officers (7; no woman)

・NRI Group 8,285 (51.5%)
・Fujitsu Group 3,102 (19.3%)

・NRI 6,248 (37.5%)
・IBM, Fujitsu, etc.

・NRI 3,800 (26.7%)
・SCSK, etc.

Sites (including consolidated subsidiaries)

・Head office: Shinagawa-ku, Tokyo・West Japan Solutions Headquarters: Osaka& Nagoya・3 subsidiaries

・Head office: Yokohama, Kanagawa
・Minatomirai Office: Yokohama
・1 subsidiary・Head office: Bunkyo-ku, TokyoManagement Goals (indicators)

Medium-term management plan・FY 2022: sales Y16 bil (result: Y16.1 bil),
O.P. Y1.23 bil (result: Y1.42 bil), operating
margin 7.7% (result: 8.8%)
・FY 2023: sales Y17.3 bil, O.P. Y1.53 bil(margin 8.8%)
・FY 2024: sales Y19.0 bil, O.P. Y1.71 bil(margin 9.0%)
・ROE: ≥13% for each year

Management Policy/Strategy (summary)・Each employee will contribute to society
through business and aim for higher
corporate value
・Develop a stable and sustainable businessfoundation based on proposal & contractbased businesses
・Work on sustainable management
・Development of digital solution service
・Develop area of strength in "Lift & Shift" of
the SI Business・Create and implement new Enhancement
model
・Develop management foundation bystrengthening people development, group
governance, and internal control

Basic strategy
・Expand the existing contract-dev.
business (core business)・Actively work on receiving orders for
DX projects for the transformation ofexisting business models of customers
and for technology innovations
・Continue investment for strengthening
business structure
・Increase development staff
・Conduct M&As and create
capital/business alliances to solve
challenges of current planLong-Term Management Vision 2030
・Create the future with customers
・Stably expand business, solve society's
issues, and create a sustainable, futuresociety
Priority Strategies
・Change business portfolio
・Focus on digital business・Build service business・Establish DX Development Center・Raise liquidity of shares and strengthen
governancee

17,300
7.5
1,530
7.9
5.9
4.6

17,750
6.4
1,770
3.1
-6.7%
5.1

15,000
5.6
1,370
3.2
12.6
4.6

189.3%

183.1%

175.2%

217.7
71.2
830
20.8
1.8
13.8
5.9
1.7

234.1
77.6
890
19.9
2.0
13.4
7.3
1.4

144.6
67.0
602
24.9
2.3
12.0
6.6
1.2

Major Clients/Customers (FY 2022)(sales = million yen; % of sales = %)Sales (million yen) CE for FY 2023
Sales Growth Rate, YoY (%)

CE

Operating Profit (million yen) CE
O.P. Growth Rate, YoY (%) CE
EPS (CE) for FY 2023, YoY (%)
DOE (%) Actual
Past 14 Years’ Sales Growth Rate (FY 2022's result div. by FY
2009's result: %)O.P. Growth Rate (same condition as above)
Equity Ratio (%) Actual# of Domestic/Overseas Employees, Actual
Est. Sales Per Employee (million yen / person)
Est. O.P. Per Employee (million yen / person)
ROE (%) Actual for FY 2022

A=B×C×D

N.P. Margin (N.P. for the year / sales : %)B

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

C

Financial Leverage (ave. total asset / ave. owner's equity) D
ROA (R.P. / total asset : %)R.P. Margin (%) Actual

E=F×G
F

Medium term management plan, final
FY: In FY 2023,
・Sales Y17.75 bil (each FY, DX-related
sales of more than 10%)
・O.P. Y1.77 bil (margin of 10%)・Maintain ROE ≥8%

New medium-term management plan,
final FY: In FY 2025 (first stage),・Sales Y16.5 bil・O.P. Y1.58 bil (margin 9.6%)
・ROE 11.4%
In FY 2028 (second stage),・Sales Y20 bil
・O.P. Y2 bil (margin ≥10%)
・ROE ≥12.5%

1.4

1.3

1.5

14.7
8.9
1.7

14.6
10.3
1.4

11.4
9.4
1.2

Total Asset Turnover Ratio (sales / ave. total asset) G
Italics show each company’s estimates/forecasts (CE) for FY 2023. Other values are actual results for FY 2022. Highest values among the three companies highlighted in yellow.

(Ref) Prepared by Alpha-Win Research Dept. based on each company’s securities report, financial results briefing materials, website,
interviews, etc.

25/40
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: 6/13/2022

7． Last Fiscal Year’s Results and This Fiscal
Year’s Company Forecast◆ Full-Year Financial Results for FY 2022 (last fiscal year)
Overview
Consolidated financial results for FY 2022 (previous fiscal year) were as
follows: sales of Y16,099 million (+8.9% YoY), operating profit of Y1,417
million (+20.7% YoY), recurring profit of Y1,432 million (+10.6 YoY), andnet profit attributable to owners of the parent of Y944 million (+11.9% YoY;
hereinafter, “net profit”). Sales exceeded the initial plan by 0.6% (+99 million
yen) and operating profit exceeded the initial plan by 15.2% (+187 millionyen). In addition, each profit mostly reached the goals that were upwardly
revised in November 2021 (Figure 30).

w In the previous fiscal
year, the initial company
plan was revised upwardand mostly achieved.
Ended up about the sameas Alpha-Win’s forecasts.
Sales grew and hit arecord high for the tenthconsecutive fiscal year.

Sales hit a record high for the 10th consecutive year starting in FY 2013.
Record-high profits were also achieved in a row. Several times in the past,
the Company had tried but failed to achieve Y1 billion or greater for both
operating profit and recurring profit, but this goal has been achieved for two
fiscal years in a row. Annual dividend per share was raised from Y20 to Y23.

w Profits also grewconsecutively, hitting
record highs. Each profit
grew at double-digit
rates.

Alpha-Win Research Department had predicted previous fiscal year’s sales
to be Y16,100 million, which was a somewhat high expectation compared to
the Company's forecast (Y16,000 million), but the actual result came out tomatch our forecast. Regarding each profit, we had expected slightly higher
values compared to the Company's forecast, but the actual results wereslightly lower than our forecasts. We had predicted operating profit to be
Y1,425 million, but the actual profit was Y8 million smaller. Similarly, we
had predicted net profit to be Y965 million, but the actual profit fell short by
Y21 million.

w Increased annual
dividend by Y3/ sharew Mostly the same as
Alpha-Win’s forecasts;
there was no surprisew Profitability improved
due to the increase inorders received andconsolidation of
resources

Despite the COVID-19 crisis, the Company’s business performance was solid
due to an increase in orders for system building projects for the shipping andtelecommunication companies and an improvement in profitability broughtby the consolidation of resources to the SI Business. There has been norecurrence of unprofitable projects since FY 2020, indicating the success ofstrengthening the project management system.

【Figure 30】Comparison of Initial Forecasts and Actual Results for FY 2022 (last FY)
Unit: million yen

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

InitialCompany
Plan

RevisedCompany
Plan

Alpha-Win's
InitialForecast

Alpha-Win's
Revised
Forecast

ResultComparison with
Revised Company
Plan (Diff.)

Comparison with
Revised Company
Plan (% Achieved)

Comparison with
Alpha-Win's Revised
Forecast (Diff.)

Comparison with
Alpha-Win's Revised
Forecast (% Achieved)

A

B

C

D

E

F＝E-B

G＝F/B

H＝E-D

I＝H/D

16,00016,00015,700
3,300
21.0%
2,100
13.4%
1,200
7.6%
1,220
830
20.0

16,100
3,475
21.6%
2,050
12.7%
1,425
8.9%
1,450
965
23.0

16,099
3,450
21.4%
2,032
12.6%
1,417
8.8%
1,432
944
23.00

1,230
7.7%
1,250
850
20.0

1,400
8.8%
1,420
950
23.0

99

17
1.1%
12
-6
0

0.6%

1.2%
0.8%
-0
0.0%

-1
-25
-0.2%
-18
-0.1%
-8
-0.0%
-18
-21
0

-0.0%
-0.7%
-0.9%
-0.6%
-1.2%
-2.2%
0.0%

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summaryw Order received increased,but order backlog stayedabout the same due to
steady delivery

Orders Received and Order Backlog
Orders received during the fiscal year increased by Y1,009 million (+6.7%),in the order of fiscal year before the previous → previous fiscal year, from
Y15,062 million → Y16,072 million. As a result of steady progress with
26/40

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: 6/13/2022

deliveries, the order backlog (at the end of each fiscal year) decreased by Y27
million (-0.6%) from Y4,303 million → Y4,276 million.

w SIS contributed to sales
growthSales and Profit by Service Category
The Company's overall sales growth was +1,310 million yen compared to FY
2021. By service category, sales grew for SIS (+1,433 million yen) and ProS(+221 million yen) but decreased for SOS (-344 million yen) (Figure 31).

w Profit margins of allservice categories
improved, leading to
profit growth.

Operating profit increased in all categories, but SIS and ProS increased by
Y207 million and Y29 million, respectively, while SOS increased slightly by
Y5 million (Figure 32). SIS accounted for 85% of the total increase inoperating profit of Y243 million.
Although the operating margin improved in all categories, it improved themost for SOS from 6.0% → 7.5% (+1.5 basis points) despite the decrease insales. Operating margin of SIS, whose sales account for 70% of the total,
improved from 7.9% → 8.7% (+0.8 basis point) and ProS’s margin
improved from 10.0% → 10.3% (+0.3 basis point).

【Figure 31】Comparison of Sales of the
Past Two Fiscal Years (FY 2021 and FY2022) by Service Category
YoY
Change(million yen)

18,00016,09916,00014,788Operating Margin(unit: %)12,00010,535

Operating Profit(unit: million yen)(+ 1,310)

14,00010,000【Figure 32】Comparison of the Past Two Fiscal Years’ Operating
Profit by Service Category

11,968(+ 1,433)

8,000
6,000
4,000
2,178

1,834

(- 344)

2,074

2,296

(+ 221)

FY 2021

FY 20222,000
0SIS (System Integration Services)
SOS (System Outsourcing Services)
ProS (Professional Services)w By industry, business fortelecommunication &transportation grew
sharply, contributing
greatly to the sales andprofit growth.

Total
SIS
SOS
ProS
Total
SIS
SOS
ProS

FY 2021
1,174
836
131
206
7.9%
7.9%
6.0%
10.0%

FY 2022
1,417
1,044
136
236
8.8%
8.7%
7.5%
10.3%

Diff.
243
207
5
29
0.9%
0.8%
1.5%
0.3%

% Diff.
20.7%
24.9%
4.0%
14.4%

(Ref) Figures 31 and 32 were prepared by Alpha-Win Research Dept. based on the financial
results briefing supplemental materials

Sales and Operating Profit by Industry
・By industry, of the total sales growth of +Y1,310 million (compared to FY2021), sales of finance decreased by Y301 million (-7.2%) and sales of theother industries decreased by Y180 million (-3.8%). On the other hand, salesof telecommunication & transportation increased significantly for the second
consecutive fiscal year by Y1,361 million (+46.6%). Sales of distribution also
increased by Y430 million (+14.8%), offsetting the declines.
Sales from the financial industry decreased due to scaled-down systembuilding projects for credit cards and online banks. Regarding the otherindustries, despite the expansion of system building projects for electric
power companies, sales declined due to the scaling down of projects foreducation business companies. On the contrary, with the telecommunication& transportation industry, system building projects for shipping andtelecommunication companies significantly contributed to sales (Figure 33
on page 28). Sales from the distribution industry grew thanks to projects forretailers and cooperatives.
・Although actual sales were lower than the initial plan for the financial andthe other industries, this was fully offset by the telecommunication &transportation industry whose sales became significantly higher (Figure 34
on page 28).
27/40

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 of the Past Two
Fiscal Years’ Sales by Industry

FY 2022 Sales

16,099(+ 1,310)

3,909(- 301)

Finance(+430)

Distribution

14,70814,00012,000

4,210
3,342

10,000
2,911
8,000
6,000

2,923

4,285

(+ 1,361)

4,000
2,000

【Figure 34】Comparison between Initial Forecasts andActual Results for Sales of Each Industry

YoY
Change(million yen)

18,00016,000Issued: 6/13/2022

4,742

4,562

FY 2021

FY 2022(- 180)Result
3,909
3,342
4,285
4,562
16,099Initial Forecast
4,300
3,100
3,200
5,400
16,000Diff: million yen
-391
242
1,085
-838
98

Diff: %
-9.1%
7.8%
33.9%
-15.5%
0.6%

Telecommunication &
Transportation
Other

0

(Ref) Figures 33-35 were prepared by Alpha-Win
Research Dept. based on the financial results briefing
supplemental materials

w Operating margin
improved for allindustries except finance.
Double-digit margin
maintained fortelecommunication &transportation

Industry
Finance
Distribution
Telecommunication & Transportation
Other
Total

・Regarding operating profit, although it decreased by Y36 million for thefinancial industry, the other three industries’ operating profit increased(Figure 35). Profit from the telecommunication & transportation industry,
whose sales growth was the largest, grew by Y201 million (+61.0%),
accounting for 83% of the Company’s entire profit growth of Y243 million.
・ The operating margin varied between the industries, with thetelecommunication & transportation being the highest since the industry
involves many high-value-added projects. As for the change in the operating
margin, the margin increased for all industries excluding finance, whose
operating margin decreased slightly by 0.3% YoY. Operating margin of
telecommunication & transportation especially improved, rising by 1.1 basis
points. The telecommunication & transportation industry contributed themost to both sales and operating profit in the previous fiscal year (FY 2022).
【Figure 35】Comparison of the Past Two Fiscal Years’ Operating
Profit by Industry

Operating Profit(unit: million yen)

Operating Margin(unit: %)Industry
Total
Finance
Distribution
Telecommunication & Transportation
Other
Total
Finance
Distribution
Telecommunication & Transportation
Other

FY 2021
1,174
333
221
330
288
7.9%
7.9%
7.6%
11.3%
6.1%

FY 2022
1,417
296
275
532
313
8.8%
7.6%
8.2%
12.4%
6.9%

Diff.
243
-36
53
201
24
0.9%
-0.3%
0.6%
1.1%
0.8%

% Diff.
20.7%-11.0%
24.0%
61.0%
8.5%

Sales and Operating Profit by Business ModelIn FY 2021, the Company began categorizing its business into the threebusiness models of Enhancement (services for improving system
performance and quality), SI (system planning, design, development, andimplementation services), and Digital (proposal-based business utilizing
digital technologies).
In FY 2022, the Enhancement Business was by far the largest, accounting for
69% of the total sales and 62% of the total operating profit. However,
although relatively small in scale, the SI Business (29% and 37%, in the sameorder) and the Digital Business (2% and 1%) have also been growing rapidly
as drivers of business performance.
w By business model,
Enhancement’s sales andprofit declines wereoffset by the rapid
growth of the SI and theDigital.

In the Enhancement Business, sales fell short of the initial forecast and bothsales and profits decreased due to scaled-down projects for the financial andother industries and the shift of resources to the other two businesses. On theother hand, in the SI Business, sales exceeded the initial forecast due to the
expansion of system projects for shipping companies and the acquisition of
new cloudification projects. A high sales growth rate (+81.4% YoY) andprofit growth rate (+186.1% YoY) were achieved, and the SI Business
28/40

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)

contributed to 159% of the Company’s overall increase in sales and 215% of
the overall increase in profit (Figures 36-38). Sales of the Digital Businessalso exceeded the initial forecast, resulting in an increase of +285 million yen
YoY (+464% YoY). Its operating profit also improved from a loss of -Y14
million to a profit of +Y16 million.

w The Digital Businessturned profitable.

【Figure 36】Comparison of the Past Two
Fiscal Year’s Sales by Business Model(million yen)

YoY
Change18,00016,00014,000

14,78
65
2,561

16,099350
4,645

12,000（+1,310)（+285)(+2,084)

10,000DigitalBusiness【Figure 37】Comparison between Initial Forecasts and Actual
Results for Operating Profit of Each Business Model
Unit: million yen
Total Operating Profit
Digital Business
SI Business
Enhancement Business

FY 2021
1,174
-14
182
1,006

FY 2022
1,417
16
522
878

Diff.
243
31
340
-128

% Diff.
20.7%
To profit186.1%-12.7%SI Business

8,000
6,000

Issued: 6/13/2022

12,162

11,1034,000(-1,058)

Enhancement
Business【Figure 38】Comparison between Initial Forecasts and Actual Results for
Sales of Each Business ModelFY 2022 Sales
ResultInitial Forecast
350
320
4,645
4,130
11,103
11,55016,09816,000Business Model

2,000

DigitalSI
Enhancement
Total

0
FY 2021

FY 2022(Ref) Figures 36-38 were prepared by Alpha-Win
Research Dept. based on the financial results briefing
materials.

w Operating profit grew
due to sales growth andresource optimization,
which had offset theincrease in expenses due
to strengthening themanagement system, etc.
w Personnel expenses roseand the SG&A expenses
ratio worsened, but
operating margin
improved thanks toincreased gross margin.

Diff: million yen
30
515
-447
98

Diff: %
9.4%
12.5%
-3.9%
0.6%

Analysis of Factors that Increased or Decreased Operating Profit
Figure 39 shows an analysis of the factors that increased or decreased overall
operating profit. The increase in orders received from transportation &telecommunication increased profit by +198 million yen, and the shift tohigh-profit projects of the SI Business and the consolidation of resources
increased profit by +303 million yen, totaling a +501 million yen increase inprofit. On the other hand, the increase in personnel expense due to thestrengthening of the governance system decreased profit by -184 million yen,
the Enhancement Business shrunk by -40 million yen, and the increase in
R&D expenses caused a -34 million yen decrease in profit, resulting in a total
decrease of -258 million yen. In sum, the Company’s overall operating profit
increased by +243 million yen.
【Figure 39】Factors Contributing to Increased Operating Profit in FY
2022 (last fiscal year) (unit: million yen)(million yen)
Increase in sales fromreceiving more orders(transportation &telecommunication,
etc.)

Increase

Profit growth from theincrease in sales of the
SI Business (Lift & Shift)and consolidation of
resources to high-profit
projects

Decrease

+303
-40

+198
Sales drop due tosmaller derivativedevelopment
projects in the
Enhancement
Business

1,174

1
FY 2021

2

1,417
-184

3

4

Increase incosts due tostrengthening
governanceandmanagement
systemYoY

5-34
Increase in
R&D
expenses

6

7
FY 2022(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials

29/40
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: 6/13/2022

The SG&A expenses increased by +22.0% YoY, largely exceeding the sales
growth rate of +8.9%. The SG&A expenses ratio rose by 1.3 basis points from
11.3% in the fiscal year before the previous to 12.6% in the previous fiscal
year. The main reason for this increase was the rise in personnel expense by
more than 21% YoY due to the increase in the number of employees, which
had caused the ratio of personnel expense to sales to increase from 5.4% to
6.0%. However, since the gross margin improved by 2.2 basis points from
19.2% to 21.4%, the operating margin also improved by 0.9 basis point from
7.9% to 8.8%. As a result, operating profit increased by 20.7% along with theincrease in sales.

◆ CUBE SYSTEM’s Financial Forecast for FY 2023 (thisfiscal year)
Overview
This fiscal year, the Company plans to achieve sales of Y17,300 million(+7.5% YoY), operating profit of Y1,530 million (+7.9% YoY), recurring
profit of Y1,545 million (+7.8% YoY), and net profit of Y1,000 million(+5.9% YoY). It is expecting record-high sales and consecutive achievementof record highs for each profit. It is not planning to post large non-operating
profit/loss or extraordinary profit/loss this fiscal year either.

w This FY, planning forconsecutive sales/profit
growth and record-highsales/profit.

w【Figure 40】The Company’s Financial Forecast for FY 2023 (this fiscal year) (unit: million yen)

Unit: million yen
Sales
Gross Profit
Gross Margin
SG&A Expenses
SG&A Exp. Ratio
Operating Profit
O.P. Margin
Recurring Profit
Net Profit

This FY's
FY 2022
Last FY's Results
Company Plan First-Half
FY 2022
FY 2023
Results
16,099
3,450
21.4%
2,032
12.6%
1,417
8.8%
1,432
944

17,300

1,530
1,545
1,000

8,060
1,718
21.3%
971
12.0%
746
9.3%
752
501

FY 2022
Second-Half
Results

FY 2023First-Half
Plan

YoY
ChangeFY 2023
Second-Half
Plan

YoY
Change

8,039
1,732
21.5%
1,061
13.2%
671
8.3%
680
443

8,155

1.2%

9,145

13.8%

749
9.2%
754
505

0.4%

781
8.5%
791
495

16.4%

0.3%
0.7%

16.3%
11.7%

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

w Expecting small sales andprofit growth in the firsthalf and double-digit YoY
sales and profit growth in
the second half.

Financial Forecast for the First and the Second Half
In the first half, the Company plans to achieve sales of Y8,155 million (+1.2%
YoY), operating profit of Y749 million (+0.4% YoY), and net profit of Y505
million (+0.7% YoY) (Figure 40). Subtracting the first half from the full year
shows that in the second half it plans to achieve Y9,145 million (+13.8%
YoY), Y781 million (+16.4% YoY), and Y495 million (+11.7% YoY),
respectively.
Normally, in the second half, the operating margin tends to rise compared to
the first half due to sales growth, increased productivity, and seasonality. Thisfiscal year, though, since it is planning to strengthen investment for R&D andhuman resources in the second half, the operating margin is expected to dropby 0.7 basis point from 9.2% in the first half to 8.5% in the second half.
Compared to the first half, it is expecting sales to increase by 12.1% andoperating profit to increase by 4.3%.
Estimates/Assumptions Used in Predicting Sales GrowthThis fiscal year, the Company is planning to achieve sales growth from thefollowing measures and factors.
30/40

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)(20) Consulting collaboration
model: Business model in which
new customers are developed
jointly with consulting companies,
or business is developed jointlywith the consulting division ofmajor SI companies.
(21) Smile Share Product: A
product which, under the theme of“Making employees smile throughdigital technology,” supports
contactless communication andengagement among employees(Thanks Connect, Cubecoin, andSmile Cash Register).
(22) Multicloud: A way of utilizing
the cloud in which multiple cloudenvironments are used at a single
point in time (Oracle / AWS /Google /Azure, etc.).
(23) Microservices: Individuallydeveloped, small services are
combined and provided as a single
service.
w By industry, finance and theother industries will be thedrivers of growth【Figure 41】Forecasted Sales by
Business Model in FY 2023 (this fiscal
year) (CE: the Company’s plan)

1. Regarding sales by business model, its new categorization, the Company
expects sales to increase in all business models. Its plan is to ambitiously
receive orders for projects related its customers' strategic IT investments(Digital Business / SI Business) (Figure 41). For the Digital Business, it isexpecting sales to grow significantly by +429 million yen (+285% YoY)
due to the development of the collaborative consultation model20 and thesales promotion of the Smile Share Product21. Sales of the SI Business isplanned to be increased by +494 million yen (+11% YoY) by receiving
more orders for multicloud22 and microservices projects23. Concerning theEnhancement Business, although its sales had temporarily decreased in theprevious fiscal year, the Company expects to increase sales by +276 million
yen (+3% YoY) by actively making proposals to receive more orders forderivative development projects or to expand the Company’s scope of workin projects.
2. Customers have recently tended to increase their IT investments to create
new business models or strengthen their competitive edge. By responding
to these demands, the Company plans to increase sales from the threeindustries excluding transportation & telecommunication for which lessorders for projects are expected. Of the Company’s entire planned sales
growth of +1,201 million yen, sales from the other industries category are
expected to be the largest at an increase of +857 million yen (71% of thetotal sales growth; +18.8% YoY). Sales from manufacturing, thegovernment, and energy-related companies are expected to especially grow.
In addition, since IT investments by financial institutions such as insurancecompanies and banks are recovering, the Company expects sales to growby +510 million yen (42% of the total; +13.1% YoY) (Figure 42).
【Figure 42】Forecasted Sales by Industry in FY 2023 (this fiscal year)(the Company’s plan)

18,00016,00014,00016,099350
4,645

17,300780（+1,200)

5,140（+494)（+429)

5,000

4,285

3,909
3,342

3,550

5,420
4,562

3,910

1,000

Digital Business0
FY 202 2(result)

FY 2023(plan)

Finance

SI Business

10,000-8.8%
YoY（-375）＋6.2%
YoY（＋207）

4,420

2,000

12,000FY 202 2(result)

FY 2023(plan)

Distribution

FY 202 2(result)

FY 2023(plan)

Telec ommunic ation &Transportation

FY 202 2(result)

FY 2023(plan)
Other(Ref) Prepared by Alpha-Win Research Dept. based on the financial results briefing materials.

8,000
6,000

＋13.1%
YoY（＋510）

3,000

YoY
Change20,000＋18.8%
YoY（＋857）(million yen)

6,000

4,000

(million yen)

Issued: 6/13/2022

11,103

11,380FY 2022

FY 2023 CE

4,000（+276)

Enhancement
Business

2,000
0

w Although operating margin is
expected to be 8.8%, which isabout the same as last FY, due
to investment costs for future
growth, it still expects to beable to increase profit throughsales growth.
w Planning to improve
profitability by working on
digitalization, improving
productivity, and shifting tohigh-value-added businesses

Estimates/Assumptions Used in Predicting Operating Profit Growth
As for operating profit, although productivity is expected to improve during
this fiscal year as well, the Company expects this to be offset by the increasein costs due to continued active investments for future growth. Consequently,
it expects its operating margin to be 8.8%, which is about the same as theprevious fiscal year. However, due sales growth, operating profit is expected
to increase by +7.9% YoY (reference: actual operating margins were 6.1% in
FY 2017 → 6.3% in FY 2018 → 6.4% in FY 2019 → 6.5% in FY 2020
→ 7.9% in FY 2021 → 8.8% in FY 2022). The Company expects thefollowing factors to increase profit.
1. Internal digitalization to improve productivity of operations
2. Improved productivity through sophistication of the Enhancement services
3. Improvement of development environment for resource optimization
4. Providing high-value-added services (DX project / proposal-based business)
31/40

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: 6/13/2022

8． Growth Strategy◆ VISION 2026: The First Medium-Term Management
Plan
As the successor to the previous VISION 2020, the Company has announced
VISION 2026, the new medium-term management vision for the six years
from FY 2022 to FY 2027 (Figure 44). The Company has been working on
the First Medium-Term Management Plan which targets the first half, or the
first three years including this fiscal year, of this VISION.
Direction of Business (No change)
With the impact of COVID-19, the society’s themes and workstyles are
expected to change as the society makes a transition to the new normal. To
proactively and flexibly respond to these changes, the Company has createdthe following two guidelines.
・The employees themselves will have their own vision and business-oriented
mindset, and will think and act for themselves.
・Achieve business growth through the proposal-based business (a businessmodel in which solutions developed based on the Company’s technologies
and expertise in its customers’ industries are proposed to its
customers/industries and the corresponding services are provided) and thecontract-based business (a business model in which the Company conducts
contract development of information systems as requested by its customers).

w In the new medium-termplan V2026, it plans toactively work on
developing the proposalbased business inaddition to its
conventional contractbased business.

The Company plans to achieve growth by shifting from the conventional
contract-based business to the proposal & contract based business, actively
making proposals, and starting new businesses. It also plans to develop astable and sustainable business foundation and especially expand the SI
Business (cloud projects and cooperation with major SIs) and the Digital
Business (solutions) based on the Enhancement Business.

w In addition to
Enhancement, it plans toachieve rapid growth bystrengthening its SI and
Digital businesses.

The Company’s current business model is composed of three parts:
Enhancement, SI, and Digital . As shown in Figure 43, the proportion of eachbusiness model’s sales in the order of “Enhancement, SI, and Digital” isplanned to be changed from “83%, 16%, and 1%” in FY 2021 to “60%, 30%,
and 10%” in FY 2027 and “40%, 40%, and 20%” over the long term (about
ten years from now).

【Figure 43】Direction of the New Medium-Term Plan
(V2026)delActionActionBusiness Modelmation theme
ngitaltheme
technologies
technologies
basedbusiness
drsbusinesst & Shift)
Shift)

Concept for Sales Breakdown by Business Model
Business Portfolio
事業ポートフォリオ
Business Portfolio

ormation theme
ation
legacytheme
systems
andsystems
platforms
acylplatforms

BusinesssinessDigital Business

SI Business(Lift & Shift*)
Survive in a shrinking market

ormation systems
ortandderivative
ation
systems
andderivativend effficient
resource

Business Portfolio 2026
Business Portfolio 2026

Proposal-based approach
Proposal-based
approach
Alliances
Alliances
Investment (raise capital efficiency
Investment
efficiency
as(raisemuch capitalas possible)
as much as possible)

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

Enhancement
Survive in a shrinking market
In-depth pursuit of highproductivity
and highofadded-value
Business
In-depth
pursuithigh(high profitability)
productivity
and high added-value(high profitability)

The Future and Beyond

General PlanConcept
for Salesby Business
forBreakdown
Sales Breakdown
by BusinessModel
Model

Take on challenges with a completely
Take on new
challenges
witha completely
approachthanbeforenew approach than before

Businessiness

6 ： 3 ： 1 Model
6 ： 3 ： 1 Model

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

2019

30%
30%
30%
Per
PerPerson
PersonPer
PersonY30
mil 60%Y30 mil60%
Y30 mil 60%

2026

2026

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

V2026: The Second Medium-Term Management Plan (to 2026)

Generate results from the transformation and accelerate growthV2026: The First Medium-Term Management Plan (to 2023)

Phase for business model transformation and development of
the management/business foundation

20%
20%
20%

Digital Business

40% Digitalization Business
40%
Business
40% SIDigitalization
Business

SI Business
Building areas of strengthin Lift & Shift

Developing digitalsolution services

SI Business
Enhancement
Enhancement

40%
40%

40%

Long-Term Goal

Long-Term Target

2019 briefing materials
2026
Long-Term Target(Ref) Excerpt from the financial results(Note) *Lift & Shift: Providing SI services in which the current system
environment is moved to the cloud environment (“Lift”) and the cloud-based
system is rebuilt (“Shift”). 2020 points to FY 2021 and 2026 points to FY 2027.

fficient resource【Figure 44】Challenges and Priority Measures of the New
Medium-Term Plan (V2026)

Enhancement Business
Building and executing a
new enhancement modelManagement Foundation
Strengthening people
development, group governance,
and internal control

・Develop original products (including social solutions)・Consulting collaboration business for major SIs / development of proposal-based SI
business targeting end users⇒Raise brand value (developing original products & proposal-based SI business)

・Provide systems mainly based on the cloud and microservices and shift to a new
operation model・Develop technologies and acquire new customers by collaborating with major SIs⇒Drive business growth (solutions business / Lift & Shift)・Optimize resources through the groupwide collaboration model and consolidation ofbusiness partners
・Scale business and improve profitability through original development anddevelopment/implementation of operating environment⇒Further raise profitability & productivity (consolidation, improving efficiency,
optimization, sophistication, human resources, technologies, and expertise)・Hire talents to support the management foundation; people development strategy,
workstyle reform, and vitalization
・Increase engagement with investors; adjustments for the Prime Market⇒Enhance human resources
Strengthen recruitment (new graduates and mid-career hires)
Trainings for greater employee skills (DX talent training and IT infrastructure /operations engineer training)
Partners (nearshore and offshore expansion; consolidation; collaboration)(Ref) Excerpt from the financial results briefing materials with additions

32/40
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: 6/13/2022

Priority Measures
The three business models and the priority measures for the businesschallenges have been set out (Figure 44 on page 32) and the Company has
been making progress mostly as planned. It plans to focus on expanding
business, improving profitability, and enhancing human capital for theSecond Medium-Term Management Plan (FY 2025 – FY 2027) in which it
will “generate results from the transformation and accelerate growth.”

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

Key Performance Indicator (KPI)The Company has disclosed its indicators for the first medium-term plan andmedium- to long-term directions based on financial and non-financial
approaches. It aims to create financial and non-financial value by
innovatively converging its two strengths, trust and quality, and its three
powers, organization and technology and talents, that its has cultivated overthe past 20 years.
w Financial and nonfinancial indicators
defined as its KPI

The financial indicators are clearly defined as five items, which consist of
ROE, operating margin, and three items related to sales (Figure 45). In May
2022, the Company announced upward revisions for three of its goals of theFirst Medium-Term Management Plan, excluding the ROE (13% or more)
and sales per employee (Y23 million). Specifically, it raised the numericaltargets for the sales breakdown representing business model transformation(the SI business’ sales growth since FY 2021: +2.5 billion yen ⇒ +3.3
billion yen), the sales growth rate (CAGR = compound annual growth rate:
about 8% or 7.8% ⇒ 8.7%), and the operating margin (8% ⇒ 9%).

w Five financial indicators:
ROE, sales per person,
sales breakdown, sales
CAGR, and operating
marginw Of the above, it raised its
goals for sales
breakdown, sales CAGR,
and operating margin.

For non-financial indicators, it has had the following three items which itplans to achieve through IT: diversity promotion, workstyle reform, andcommunication vitalization. People development has now been added too.
All items are related to people, representing the Company’s idea that people
are the driving force in attaining sustainable growth through sustainability
management and that the enhancement of human capital is truly essential. At
the time of the previous announcement of its plan, it did not specify the nonfinancial numerical targets. However, the Company has now set the ratio of
female employees at section-head levels of 20% or more (16.7% in FY 2022)
as its KPI for promoting diversity, and paid holiday acquisition rate of 70%
or more (57% in FY 2022) as its KPI for workstyle reform.

w Four non-financial KPIs
(of which numericaltargets have been newly
set for two)

【Figure 45】Financial and Non-Financial Goals of the First Medium-Term Management Plan (V2026)

Capital Efficiency
Productivity
Financial

Key Performance Indicator(KPI)

FY 2022 Results

ROE

13.8%

(FY 2020: 14.0%)

22.5 million yen

Sales per Person(FY 2020: Y21 million)

Goals of the First
Medium-Term
Management Plan

Maintain

23 million yen

SI Business

SI Business2 billion yen (from FY 2020)+3.3 billion yen (from FY 2020)

Business Model
Transformation

Sales Breakdown

Growth Potential

Sales CAGR

8.9%*1

Approx.

Profit Indicator

Operating Margin

8.8%

9%

(FY 2020: 7.9%)+

Medium/Long-Term Plan

13.0% or greater
30 million yen
2 billion yen (from FY 2023)

Digital Business +Ratio of 6:3:1 for Enhancement:SI:Digital

8%

Approx.
Approx.

9%10%

NonFinancial

Through IT

Implement measures to continuously improve profitability and productivity

Diversity Promotion

Percentage of Females in
Section-Head-Level Positions

16.7%

20% or more

Promoting female participation, supporting
employment of people with disabilities, andsupporting child and elderly care

Workstyle Reform

Paid Holiday Acquisition
Rate

57%*2

70% or more

Setting indicators for job satisfaction, mental andphysical health, workplace liveliness, and more,
as well as working on their improvement

Smile Share ProductMeasured amount ofcommunication in Thanks
Connect*3 & evaluated effectCreate a non-financial value
platform“Thank you” and “Like” indicators of CUBESYSTEM’s original product Smile ShareDiverse Career Paths andDevelopment

Finished verifying theeffectiveness of Career Field

Create a personnel systemthat maximizes employee
skills and strengths

Workplace with diverse professionals

Communication Vitalization
People Development(Ref) Financial results briefing
materials(Notes on items in the figure)*1: Result for FY 2022 is the percent
change in actual sales from FY
2021 (YoY).
*2: Acquisition rate (%) = Total
number of days of paid holiday
acquired by all employees ÷ Total
number of days of paid holiday
granted to all employees ×100
*3 Thanks Connect: one of the Smile
Share Products that visualizes
people’s feelings of ”thank you”

33/40
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: 6/13/2022

Financial Goals of the Medium-Term Management PlanOn May 11, 2022, the Company also revised its consolidated financial
indicators (targets) for each of the two fiscal years following this fiscal year.
For both fiscal years, the four items of sales, sales CAGR, operating profit,and operating margin were revised upward, and the ROE (13% or more)target was left unchanged (Figure 46: “Revised CE” is the new company plan).

w Forecasts for this and thenext fiscal year have beenrevised upward.
w Aiming for sales of Y19
billion and operating
profit of Y1.71 billion in
FY 2024In the final year or FY 2024, it plans to reach sales of Y19 billion (+Y500
million compared to the previous forecast of Y18.5 billion), operating profitof Y1.71 billion (similary, +Y230 million compared to the previous Y1.48
billion), and operating margin of 9.0% (+1.0% compared to the previous8.0%).

w Expecting high growthrate for sales and profits

The new forecast for the sales growth rate, in the order of FY 2022 (actual
result) → FY 2023 (plan) → FY 2024 (plan), is +8.9% → +7.5% →+9.8% YoY. A high operating profit growth rate is also expected due to theincrease in the sales growth rate and operating margin, from +20.7% →+7.9% → +11.8%.

w Will accelerate the growthof the Digital and the SI
businesses.

By business model, due to the shift of resources to areas of high profit, salesof the Enhancement Business have been revised downward, while sales
forecasts for the Digital and the SI businesses have been revised upward. As
a result, the overall sales growth rate in terms of CAGR (annual rate overthree fiscal years) is expected to increase from +7.8% to +8.7%.
【Figure 46】Financial Goals of the First Medium Term Management Plan of V2026 (FY 2022 – FY 2024)
Million yen
Sales
Digital Business
SI Business
Enhancement Business
Operating Profit
Operating Margin
ROE

FY 2021
Results
14,78866
2,561
12,162
1,174
7.9%
14.0%

FY 2022
Initial CE
16,000320
4,130
11,5501,230
7.7%
13% or more

FY 2022
Results
16,099350
4,645
11,103
1,417
8.8%
13.8%

FY 2023
FY 2023
FY 2024
FY 2024
Initial CE Revised CE Initial CE Revised CE
17,20017,30018,50019,000
400
780
500
1,000
4,500
5,140
5,000
5,700
12,30011,38013,00012,300
1,340
1,530
1,480
1,710
7.9%
8.8%
8.0%
9.0%
13% or more

(Ref) Excerpt from the financial results briefing materials. “Initial CE” is the Company’s forecast announced on June 11, 2021. “RevisedCE” is the forecast announced on May 11, 2022.

【Figure 47】Forecasts of Medium-Term Financial Results (the Company’s plan and Alpha-Win’s forecast)
Unit: million yen, %Sales
Digital Business
SI Business
Enhancement Business
Gross Profit
Gross Margin
SG&A Expenses(% over sales)

Operating Profit(% over sales)

Recurring Profit(% over sales)

Net Profit(% over sales)

Sales (% YoY growth)Gross Margin (% YoY diff.)

FY 2022 Results FY 2023 Old E FY 2023 New E
16,100350
4,645
11,103
3,450
21.4%
2,032
12.6%
1,417
8.8%
1,432
8.9%
944
5.9%

16,800

8.9%
2.2%

SG&A Expense (% YoY growth)

22.0%

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

20.6%
10.6%
11.8%

FY 2023 Old CE

FY 2023 Revised CE

FY 2024 Old E

FY 2024 New E

FY 2024 Old CE

FY 2024 Revised CE

FY 2025 New E

17,300780
5,140
11,38017,70018,500500
5,000
13,00019,0001,000
5,700
12,300

3,720
21.0%
2,120
12.0%
1,600
9.0%
1,620
9.2%
1,080
6.1%

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

1,480
8.0%

1,710
9.0%

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

5.4%
-0.4%
1.0%
6.7%
6.6%
8.0%

8.7%
-0.1%
5.5%
11.8%
11.7%
10.0%

7.6%

9.8%

10.4%

11.8%

17,200400
4,500
12,300

3,600
21.4%
2,100
12.5%
1,500
8.9%
1,520
9.0%
1000
6.0%

17,200800
5,200
11,200
3,700
21.5%
2,180
12.7%
1,520
8.8%
1,535
8.9%
1,000
5.8%

1,340
7.8%

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

4.3%
-0.0%
3.3%
5.9%
6.1%
5.9%

6.8%
0.1%
7.3%
7.3%
7.2%
5.9%

6.8%

7.5%

-5.4%

8.0%
7.9%
5.9%

(Ref) Prepared by Alpha-Win Research Dept.

34/40
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.

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

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

Issued: 6/13/2022

Alpha-Win Research Dept.’s Financial Forecast for FY 2023
(this fiscal year)
Revisions of the Financial Forecast
We reviewed our financial forecast for the current fiscal year and revised
sales from the previous Y16,800 million to Y17,200 million (compared to thecompany forecast for the current fiscal year: -100 million yen) (Figure 47 onpage 34). We also revised the operating profit forecast for the current fiscal
year from the previous Y1,500 million to a slightly higher value of Y1,520
million considering the impact of sales growth (compared to the Company's
forecast: -10 million yen, mostly at the same level).

w We reviewed our previous
forecast for this FY andrevised sales and profit
upward.
w The company forecast
seems to be within an
achievable range, but wemade a somewhat cautious
forecast considering therisks that IT investments
will be suppressed andcosts will rise due to theworsening macroeconomic
environment.

Although the macroeconomic environment is worsening, customers havebeen shown strong interest in strategic IT investments. Therefore, while theCompany plan is somewhat ambitious, it seems to be within an achievable
range. However, since the corporate earnings environment has been
becoming worse, we have factored in the possibility that the investment
sentiment will weaken especially starting in the second half of the fiscal year.

w The increase in cost is
expected to be offset by the
improvement in
profitability, resulting in
about the same operating
margin.

The Company will likely continue to actively invest toward growth, causing
various costs such as personnel and subcontracting expenses to increase. On
the other hand, productivity is expected to improve due to digitalization andresource optimization. We predict that these factors will offset each other sothat the operating margin will be 8.8%, which is the same level as the previous
fiscal year and the Company’s plan for the current fiscal year.

w There has been a generally
small deviation on average
between the initial forecast
and the actual results overthe long term, but theCompany has tended toannounce somewhat
ambitious forecasts.

Financial Forecast and Track Record of Financial Performance
Figure 48 shows an analysis of the past deviation between the Company's
initial forecast and actual results over the long term.
During this period, on a simple average, the deviations have been small, as
actual sales were 1.7% lower than the initial forecast, and the actual operating
profit, recurring profit, and net profit were 3.9%, 2.5%, and 3.2% lower,
respectively. Neither operating nor recurring profit has ever been more than
30% lower than the initial forecast in any fiscal year. The Company tends toannounce targets that are ambitious but within a realistically achievable range.

【Figure 48】Chronological Comparison of Initial Forecast (the Company’s) vs. Actual Consolidated Results
Sales

Consolidated
Unit: million yen
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023 CE

InitialForecast

Results

Operating Profit
InitialForecast

Results

Recurring Profit
InitialForecast

Results

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

InitialForecast

Results

4,806
387
5,598
485
445
246
6,244
510
432
235
6,900
6,575
491
522
500
284
280
7,000
7,100
558
532
551
287
315
7,800
7,767
549
600
551
340
312
8,300
7,923
590
570
584
330
324
8,300
8,109
605
645
610
643
336
342
8,500
8,507
680
652
685
597
350
308
8,800
8,706
660
637
670
660
350
349
9,200
9,166
675
662
680
672
263
208
9,300
8,431
665
524
675
533
350
118
9,000
9,242
620
601
630
606
350
338
10,00011,217
700
665
700
702
380
387
12,00012,527
840
964
840
981
480
594
13,00012,623
1,000
949
1,020
960
600
629
14,00012,899
920
781
940
811
450
551
14,30013,559
1,060
855
1,080
893
650
567
14,70014,325
1,010
922
1,010
960
640
597
15,50014,708
1,090
959
1,090
976
684
525
16,00014,788
1,120
1,174
1,120
1,295
700
844
16,00016,099
1,230
1,417
1,250
1,432
850
944
17,300
1,530
1,545
1,000
Simple average of diff. (unit: %), calc. for longest period with data on both sales and profits→
Green highlight: record-high
Yellow: 2nd highest
Number of times revised up:down from initial forecast →

Sales

O.P.

R.P.

N.P.

% Diff. from Initial Forecast

Sales

O.P.

R.P.

N.P.

% YoY Change for Actual Results

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

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

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

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

-1.7%
6 ： 13-3.9%
4 ： 11-2.5%
7 ： 12-3.2%
8 ： 11

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%
11.9%
7.5%
7.9%
7.8%
5.9%
6.1%
6.4%
7.3%
13.6%
↑ Simple average the FYs (excl. FY 2023 CE)(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s forecast.

35/40
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 We revised our mediumterm forecast. We believethat sales and profit willcontinue to increase overthe medium term,
consecutively hitting theirrecord-highs.
w The macroeconomic
environment and securingof employees will be therisk factors.

w 当調査部では、今後も日本企業の IT 投資は増加し、
w We predict the medium同社の中期年間利益成長率
term profit growth rate toを～10％と予想。
be6about
6-10% per year.
w We expect the Company tobe able to grow sales by
about 5-8% per year bysuccessfully receiving
orders for projects related
to strategic IT investments.

w We expect the profit
margin to gradually
increase. Sales growth isexpected to be the main
factor contributing to
profit growth.

Issued: 6/13/2022◆ Alpha-Win Research Dept.’s Forecast of Medium-Term
Financial Results
We revised our previous medium-term forecast and prepared a forecast for
the three fiscal years starting this fiscal year, with the forecast for FY 2025
newly added (Figure 47 shown previously on page 34). For medium-term
results, we made a somewhat more cautious forecast than the Company forboth sales and profit upon taking into account the comparison with theCompany’s forecast (medium-term plan), the estimates and assumptions
described below, and the risk factors. We predict, though, that the Company
may be able to continue its sales and profit growth trend and hit their record
highs consecutively in the next fiscal year onwards too.
Risk Factors
・Regarding the macroeconomic environment, points of concern in terms of
the impact on the business performance of Japanese companies are theprolongation of the war in Ukraine, the cheap yen and price rise, tapering andincrease in interest rate to control inflation, and the subsequent increase inglobal economic uncertainties.
・Factors that are hard to predict include the Company’s main end users’
earnings trends, IT investment trends, upfront investment costs fordeveloping new business domains, increase in cost, and recruitment situation.
However, we have not changed our forecast that, based on the following
factors and estimates, sales and profit will likely continue to increase annuallyby about 6-10% over the medium to long term.
Factors and Estimates for Predicting Increased Sales
・ As the impact of COVID-19 becomes gradually smaller, strategic IT
investment projects are expected to increase. By responding to such demand,
the Company is likely to grow sales at 5-8% per year over the medium term.
・The business with its major customers, the Digital Business, and the SI
Business are expected to continue to expand through the technologicalexpertise and trust that it has built up over the years.
・Sales growth can be expected due to the development of new businesses
and business domains – specifically, businesses related to DX, energy,
consulting, and new solutions (Smile Share Product, cloud, AI, blockchain,etc.)
・Sales growth from large-scale M&As, etc., has not been factored in.
Factors and Estimates for Predicting Increased Profit
・The gross margin rose last fiscal year due to various measures (improved
productivity, reviewing subcontracting cost, etc.), but we expect it to stay flat
at a high level starting this fiscal year.
・Large profit growth of the new businesses is not expected for the time being.
・The Company is expected to strengthen its business foundation for future
growth (expansion of staff size, organization, and office sites), have increased
personnel expense and subcontracting cost, and conduct upfront investments
in new technology/business research. However, starting next fiscal year, we
expect the rise in the SG&A expenses to settle down for the moment to about
a 4-6% rise per year, which is a little less than the sales growth rate.
・Consequently, we predict that the operating margin will improve by about
0.1-0.2 basis point per year starting next fiscal year and that sales growth willbe the main factor contributing to profit growth.
・No significant occurrence of unprofitable projects, nonoperating profit/loss,
or extraordinary profit/loss are expected.
36/40This 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: 6/13/2022

9． Analyst’s Views◆ SWOT Analysis
The Company’s SWOT analysis result is shown in Figure 49. There havebeen no significant changes (changes made in this report are shown in red).
【Figure 49】SWOT Analysis
・ Long history in the industry, extensive experience, and strong trust・ Stable and excellent customer base・ Technological expertise / unique know-how / employees and organization with expertise (industry type and project/risk management)

Strength

Weakness

Opportunity

Threat・ Entry barrier essentially high; business model with high continuity
・ Cash-cow business, ample cash & deposits, and firm financial standing
・ Management with eager attitude toward developing new businesses and expanding business・ Consulting-based sales through direct sales activity
・ Quality people development and training system
・ Low-cost development system using overseas subsidiaries
・ Relies heavily on certain customers
・ IT-related labor market is tight and acquisition of more, new 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 occurrence of unprofitable projects)
・ Specialized in domestic demands; overseas development difficult
・ Continous growth of the market for IT systems due to HR deficit and the need to streamline operation
・ DX, new products, new services, and technology innovations leading to increased strategic demand for systems
・ Shfiting to upstream processes, niche areas, large-scale dev. projects, and direct-contract projects; reinforce Enhancement Business・ Business expansion following the global entry of customers
・ M&As and strengthening alliances
・ Reduced IT investment, less demand for updates, and intensifying price competition due to worsening macroeconomic environment andrecession
・ Emergence of alternatives (popularization of AI or packaged business software), delayed product development, and product defects
・ Information management and leakage risks
・ Increased personnel expense and subcontracting cost(Ref) Prepared by Alpha-Win Research Dept.

w Many years’ worth oftrust, track record, andtechnological expertiseare its strengths. Growthpotential is large since
Japanese companies are
expected to increase IT
investments.
w Acquisition of talented
employees is thebottleneck to further
growth.
w Another challenge will beto effectively utilize its
ample cash & deposits forbusiness growth.
w Focusing onstrengthening project
management. However,
the occurrence of
unprofitable projects willcontinue to be an
inherent risk.

Describing the strengths in more detail, the Company has an excellent
customer base owing to its long years of business during which it has earned
trust and built technological expertise. Its business is characterized by highbusiness continuity, stability, and ambitiousness. Moreover, the Company’s
strength lies in its close position to the end users, which means that it cansuggest related or derivative systems to its customers and obtain new
development and service projects (Enhancement). Since its users, or Japanesecompanies, are expected to continue to strategically increase IT and DX
investments to improve business efficiency and profitability, the Company’s
growth potential is large.
On the other hand, looking at its weaknesses in more detail, the Company’s
industry in general is characterized by a tendency to have flat profit margins
over the long term, so that profit does not generally increase without sales
growth. New business area development and new customer acquisition are
crucial to increasing sales, but the shortage of employees, especially for
project manager positions, has been the bottleneck to further growth. Anotherpoint is that its business is becoming a cash cow and that effective utilizationof its cash and deposits for future growth will also be one of its challenges
going forward.
Also, the Company as well as the entire SI industry has been strengthening
preventive measures and project management over many years, but someprojects such as development in new areas still sometimes become
unprofitable and cause a temporary decline in profit. Although the Company
has been working on further improving its quality control and has been seeing
positive results in recent years, this point should be noted as a consistent risk
factor.
37/40

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: 6/13/2022◆ Shareholder Return and Shareholder Benefit Program
The Company’s policy is to raise shareholder asset value by improving its
financial results in order to conduct stable dividend payments and increase
market capitalization. So far, it has been taking a proactive stance withregards to improving the return of profit to shareholders, by conducting
dividend hikes, share buybacks, stock splits, and enhancement of theshareholder benefit program.

w Proactive stance withregards to returning profit
to shareholders

w Raising dividend
consecutively based on atarget dividend payout
ratio of 35%

The Company’s consolidated dividend payout ratio was 46.5% in FY 2020,
32.2% in FY 2021, 32.9% in FY 2022, and predicted to be 35.2% in FY 2022
based on the Company’s forecast, reaching its target of 35%. It raised its
dividend from Y14 to Y16 per share in FY 2018, and then raised it by Y2
again in both FY 2020 and FY 2021 to Y18 and Y20. In FY 2022, it had
initially planned to keep dividend the same at Y20, but then decided to raise
it by Y3 to Y23 (Figure 50). This fiscal year, the Company plans to raise
dividend again by another Y3 to Y26. Since profit growth is expected overthe medium term, we believe that dividend may be increased more in the next
fiscal year onwards.

w Planning to increase
dividend again this fiscal
year by 3 yen. Dividend
hikes are also possible
over the medium-term.

Dividend yield is 2.8% when calculated based on a stock price of Y925
(closing price on June 10). Many of the Company’s investors are individual
investors, and it has a shareholder benefit program in which JCB Gift Cards
are given to shareholders based on the number of shares they own (Figure 51
on page 39). When this benefit program is taken into account, the actual
dividend yield increases to approx. 3.4% at maximum (for the optimum
number of shares owned). The Company plans to continue to maintain its
stable dividend payment and raise the EPS to enhance shareholder return.

w Actual annual (maximum)
yield including theshareholder benefit
program is about 3.4%.

Since the actual annual yields of its competitors including their shareholder
benefit programs are approx. 4.0% for HIMACS and approx. 3.7% for Toho
System Science, the Company’s dividend yield is somewhat low. On theother hand, the dividend on equity ratio (= total dividend / shareholder’sequity) in FY 2022 was 4.6% for the Company, 5.1% for HIMACS, and 4.6%
for Toho System Science. The Company’s DOE is in the middle range, but ishigh compared to the common levels of DOE.

w Actively conducted stock
splits and share buybacks
in the past
w Rich in cash; may conduct
share buybacks in the
future too.

Since becoming listed on the market, the Company has performed a total ofsix stock-splits, including a 1-to-2 split in April 2010, a 1-to-1.5 split in April
2011, and a 1-to-2 split in October 2014. Stock splits have not been conductedsince then. It has also conducted six share buybacks in the past, acquiring a
total of approx. Y650 million’s worth of shares (acquisition price at the timeof acquisition). Since the Company has a solid financial standing and is richin cash, depending on the level of the stock price, additional share buybacks
are possible in the future.
【Figure 50】Change in Dividend and Dividend Payout Ratio
(Y)

（％）

60.0

35.00

Dividend (right axis)
51.2

50.0

Commemorative dividend (right axis)

48.9

40.0

39.4
36.3

35.8

35.2

25.00
37.0

35.1
32.2

32.4

30.1

30.0

20.0

10.0

30.00

46.5

Dividend payout ratio (left axis)
42.7

41.2

2.5

2.5

8.3

8.3

8.3

8.5

8.5

8.5

FY 2009

FY 2010

FY 2011

FY 2012FY 2013

FY 2014

14.0

14.0

14.0

16.0

16.0

18.0

20.0

32.9

23.0

26.0

34.4

28.0

34.3

30.0

20.00
15.00
10.00
5.00

0.0

0.00
FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020 FY 2021

FY 2022 FY 2023 E FY 2024 E FY 2025 E(Ref) Prepared by Alpha-Win Research Dept. Estimates/forecasts (E) were made by Alpha-Win.

38/40
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: 6/13/2022【Figure 51】Shareholder Benefit Program and Actual Net Yield (shareholder benefit vesting date: end of Sept)
Number of Shares Owned(greater than or equal to)(less than)Shareholder Benefit(JCB Gift Card: Y)

Dividend: Y

Actual Net Yield: %

200
400
1,000
26
3.4
400
1,000
2,000
26
3.4
1,000
3,000
26
3.1
Actual net yield* = (dividend + benefit value) / (stock price)*Calculated for the min. (optimum) number of stock owned in each range
Stock price assumed to be Y925 (closing price on June 10, 2022). Dividend is based on this FY's forecast.
End of April 2009

CS*
192
(Ref) Prepared by Alpha-Win Research Dept. basedon the Company’s
websiteTPX
837.79!Sto ck-s pl i t a djus ted◆ Stock Characteristics/Price and Valuation Comparison
w A defensive, domesticdemand-oriented growthstock. Stock priceincreased by approx. 4.8x
over the past approx. 13
years, largely
outperforming the
TOPIX.
w Stable growth is expected
to continue this fiscal
year, and it seems to be
an attractive investment
target for the medium- tolong-term span.

The Company’s stock is a defensive, small-cap, and domestic-demandoriented growth stock. Over the past approximately 13 years, the Company’s
stock price rose by about 4.8x, largely outperforming the TOPIX by +251%(calculated with stock splits taken into account; based on the closing price onJune 10, 2022; Figure 52). This increase seems to reflect the Company’s
strong fundamentals and firm financial growth over the long term.
With the general increase in strategic IT and DX investments by Japanesecompanies, the Company is expected to be able to maintain a relatively stableprofit growth. Since the stock also has a defensive characteristic, theCompany will likely be seen as a candidate for medium- to long-term
investment.
【Figure 52】Long-Term Return of the Company’s Stock (CS) and TOPIX(change in monthly stock price over the past approx. 13 years)
700%
600%

CS％

Past Approx. 13 Years' Growth Rate (%)
CS
TPX
Relative Return
382.6
131.9
250.7

TPX%

500%

6/10/2022
CS
925
TPX
1,943.09

400%
300%
200%

End of April 2009
CS*
192
TPX
837.79!Stock-split adjusted

100%
0%
-100%
4/20094/20104/20114/20124/20134/20144/20154/20164/20174/20184/20194/20204/20214/2022

Note: CS stock price and TOPIX at the end of April 2009 set to 0% as the start point(Ref) Prepared by Alpha-Win Research Dept.

w Underperforming the
TOPIX since thebeginning of the year.

w Valuation is about
average and at fair value.

However, this year, the Company has been somewhat underperforming the
TOPIX. This is partly probably due to a fallback from its previous significant
outperformance over TOPIX starting in March 2020, when it had been
evaluated as a domestic-demand-oriented growth stock with firm financial
results despite the concerning situation over COVID-19 and its negative
impact on the financial performance of companies. Another reason may bethat the market has recently favored buying export-related stocks that would
benefit from the cheap yen, inbound-related and economically sensitive
stocks in anticipation of post-COVID-19 changes, and stocks related toenergy and resources.
The Company’s valuation was compared in terms of the major valuation
indicators with all stocks listed on the TSE Prime Market as well as its
competitors (HIMACS and Toho System Science). Based on this fiscal
year’s forecasted results, the Company’s valuation is slightly low compared
39/40

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: 6/13/2022

to the former (P/E and dividend yield), and slightly high but not expensive
compared to the latter two companies. Its valuation does not seem to be atmuch of a premium compared to its two competitors, perhaps because its
relatively stable growth potential and high liquidity are not being reflected(Figure 53).

w The most stable financial
performance and highest
liquidity among the threecompeting companies
w Should continue to watch
its growth as a defensive,
domestic-demandoriented growth stock

Despite its solid financial performance, the Company’s stock price haslargely fallen over the past approximately 12 months and has been
underperforming the TOPIX and its competitors. When defensive, small-cap,and domestic-demand-oriented growth stocks become evaluated highly inthe market, the Company’s stock price should start outperforming again.

【Figure 53】Comparison of Valuation and Liquidity
Company Name
Code
Stock Price (at 6/10 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)
Average Daily Trading Volume (million yen)

CUBE SYSTEM(CS: consolidated)

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

2335

4299

4333

925
13,413
12.52
1.74
2.81
4.95
0.78
23

1,286
15,963
12.31
1.57
3.27
4.51
0.90
20

940
13,034
12.08
1.40
3.19
3.00
0.87
7

All Stocks Listed on
TSE Prime

24 SI Companies Listed on
TSE Prime

999.74
704,887,500
13.99
1.21
Simple average: 2.35
(Weighted average: 2.45)

12,098,161
17.96
2.36
2.45
2.02
(Simple average of the 24 companies)

Market cap= (shares outstanding) x (market share price [at 6/10/2022 closing])
The companies' planned EPS and dividend values for FY 2023 were used in all P/E and dividend yield calculations. Actual BPS values of FY 2022 were used in P/B calculations.
EV/EBITDA=(market cap + interest bearing debt - cash & deposits*)/(O.P. + depreciation + intangible fixed asset amortization)*Long-term deposit and securities with high liquidity are included in the cash & deposits
P/S=market cap / sales [the companies' forecasts for FY 2023]
Average Daily Trading Volume: Estimated average trading volume per day over the past approx. six months (million yen)(Ref) Figures 53 and 54 were prepared by Alpha-Win Research Dept. based on the securities reports, financial results summaries, and stock data.

Relative to the universe of the leading 24 SI companies listed on the TSE
Prime Market (including the Company and the two companies mentioned
above; the total market cap of the 24 companies is approx. Y12.1 trillion,
their total sales are about Y8.2 trillion, total operating profit is Y803.5 billion,
and operating margin is 9.78%), the Company’s valuation seems somewhat
cheap within the SI sector (Figures 54). Going forward, we believe that if theCompany’s operating margin continuously improves and its sales grow, its
EPS and valuation (P/E, etc.) may increase sharply and its market
capitalization may also rise.
【Figure 54】Comparison of Major Stocks in the SI Sector
Code
9613
4307
4684
3626
4739
4768
9719
2327
8056
1973
4812
9749
9759
9682
4719
4674
9692
9739
4725
9600
4299
4662
2335
4333

Company Name
Market Cap.
Stock Price
Sales
O.P.
O.P. Margin Actual ROE (%)
Est. P/E Actual P/B Est. Dividend Yield
Est. Dividend
Est. EPS Actual BPS
NTT DATA
2,733,473
1,949
3,270,000
236,000
7.2%
12.2
20.1
2.2
1.1%
21.00
96.97
906.22
Nomura Research Institute2,247,363
3,680
670,000
115,000
17.2%
21.3
28.2
6.4
1.2%
44.00
130.60575.59OBIC
1,913,316
19,21098,50059,600
60.5%
15.5
36.2
5.8
1.1%
220.00530.01
3,310.49
TIS
855,203
3,405
500,000
57,000
11.4%
14.0
22.1
2.9
1.4%
47.00
154.22
1,173.60
Itochu Techno-Solutions
775,200
3,230
553,000
55,500
10.0%
13.2
19.6
2.7
2.5%
81.00
164.45
1,216.67
Otsuka Corporation
759,058
3,995
828,000
53,600
6.5%
13.9
20.7
2.7
3.1%
125.00193.301,503.94
SCSK
701,6642,245
450,000
54,000
12.0%
14.1
18.4
2.8
2.3%
52.00
121.71790.86
NS Solutions
338,096
3,695
295,000
31,000
10.5%
10.6
16.0
1.7
1.9%
70.00
230.602,149.59
BIPROGY
323,946
2,954
330,000
29,000
8.8%
17.0
14.8
2.3
2.7%
80.00
199.16
1,283.45
NEC Networks & System Int.
278,1861,863
330,000
26,000
7.9%
11.6
18.1
2.1
2.5%
46.00
102.73904.66ISID
259,100
3,975
120,000
15,000
12.5%
14.3
24.7
3.8
1.7%
66.00
161.13
1,041.24
Fujisoft
249,380
7,400
265,500
17,300
6.5%
7.5
23.9
1.8
1.5%
109.00309.384,046.94
NSD
215,190
2,391
75,00012,000
16.0%
15.7
23.2
3.6
2.3%
54.00
103.13657.57
DTS
152,616
3,110
100,000
11,400
11.4%
13.0
17.2
2.3
3.9%
120.00180.72
1,376.05
ALPHA SYSTEMS
58,9504,195
35,000
4,200
12.0%
7.5
20.3
1.5
1.7%
70.00
206.56
2,715.43
CRESCO
46,7362,032
47,500
4,750
10.0%
15.6
12.8
1.9
2.3%
46.00
159.22
1,051.97
CEC
46,662
1,241
48,000
5,000
10.4%
12.4
12.8
1.2
3.2%
40.00
97.16
1,015.48
NIPPON SYSTEMWARE
37,0562,487
45,000
5,000
11.1%
13.8
10.7
1.4
2.0%
50.00
231.55
1,779.70
CAC Holdings
29,703
1,446
45,000
3,000
6.7%
8.8
12.2
0.8
4.1%
60.00
118.05
1,742.13
I-NET
19,994
1,231
33,500
2,640
7.9%
10.1
10.7
1.1
3.9%
48.00
114.55
1,083.14
HIMACS
15,963
1,286
17,750
1,770
10.0%
13.4
12.3
1.6
3.3%
42.00
104.56819.07Focus Systems
14,859912
27,500
1,800
6.5%
8.3
11.3
0.9
3.3%
30.00
80.91
979.16
CUBE SYSTEM
13,413925
17,300
1,530
8.8%
13.8
12.5
1.7
2.8%
26.00
73.91
531.14
Toho System Science
13,034940
15,000
1,370
9.1%
12.0
12.0
1.4
3.2%
30.00
78.57
670.96
Simple Average
504,090
12.1%
12.9
18.0
2.4
2.5%
Simple Average (excl. OBIC)
442,819
10.0%
12.8
17.2
2.2
2.5%
(Note) Unit for market cap., sales, and operating profit (O.P.): million yen
Sales and operating profit are generally based on the companies' most recent forecasts
Only valid data are used in the averages
Unit for stock price, dividend, estimated EPS, and actual BPS: yen
No unit for P/E, P/B, and P/SStock price is based on the closing price on June 10, 2022

40/40
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
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P/S
0.8
3.4
19.4
1.7
1.4
0.9
1.6
1.1
1.0
0.8
2.2
0.9
2.9
1.5
1.7
1.0
1.0
0.8
0.7
0.6
0.9
0.5
0.8
0.9
2.0
1.3