Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE Prime)● SummaryIssued: 8/15/2024

Alpha-Win Capital Research Department
https://www.awincap.com/◆ Independent, mid-tier system integrator with long-term, stable growth・CUBE SYSTEM INC. (hereinafter, the “Company”) is an independent, mid-tier system integrator listed on the
TSE Prime. Its main customers include the Nomura Research Institute (NRI) and the Fujitsu Group. It develops
systems and provides services mainly for the financial, distribution, transportation, telecommunication, andmanufacturing industries.
・ Its strengths are its excellent customer base, extensive experience, high credibility, and the technology andexpertise that it has built over the years. Founded in July 1972, it has 52 years of history.
・With the exception of one fiscal year, the Company has been continuously increasing sales year over year (YoY)
for the past 26 years. During this period, the annual growth rate for net sales (simple average of the rate of increasein net sales) was +6.1% and the annual growth rate for ordinary profit (simple average) was +7.6%; it has beensteadily expanding its business and keeping its business profitable over many years. Its ordinary profit margin has
stably been around 7% (simple average of 7.4%) and the increase in sales has been contributing directly to increases
in profits, dividends, and market capitalization. In FY2024 (note that the Company’s fiscal year is March-ending,i.e., FY2024 ended in March 2024), it achieved record-high net sales and profits and also increased dividends forthe fifth fiscal year in a row.
・In April 2022, it moved from the TSE First Section to the newly established Prime Market.
・In December 2022, the Company formed a capital and business alliance with NRI, a top-level and major bluechip company of the industry. NRI has become the Company’s largest shareholder, holding 20.2% of theCompany’s voting rights. The NRI Group is also the Company’s largest customer, accounting for 52.7% of its
consolidated net sales in FY2024.
・Adding its own cash on hand to the capital raised through the capital alliance with NRI, the Company plans toinvest a total of approximately 2.2 billion yen over the four-year period from FY2023 to FY2026. It plans to invest
in strengthening and enhancing its development bases, as well as development organization and facilities, toachieve further growth and solve its bottleneck of human resources.

◆ This fiscal year’s Q1 results: Sales increased slightly and profit decreased significantly
due to upfront investments, but were in line with the Company’s plan.
Q1: Summary
・In the first quarter of FY2025 (April-June 2024; hereinafter, “Q1”), net sales were 4,411 million yen (+0.8% YoY),
operating profit was 220 million yen (-40.3% YoY), ordinary profit was 226 million yen (-38.9% YoY), and net
profit attributable to owners of parent (hereinafter, “net profit”) was 157 million yen (-32.3% YoY). Sales increasedslightly but profit decreased significantly (Figure 1 on page 2).
・It achieved its highest net sales for the first quarter. Although the Company’s Q1 plan was not disclosed, bothsales and profits seem to have been mostly in line with its plan.
・The Company has been receiving an increasing amount of orders thanks to its customers’ strong appetite for IT
investments in areas such as DX and the cloud due to their strong business performance. Meanwhile, the Company
has been making upfront investments, mainly in strengthening its development organization and facilities and in
human resources (greater personnel expenses due to an increase in the number of employees and the introductionof a new HR system), which caused profit to result in a significant decline despite a slight increase in sales.
・The gross profit margin fell by 1.3 percentage points from 21.4% in Q1 FY2024 to 20.1% in Q1 FY2025 (thesame order applies below). SG&A expenses increased by 17.1% from 568 million yen to 665 million yen, largely
exceeding the rate of sales growth. Consequently, the SG&A expense ratio increased by 2.1 percentage points from
13.0% to 15.1%. As a result, the operating profit margin declined by 3.4 percentage points from 8.5% to 5.1%.
Short Report

1/10This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

Issued: 8/15/2024【Figure 1】Summary of Results in the First Quarter
Consolidated
Category

Results for the First Quarter

Q1 FY2024

Q1 FY2025% Change

Change in Amount /Difference

Unit: million yen or %Apr-Jun 2023

Apr-Jun 2024

YoY：%

YoY: million yen or %Consolidated Sales
Sales

1. By Business Style

Operating Profit

Operating Profit
Margin (%)

Sales

2. By Industry

Operating Profit

Operating Profit
Margin (%)

Sales

3. By Business
Model

Operating Profit

Operating Profit
Margin (%)
Consolidated

Service or Industry Name

SIer Business
End-User Business
Service Providing Business
SIer Business
End-User Business
Service Providing Business
SIer Business
End-User Business
Service Providing Business

Finance
Distribution
Transportation & Telecommunication
Manufacturing (others)
Government (others)
Others (others)
Finance
Distribution
Transportation & Telecommunication
Manufacturing (others)
Government (others)
Others (others)
Finance
Distribution
Transportation & Telecommunication
Manufacturing (others)
Government (others)
Others (others)
Digital Business
SI Business
Enhancement Business
Digital Business
SI Business
Enhancement Business
Digital Business
SI Business
Enhancement Business

Gross Profit

Gross Profit Margin (%)
SG&A Expenses

SG&A Expense Ratio (%)
New RevenueRecognition
Standard

Operating Profit

Operating Profit Margin (%)
Ordinary Profit

Ordinary Profit Margin (%)
Net Profit

Net Profit Margin (%)

4,376
3,437
865
74
294
75
0
8.6
8.8
0.2
1,397
956
644
401
264
713
126
87
40
37
32
46
9.0
9.1
6.3
9.2
12.3
6.5
126
1,558
2,692
4
155
210
3.2
9.9
7.8
938
21.4
568
13.0
369
8.5
371
8.5
232
5.3

4,411
3,429
804
177
167
54
-1
4.9
6.8
-0.8
1,527
731
577
419
367
788
87
17
45
23
28
17
5.8
2.4
7.9
5.6
7.7
2.2
201
1,501
2,708
10
105
104
5.2
7.0
3.9
886
20.1
665
15.1
220
5.0
245
5.1
157
3.6

0.8
-0.2
-7.0
139.7
-43.1
-27.6
To loss

9.3
-23.5
-10.4
4.5
39.1
10.5
-30.3
-79.9
13.4
-36.5
-13.4
-61.8

59.5
-3.7
0.6
154..3
-32.0
-50.3

-5.5
17.1
-40.3
-38.9
-32.3

35
-8
-61
103
-127
-21
-1
-3.7
-2.0
-1.0
130
-225
-67
18
103
75
-39
-70
5
-14
-4
-29
-3.2
-6.7
1.6
-3.6
-4.6
-4.3
75
-57
16
6
-50
-106
2.0
-3.0
-3.9
-52
-1.3
97
2.1
-149
-3.5
-126
-3.4
-75
-1.7

% of Total Amount% of Totalof Change%%

FY2025 Full-Year
Company Plan

Change in Amount /DifferenceApr 2024 - Mar 2025

YoY: million yen or %% Change Progress in
Q1 (%)
YoY：%

100.0
-22.9
-174.3
294.3
-85.2
-14.1
-0.7

100.0
77.8
18.2
4.0
75.9
24.5
-0.5

18,80014,600
3,480
720

779
379
180
220

4.3
2.7
5.5
44.0

23.5%
23.5%
23.1%
24.6%

371.4
-642.9-191.4
51.4
294.3
214.3
-26.2
-47.0
3.4
-9.4
-2.7
-19.5

34.6
16.6
13.1
9.5
8.3
17.9
39.5
7.7
20.5
10.5
12.7
7.7

6,300
3,300
2,500

235
-356
-28

3.9
-9.8
-1.1

24.2%
22.2%
23.1%

6,700

928

16.1

23.5%

214.3
-162.9
45.7
4.0
-33.6
-71.1

4.6
34.0
61.4
4.5
47.7
47.3

800
6,800
11,200

236
129
413

41.9
1.9
3.8

25.1%
22.1%
24.2%

-

-

4.2

13.8%

3.7

14.8%

3.1

14.3%

1,600
8.5
1,650
8.8
1,100
5.9

(Reference and Notes) Q1 values are results, while the full-year values for FY2025 are the Company’s forecasts. Prepared by Alpha-Win Research Dept.
based on the financial results summary and the financial results briefing’s supplemental materials. The percent of the total amount of change is the
proportion relative to the absolute net amount of change. Note that throughout this Report, there may be differences in the figures due to processing
during calculations.

Q1: Results by Segment
・Companywide sales increased slightly by 35 million yen (+0.8% YoY) and operating profit decreased by 149
million yen (-40.3% YoY) (see Figure 1 for the following sections).
1. Results by Business Style (three categories)
・The SIer Business (system integrator, abbreviated as “SIer,” is a company that conducts system integration; it isa general term for companies that plan, design, develop, operate, and provide other solutions for the IT operation
systems of customers including companies and the government) accounted for about 80% of net sales and overall
operating profit (based on this Q1’s results; the same applies hereinafter). This business was generally firm, withsales of 3,429 million yen (-8 million yen or -0.2% YoY) thanks to the acquisition of ongoing projects and various
new projects.
・Sales of the End-User Business declined to 804 million yen (-61 million yen or -7.0% YoY) due to insufficiencyof the development organization and facilities despite strong demand.
・Only the sales of the Service Providing Business increased, albeit by a small amount (+103 million yen or+139.7%), to 177 million yen due to the expansion of consulting services in collaboration with solution vendors.
This increase offset the decline in sales in the other two businesses.
・Operating profit declined since profit margins worsened in all businesses.
2. Results by Industry (four categories / six categories)
・Sales declined for the distribution industry due to a reduction in projects for a major general merchandise store,
and also declined for the transportation & telecommunication industries due to a reduction in projects for a major
logistics company and telecommunications carriers. On the other hand, sales increased for the financial industry,
which saw an increase in projects for regional banks, online banks, and a stock exchange, and for the otherindustries, which saw an increase in projects for electricity companies and the central government.
Short Report

2/10This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

Issued: 8/15/2024

・Profit margins declined for all industry categories except for the transportation & telecommunication industries,
resulting in a decline in profit.

3. Results by Business Model (three models)・The Enhancement Business, which accounted for 61% of net sales and 47% of overall operating profit, saw sales
increase slightly by 16 million yen (+0.6% YoY) to 2,708 million yen as orders were received as planned. However,the profit margin was halved, resulting in a halving of profit (from 210 million yen to 104 million yen).
・In the SI Business, sales fell by 57 million yen (-3.7% YoY) to 1,501 million yen and operating profit declined
by 50 million yen (-32.0% YoY) to 105 million yen due to the completion of a large-scale, cloud solution project.
・In the Digital Business, sales increased by 75 million yen (+59.5% YoY) to 201 million yen and operating profit
rose by 6 million yen (+154.3% YoY) to 10 million yen due to the Company’s participation in an IoT infrastructurebuilding project in the energy industry. Although the sales growth rate was high, its contribution in amount waslimited due to the small scale of business (4.6% of net sales).
Q1: Factors that Increased or Decreased Profit
・The factors that increased or decreased operating profit in the first quarter of the current fiscal year are as shownin Figure 2.
・Profit increased due to the expansion of projects in the Digital and Enhancement businesses (+26 million yen YoY
to profit). On the other hand, there was a large increase in costs due to the personnel expenses accompanying the
introduction of a new HR system (-78 million yen YoY to profit), expansion of the development organization andfacilities (strengthened hiring and expansion of bases; -37 million yen YoY to profit), and upfront investments inoverseas subsidiaries (increased training and hiring; -35 million yen YoY to profit). As a result, operating profit
declined by 149 million yen YoY.
・Investments to strengthen development bases, as well as development organization and facilities, are being madeas planned, with no major delays or leftover budget in Q1.
【Figure 2】Factors that Increased or Decreased Operating Profit in the First Quarter(Unit of million yen YoY; Factor that Increased Profit / Factor that Decreased Profit)(Million yen)

369

26

(78)
(37)

Increase in profit
due to expansionof projects

June
2023

Increase inpersonnel
expenses due tothe introductionof a new HR
systemExpansion ofdevelopment
organization andfacilities(35)

Upfront
investments inoverseassubsidiaries, etc.

(25)

220

Investments in
R&D andimprovement ofengagement-149 million yen YoY

June
2024

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

Progress in the First Quarter and Seasonality of Quarterly Results
・Progress during Q1 in terms of achieving the Company’s full-year forecast was 23.5% for net sales (24.3% in the
Q1 of the previous fiscal year) and 13.8% for operating profit (similarly, previously 22.8%).
・As reference, the simple average of progress in Q1 during the past 11 years (including the previous fiscal year)
was 23.1% for net sales and 17.0% for operating profit. The progress in this fiscal year’s Q1 somewhat exceeded
this average for sales, but it fell short of the average for operating profit.
・The Company’s business performance and profit margins tend to fluctuate on a quarterly basis. The fourth quarter
Short Report

3/10This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

Issued: 8/15/2024(Q4 or Jan-Mar) tends to contribute the most to the full-year results (past 11 years’ average: 27.3% of full-year net
sales and 32.8% of full-year operating profit), followed by the second quarter (Q2 or Jul-Sep; average of 25.8%
and 26.9%, respectively) and the third quarter (Q3 or Oct-Dec; average of 23.8% and 23.3%, respectively). Q1 hasgenerally been the smallest in contribution (Figures 3-5).

【Figure 3】Quarterly Change in Sales(Unit: million yen)

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

5,000

600

4,500
4,000

500

3,500

400

3,000
2,500

300

2,000

200

1,500
1,000

100

500

0

0

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025
Q1

Q2

Q3

Q1

Q4

Q2

Q3

Q4

(Ref) Figures 3 to 6 were prepared by Alpha-Win Research Dept. based on the financial results briefing’s supplemental materials.
(Note) Values for this fiscal year’s Q2 have been calculated based on the Company’s forecast.

【Figure 5】Quarterly Change in Operating Profit
Margin (Unit: %)【Figure 6】Change in Orders Received, Order Backlog, andNet Sales in the First Quarter (Unit: million yen)

14.0%

5,000

12.0%

4,500
4,000

10.0%

3,500

8.0%

3,000

6.0%

2,500
2,000

4.0%

1,500

2.0%

1,000

0.0%
FY
20
14
FY
20
15
FY
20
16
FY
20
17
FY
20
18
FY
20
19
FY
20
20
FY
20
21
FY
20
22
FY
20
23
FY
20
24
FY
20
25

500

Q1

Q2

Q3

Q4

FY

0
Q1 FY2019 Q1 FY2020 Q1 FY2021 Q1 FY2022 Q1 FY2023 Q1 FY2024 Q1 FY2025

Orders Received

Net Sales

Order Backlog

Orders Received
・The overall amount of orders received increased has steadily from 4,633 million yen in the same period of theprevious fiscal year to 4,789 million yen (+156 million yen or +3.4% YoY), and the order backlog has increased
from 4,828 million yen to 5,025 million yen (+197 million yen or +4.1% YoY) (Figure 6).

s

Orders Received: By Industry (four categories)
・Regarding the amount of orders received and the order backlog in Q1 by industry, like sales, the decline in thebusiness with the transportation & telecommunication industries was offset mainly by strong performance in thebusiness with the financial and other industries (especially the government).
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4/10

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

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

Issued: 8/15/2024

Orders Received: By Business Model (three models)・The amount of orders received and the order backlog in the Enhancement Business have remained flat, while
they have increased for the Digital Business (+105 million yen or +91.2% YoY and +85 million yen or +53.2%
YoY, respectively) and the SI Business (Lift & Shift; +61 million yen or +3.2% YoY and +88 million yen or+5.1% YoY, respectively).
Orders Received: By Business Style (three models)・The amount of orders received increased for all three businesses. The order backlog increased in both the SIerand Service Providing businesses, although it declined slightly in the End User Business. While small in scale, theService Providing Business had a high rate of increase regarding the amount of orders received and the orderbacklog.

Number of Employees, Productivity, and Profitability
・In the Company’s main business model, sales growth is generally directly correlated with the number of
employees. Its capacity in terms of human resources has been expanding, with the total number of employees inJapan and overseas increasing steadily (Figure 7). However, while the Company has worked on improving thework environment and compensation, as well as strengthening engagement and mid-career hiring, the demand forsystems has continued to grow and the Company is still short of employees.
・Quarterly net sales and operating profit per employee in Japan, which are its key management indicators, hadbeen improving. However, this fiscal year, they have decreased temporarily due to greater investment in humanresources.

【Figure 7】Number of Employees and Change in Net Sales and Operating Profit Per Capita
Total Number of Employees in Japan and Overseas% Change

Number of
Persons

Quarterly Net Sales Per Employee in Japan

Change in Number:% Change: YoY Thousand Yen
YoYChange inAmount: YoY% Change:
YoY

-

-

Quarterly Operating Profit Per Employee in Japan
Thousand Yen
339

Change in Amount:
YoY% Change:
YoY

-

-

End of June 2020

799

33

4.3

4,737

End of June 2021

829

30

3.8

5,402

665

14.0

513

174

51.3

End of June 2022

882

53

6.4

5,082

-320

-5.9

355

-158

-30.8

End of June 2023

904

22

2.5

5,744

662

13.0

485

130

36.6

End of June 2024

951

47

5.2

5,479

-265

-4.6

274

-211

-43.5

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

Balance Sheet・As of the end of this Q1, there has been no significant change in the balance sheet. The Company has ample
liquidity on hand, with cash & deposits of 6.4 billion yen (4.1 months’ worth of the average monthly sales
forecasted for this fiscal year; essentially debtless). With a current ratio of 443.9% and an equity ratio of 76.2%,
its financial standing is firm. Effective use of its surplus capital for growth, including the improvement ofshareholder returns, M&As, business alliances, investments, and loans, will continue to be a key point.

◆No change to the first-half or full-year forecasts from the beginning of the fiscal year
・The Company has not changed its first-half or full-year forecasts since their announcement at the beginning of
the fiscal year (Figure 8 on page 6).
This Fiscal Year (first half): Company Forecast
・For the first half, the Company plans for net sales of 8,800 million yen (-215 million yen or -2.4% YoY), operating
profit of 600 million yen (-194 million yen or -24.4% YoY), and net profit of 440 million yen (-61 million yen or-12.2% YoY). It plans for declines in both sales and profits. It expects to achieve the second highest level of net
sales for the first half, following the record high of the previous fiscal year, and also high levels of profit (the third
highest in its history) despite the profit decline due to increased costs.
Short Report

5/10This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

Issued: 8/15/2024

This Fiscal Year (full year): Company Forecast
・The Company has maintained its full-year forecasts of 18,800 million yen in net sales (+4.3% YoY), 1,600 million
yen in operating profit (+4.2% YoY), and 1,100 million yen in net profit (+3.1% YoY), which were announced at
the beginning of the fiscal year. Like the previous fiscal year, it expects sales and profits to increase again in thecurrent fiscal year. It also plans to achieve record-high net sales and profits for the consecutive fiscal year.
・It plans to raise its dividend per share by 5 yen, from 35 yen in the previous fiscal year (15 yen for the first halfand 20 yen for the end of the fiscal year) to 40 yen (20 yen for the first half and 20 yen for the end of the fiscal
year). The consolidated dividend payout ratio is expected to be 55.1%, exceeding the target of 50%.
・The Company has been working on expanding its development organization and facilities, investing in humanresources, and strengthening its prioritized approach toward customers who are actively pursuing strategic IT
investments (strengthening sales activities toward its major customers, expanding the existing businesses, anddeveloping new domains or areas of business). Through these measures, the Company plans to continue to improveits capacity and profitability and increase shareholder returns.

This Fiscal Year (full year): Alpha-Win’s Forecast
・Alpha-Win Research Department forecasts the same amounts (of net sales, profits, and dividends) as the Company
for this fiscal year’s financial results.
・The sales growth rate of +0.8% in Q1 is somewhat above the -2.4% sales decline rate that the Company hasplanned for the first half. Although the rate of decrease in profit is worse than the first-half plan, the Q1 profit
results seem to be generally in line with the plan.
・For this second half (full-year plan minus first-half plan), the Company expects net sales of 10,000 million yen(+11.0% YoY), operating profit of 1,000 million yen (+34.8% YoY), operating profit margin of 10%, and net profitof 660 million yen (+16.6% YoY). The Company’s plan for this second half’s sales growth rate and operating
profit margin appears to be somewhat ambitious compared to the levels achieved up through the previous fiscal
year and the rate of increase in the order backlog.
・Given factors such as the shift to a stronger yen, rising prices, increasing domestic interest rates, and global
uncertainty, it is expected that some of the Company’s corporate customers with deteriorating performance may
start to restrain their IT investments, leading to potential changes in their IT investment strategies.
・However, customers’ enthusiasm for strategic IT investments remains strong, and there are no signs of changes
in the Company’s current orders, business negotiations, or price per contract, which continue to be solid.
・In addition to the positive effects of the alliance with NRI, the Company has succeeded in receiving orders forstrategic projects in well-performing industries and projects in newly developed areas. Also, since it has been
making progress with the shift to high-profit projects and the streamlining of resources, the impact of deteriorationin the environment is expected to be relatively limited. Therefore, we evaluate that with proper cost control in Q2
and the second half, the downside risks are limited regarding this fiscal year’s full-year plan for profit.

【Figure 8】This Fiscal Year’s Financial Performance (Q1 results and forecasts for Q2, the first

half, and the second half)
Unit: million yen

Last Fiscal Year's
Results
FY2024

Net Sales

18,021This Fiscal Year's
Company Forecast
FY202518,800

FY2024First-Half
Results

FY2025First-Half
Plan

9,015

8,800

YoY
Change(%)-2.4%

FY2024
Second-Half
Results

FY2025
SecondHalf Plan

9,006

10,000

YoY
Change
(%)
11.0%

Q1
FY2024
Results
4,376

Q2
FY2024
Results
4,639

Q1
FY2025Results
4,411

Gross Profit

3,922

1,960

1,962

938

1,022

886

Gross Profit Mrgin

21.8%

21.7%

21.8%

21.4%

22.0%

20.1%

1,166

1,220

Q1
Q2
FY2025 FY2025
Forecasts YoY ％
4,389

0.8

Q2
FY2025
YoY %
-5.4

-5.5

Q1
Q2
FY2025 FY2025
YoY Diff. YoY Diff.
35

-250

-52
-1.3%

SG&A Expenses

2,386

568

598

665

SG&A Expense Ratio

13.2%

13.0%

12.9%

15.1%

Operating Profit

1,536

1,600

794

600

-24.4%

742

1,000

7.7%

369

425

220

380

Operating Margin

8.5%

8.5%

8.8%

6.8%

-2.0%

8.2%

10.0%

1.8%

8.5%

9.2%

5.0%

8.7%

Ordinary Profit

1,590

1,650

788

650

-17.6%

802

1,000

24.7%

371

417

226

424

-38.9

1.7

-145

7

Net Profit

1,067

1,100

501

440

-12.2%

566

660

16.6%

232

269

157

283

-32.3

5.2

-75

14

12.9%

13.5%

17.1

97

16.1
-40.3

2.1%
-10.6

-149

-45

-3.5%

-0.5%

(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s forecasts.
(Note) Q2 FY2025 has been calculated by first-half company plan minus Q1 result.

Short Report

6/10

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

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

Issued: 8/15/2024

Medium-Term Financial Outlook: The Company’s Medium-Term Plan and Alpha-Win’s Forecast
・In the Second Medium-Term Management Plan (V2026), which is positioned as the Company’s “second founding,”
it plans to improve profitability and achieve net sales of 23 billion yen and operating profit of 2.41 billion yen in
FY2027, the final year of the plan (see our research report issued in June 2024 for details).
・We have not changed our forecasts of the Company’s medium-term financial performance since our previous
report (Figure 9).
・IT investments by the Company’s users (companies) are expected to keep increasing as they develop new businessmodels, strengthen their competitive edge, work on solving labor shortages, streamline and speed up operations,work on DX, and shift to the cloud. Therefore, the Company’s growth potential is large.
・With strong IT demand, the Company is expected to achieve top-line growth by utilizing its abundant cash on
hand to hire more employees and expand its development bases. Since the high level of investment in FY2024 andFY2025 will be halved in FY2026, the rate of cost increase is expected to slow down and the investments results
are expected to contribute to profits.
・We forecast that the Company will be able to maintain a stable increase in sales, profits, and dividends over the
medium term through the expansion of the Digital and the SI businesses, the effect of the alliance with NRI, thedevelopment of new customers and new areas of business, and various measures to improve productivity.

【Figure 9】Medium-Term Financial Forecast
Unit: million yen or %Net Sales
Digital Business
SI Business
Enhancement Business
Gross Profit
Gross Profit Margin
SG&A Expenses(Ratio to sales)

Operating Profit(Ratio to sales)

Ordinary Profit(Ratio to sales)

Net Profit(Ratio to sales)

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

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

FY2024 Results

FY2025 CE

FY2025 E

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

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

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

FY2026 Medium-Term Plan
20,6001,950
9.5%

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

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

2,410
10.5%

6.3%

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

5.9%

5.9%

5.9%

10.4%
-0.1%
12.7%
5.8%

4.3%
2.7%
25.7%
4.2%

4.3%
2.2%
21.5%
4.2%

7.5%

3.7%

3.8%

15.2%

15.8%

7.8%

3.1%

3.1%

13.6%

16.0%

9.6%

21.9%

6.4%
0.1%
1.7%
15.6%

6.7%
11.6%

23.6%

8.5%
0.4%
6.8%
16.2%

(Ref) Prepared by Alpha-Win Research Dept. (Notes) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate.

◆ Share price and characteristics: Significantly outperforming the TOPIX over the longterm as a stable growth stock centered on domestic demand. Shares do not seem
overvalued, and dividend yield is high.
Performance・Over the past approximately 15 years, the Company’s share price has increased by about 5.1x thanks to its strong
business performance, significantly outperforming the TOPIX (by about +213%).
・The Company is a defensive, domestic-demand-oriented stock with low volatility in past business performance.
The coefficient of variation (standard deviation divided by the average) for the YoY rate of change in net sales andordinary profit over the past 20 years is about half that of its two competitors* listed on the TSE Prime Market(HIMACS* with securities code 4299 and Toho System Science* with securities code 4333), indicating that theCompany’s business performance is relatively stable.
・However, in the recently volatile stock market, the Company has underperformed the TOPIX over the 12 months(Figure C on page 10). This may be due to the Company’s high historical beta (weekly beta for the past five years:
1.14), the fact that it is a small-cap stock with low liquidity, and the fact that the Company’s expected full-year
profit growth rate and Q1’s progress toward achieving the full-year profit plan have been low.
Short Report

7/10

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

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

Issued: 8/15/2024

・Similarly, a comparison of the performance over the past 12 months with its two competitors* shows that its
performance has been about the same level as HIMACS. On the other hand, it has underperformed Toho System
Science, which is highly dependent on the financial industry such as banks and insurance companies that benefit
from lower interest rates.
・Regarding the rates of change (YoY) in the operating profit and net profit in Q1, HIMACS and Toho System
Science posted single-digit growth rates of +5.7% and +5.7% (HIMACS) and +1.2% and +1.1% (Toho System
Science), respectively, while the Company posted sharp declines of -40.3% and -32.3% due to upfront investments.
In contrast, the average net profit of about 1,000 companies listed on the TSE Prime Market in Q1 (April-June)
was +10%, partly due to the weaker yen.

Valuation
・Currently, the average valuation of all companies listed on the TSE Prime Market is as follows: forecasted P/Eratio of 14.38, actual P/B ratio of 1.21, and forecasted dividend yield (simple average) of 2.56% (based on theclosing price on August 9, 2024).
・Compared to these averages of the TSE Prime, the Company’s valuation is somewhat low in terms of its P/E ratioof 13.47, while it is high in terms of its P/B ratio of 1.49. Although the growth rate of each profit for this fiscal year
is around +3% to +4%, which might seem modest, this is due to upfront investments. Considering the mediumterm growth potential and the relatively high forecasted dividend yield for this fiscal year (4.09%), the stock
appears somewhat undervalued.
・Compared to its two competitors mentioned above*, its valuation is in the middle range (the second highest among
the three companies) in terms of the major valuation measures (P/E, P/B, and EV/EBITDA) excluding dividend
yield (which is the highest) (Figure 10).
【Figure 10】Comparison of Valuation with Competitors
Company Name
Code
Stock Price (at 8/9 closing)Market Capitalization (million yen)
P/E (price-to-earnings ratio)
P/B (price-to-book ratio)
Dividend Yield (%)
EV/EBITDA
P/S (price-to-sales ratio)
Weekly Beta (β) against TOPIX for the Past 5 Years

CUBE SYSTEM(CS: consolidated)

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

2335 P

4299 S

4333

977
15,388
13.47
1.49
4.09
5.34
0.82
1.14

1,279
15,876
12.14
1.36
3.44
3.50
0.85
0.57

Refernce:
All TSE Prime Stocks
Nomura Research Institute(average)(NRI: consolidated)

4307
1,611
33,507
24.80
3.18
2.48
13.60
1.88
0.59

4,606
2,675,151
30.13
6.64
1.26
15.44
3.43
0.82

1,278.03
14.38
1.21
2.56
-

(Ref) Prepared by Alpha-Win Research Dept. based on each company’s financial results summary and stock price data.
(Notes) Market capitalization = shares outstanding x stock price (at 8/9/2024 closing)
EPS values used in P/E calculations are the companies’ forecasts for FY2025.
BPS values used in P/B calculations reflect the companies’ results for this fiscal year’s Q1.
EV/EBITDA = (market cap + interest bearing debt - cash & deposits) / (operating profit + depreciation + intangible fixed asset amortization)
Interest bearing debt and cash & deposits reflect this fiscal year’s Q1 results.
Operating profit is the companies’ full-year forecasts for this fiscal year.
Depreciation and intangible fixed asset amortization are last fiscal year’s results.
P/S = market cap / sales (the companies’ forecast for FY2025)
P: TSE Prime Market. S: TSE Standard Market.

Stock Price Outlook
・The Company’s stock price will likely be impacted by the progress of its business performance (profit levels of
the first half and the full fiscal year, order trends, and the rate of increase or decrease in profit planned for the next
fiscal year) and the changes in stock return (whether there will be a dividend hike, a share buyback, or a stock split).
・Over the medium term, the key points are the changes in the top line (sales growth rate, hiring and retaining of
employees, and the effect of the alliance with NRI) and the profit margins (gross profit margin, operating profit
margin, and SG&A expense ratio). We should also keep note of the contribution of the SI and the Digital businesses
to earnings, as well as the business performance and IT investment trends of the Japanese companies that are its
end users (the environment surrounding orders received by the Company; changes in the volume of orders received
and the price per contract).
Short Report

8/10

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

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

Issued: 8/15/2024

・We believe that if the Company can stably maintain a profit growth rate that is close to a double digit, then its
share price may rise due to adjustment for the level of the P/E ratio and the increase in EPS.
・From a medium- to long-term perspective, we believe that the Company will be a candidate for investment as adefensive and stable growth stock centered on domestic demand.
【 2335 CUBE SYSTEM

Sector: Information & Communication 】 Figure A
Net Sales

YoY

Operating Profit

YoY

Ordinary Profit

YoY

Net Profit

YoY

EPS

BPS

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

(%)

(Y)

(Y)

(Y)

A
A
A
A
A
CE

14,70814,78816,09916,32518,02118,800

2.7
0.5
8.9
1.4
10.4
4.3

959
1,174
1,417
1,452
1,536
1,600

2025

E

18,8004.3

2026

Medium-Term Plan

20,600

9.6

2026

E

20,0002027

Medium-Term Plan

23,0002027

E21,700

2022

Q1

3,987

2023

Q1

3,892

2024

Q1

2025

FY

2020
2021
2022
2023
2024
2025

4.1
22.5
20.7
2.4
5.8
4.2

976
1,295
1,432
1,480
1,590
1,650

1.7
32.7
10.6
3.3
7.5
3.7

525
844
944
989
1,067
1,100

-11.9
60.7
11.9
4.8
7.8
3.1

38.69
62.11
69.82
70.35
70.39
72.55

411.96476.52531.14634.29668.41
Not disclosed

18.0
20.0
23.0
50.0
35.0
40.0

1,600

4.2

1,650

3.7

1,100

3.1

72.55

705.91

40.0

1,950

21.9

6.4

1,850

15.6

1,900

15.2

1,250

13.6

82.45

748.35

43.0

11.7

2,410

23.6

8.5

2,150

16.2

2,200

15.8

1,450

16.0

95.64

800.99

50.0

18.2

378

56.5

390

57.1

262

59.0

19.35

487.51

0.0

-2.4

272

-28.1

271

-30.5

173

-34.0

12.84

543.58

0.0

4,376

12.4

369

35.9

371

37.0

232

34.2

15.36

622.93

0.0

Q1

4,411

0.8

220

-40.3

226

-38.9

157

-32.3

10.47

657.73

0.0

2022

Q2

4,073

9.8

368

18.7

362

2.0

239

1.7

17.65

8.0

2023

Q2

4,000

-1.8

326

-11.4

323

-10.8

215

-10.0

15.89

23.0

2024

Q2

4,639

16.0

425

30.4

417

29.1

269

25.1

17.71

15.0

2025

Q2 CE

4,389

-5.4

380

-10.6

424

1.7

283

5.2

18.55

20.0

2022

H1

8,060

13.8

746

35.1

752

24.6

501

25.3

37.00

8.0

2023

H1

7,892

-2.1

598

-19.9

594

-21.0

388

-22.6

28.73

23.0

2024

H1

9,015

14.2

794

32.7

788

32.6

501

29.1

33.07

15.0

2025

H1 CE

8,800

-2.4

600

-24.4

650

-17.6

440

-12.2

29.02

20.0

2022

H2

8,039

-13.0

671

-25.4

680

-22.5

443

-24.8

32.82

15.0

2023

H2

8,433

4.9

854

27.3

886

30.3

601

35.7

41.62

27.0

2024

H2

9,006

6.8

742

-13.1

802

-9.5

566

-5.8

37.32

20.0

2025

H2 CE

10,000

11.0

1,000

34.8

1,000

24.7

660

16.6

43.53

20.0

(Notes) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate. Q1: Apr-June. Q2: July-Sept.
H1 (first half): Apr-Sept. H2 (second half): Oct-Mar.

【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】 Figure B
Item
Stock Price (Y)8/9/2024

Item

P/E

P/B

Dividend Yield

Dividend Payout Ratio

Last FY's Results

13.9

1.5

3.6%

49.7%

Shares Outstanding (thou.)

15,750

Forecast for This FY

13.5

1.4

4.1%

55.1%

Market Capitalizatoin (million yen)

15,388

Forecast for Next FY

11.8

1.3

4.4%

52.2%

Forecast for the FY After the Next

10.2

1.2

5.1%

52.3%

5.4%

Last FY's ROE

10.8%

977

Dilutive Shares (thou.)0

Equity Ratio for This FY's Q1

76.2

Last FY's DOE(Note) Estimates for this fiscal year and the following two fiscal years have been made by Alpha-Win Research Department.

Short Report

9/10This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting fromthe use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

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

Issued: 8/15/2024【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400

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

Stock Price (left axis)
Price Relative to TOPIX(right axis)【Performance】
PeriodReturn vs. TOPIX
1 month-17.4%-6.3%
3 months-11.9%-1.5%
6 months-11.3%-4.2%
12 months-15.9%-22.4%

Y)

/Y

M

09
/1
6
03
/1
7
09
/1
7
03
/1
8
09
/1
8
03
/1
9
09
/1
9
03
/2
0
09
/2
0
03
/2
1
09
/2
1
03
/2
2
09
/2
2
03
/2
3
09
/2
3
03
/2
(M 4

(Notes)・Reflects stock and index prices throughthe closing price on 8/9/2024.
・“Vs. TOPIX” is the relative value after
subtracting the TOPIX’s performance fromthe performance of the Company’s stock.
・Performance for the 1-month period is thecomparison between the closing price on
the last day of July and the closing price on
August 9 (similar for the other periods).
(Note) From the first week of September 2016 to the second week of August 2024 (through the closing price on August 9)＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

Disclaimer
This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital
Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not 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 (https://www.awincap.com/). We also
do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate,or fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied, cited, 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.
SV2024-0820-2100

Short Report

10/10This Alpha-Win Company Research Report (hereinafter, “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter, “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
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