Alpha-Win Company Research Report
CUBE SYSTEM INC.
(2335 TSE First Section)● SummaryIssued: 11/16/2021

Alpha-Win Capital Inc. Research Department
http://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 theFirst Section of the TSE. Its main customers are the following four corporate groups: Nomura Research Institute(NRI: largest customer, contributing to more than half of the Company’s sales), Fujitsu, Aeon, and Mizuho. It
develops systems and provides services mainly for the finance, distribution, transportation, andtelecommunications industries. Its strengths are its excellent customer base, extensive experience, high credibility,
and the skill and expertise that it has built up over the years. Founded in 1972, it has about 49 years of history.
・With the exception of one fiscal year, the Company has been continuously increasing sales YoY for the past 20
years. During this period, the annual sales growth rate (simple average of the rate of increase in sales) was +6.0%
and the annual recurring profit growth rate (simple average) was +7.1%; it has been steadily expanding its businessover many years and has always stayed in the black. Its recurring margin has stably been at around 7%, and theincrease in sales has been contributing directly to increases in profit, dividend, and market capitalization. In FY
2021 (note that the Company’s fiscal year is March-ending, e.g., FY 2021 ended in March 2021), it achieved
record-high sales and profit.
・It has developed a stable and sustainable business foundation through its proposal- and contract-based businesses,
and has been focused on developing the SI Business (details described later) and the Digitalization Business basedon the Enhancement Business.
・Since the Company satisfies the criteria of the Prime Market that will be newly established, it is expected to movefrom TSE First Section to the Prime Market.

◆ This fiscal year’s H1 results: sales grew by +13.8% YoY and operating profit grewsignificantly by +35.1% YoY thanks to the business structure/model reform. H1 record
highs achieved for sales and each profit.
H1 Summary
・In the first half of FY 2022 (April-September 2021: hereinafter, “H1”), sales were Y8,060 million (+13.8% YoY),
operating profit was Y746 million (+35.1% YoY), recurring profit was Y752 million (+24.6% YoY), and net profit
attributable to owners of the parent (hereinafter, “net profit”) was Y501 million (+25.3% YoY). It achieved
significant increases in sales and profit (see Figure 1 on page 2 and Figures 2-4 on page 3).
・Compared to the Company's initial plan for H1, sales were Y160 million greater (+2.0%) and operating profit was
Y46 million greater (+6.6%).
・Although the Company had made a transition to the new revenue-recognition standard starting this fiscal year, its
impact has stayed small (compared to the previous standard, sales were decreased by Y89 million and gross,operating, and recurring profits were each decreased by Y14 million; only impacted Q1 or April-June and no
impact on Q2 or July-September), and the Company achieved record-high H1 sales and profits.
・Amidst the COVID-19 crisis, the Company has been working on improving the efficiency of its sales activity bystrengthening sales activities toward its main clients, as well as responding to the polarization of its customers’ IT
investment trends by prioritizing its approach toward customers who are actively working on strategic IT
investments and developing new domains and areas of business. As a result, orders received in H1 reached Y7,937
million (+14.0% YoY) and the order backlog as of the end of September 2021was Y4,181 million (+6.9% YoY),
both showing steady growth.
・Profit grew significantly in H1 due to the progress made in business structure/model reform, especially with thesales growth mainly owing to the SI Business (Lift & Shift: moving the legacy environment to the cloudenvironment in “Lift,” and stepwise system reconstruction while optimizing for the cloud environment in “Shift”),
Short Report
1/9This 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 First Section)

Issued: 11/16/2021

as well as profit growth due to the shift to high-profit projects, optimization of resources, and other positive effectsof the reform.
・The gross margin increased from 19.1% and 18.4% in the previous fiscal year’s Q1 and Q2 (18.7% in H1) to
21.6% and 21.0% in this fiscal year’s Q1 and Q2 (21.3% in H1). On the other hand, SG&A expenses in H1
increased by 25.7% from Y773 million in the previous fiscal year’s H1 to Y971 million in this fiscal year’s H1,and the SG&A expenses ratio increased from 10.9% to 12.0%. In sum, the operating margin increased by 1.5
points from 7.8% to 9.3%.
H1 Results by Segment
・Overall, in H1, sales grew by Y977 million YoY and operating profit increased by Y194 million YoY (see Figure
1 for the sections below).
Results by Service Category (three categories)
・In the System Integration Service (SIS), which is its core business, sales grew largely by Y1,079 million (+21.6%
YoY) to Y6,067 million. The increase in projects for transport companies in the transportation industry andprojects for general merchandise stores and co-ops in the distribution industry had contributed to this growth. As
a result of this growth, operating profit increased significantly by Y211 million (+55.8% YoY) to Y589 million(note that starting this fiscal year, each segment’s profit is disclosed in terms of operating profit instead of grossprofit).
・Sales of the System Outsourcing Service (SOS) decreased by Y155 million (-14.2% YoY) to Y936 million due
to the completion of projects for data centers, but operating profit increased by Y10 million (+17.7% YoY) to Y68
million.
・In the Professional Service (ProS), sales increased by Y54 million (+5.3% YoY) to Y1,056 million due to theincrease in system construction projects for the telecommunications industry, despite the decrease in consulting
projects and system construction projects for banks set up by retailer. However, due to the decline in the profit
margin, operating profit decreased by Y27 million (-23.5% YoY) to Y88 million.
【Figure 1】Summary of Results for the First Half (Q1 and Q2)
Q1 & Q2 Results

Q1 FY 2021

Q1 FY 2022

Change inAmount / Diff.

Change (%)

Q2 FY 2021

Q2 FY 2022

Change inAmount / Diff.

Change (%)

H1 FY 2021

H1 FY 2022

Change inAmount / Diff.

Change (%)% of Total
Change% of Total

Unit: million yen

Apr-Jun 2020

Apr-Jun 2021

YoY: million yen/%

YoY: %

Jul-Sep 2020

Jul-Sep 2021

YoY: million yen/%

YoY: %

Apr-Sep 2020

Apr-Sep 2021

YoY: million yen/%

YoY: %%%

Consolidated
Category

Consolidated Sales
Sales

By Service Category

Operating Profit

Operating Margin
(%)

Sales

By Industry

Operating Profit

Operating Margin
(%)

Sales

By Business Model

Operating Profit

Operating Margin(%)
Consolidated

Service/Category Name

System Integration: SIS
System Outsourcing: SOS
Professional: ProS
System Integration: SIS
System Outsourcing: SOS
Professional: ProS
System Integration: SIS
System Outsourcing: SOS
Professional: ProS

Finance
Distribution
Telecommunications/Transportation
Manufacturing (other)Government (other)
Other (other)
Finance
Distribution
Telecommunications/Transportation
Manufacturing (other)Government (other)
Other (other)
Finance
Distribution
Telecommunications/Transportation
Manufacturing (other)Government (other)
Other (other)
Digitalization Business
SI Business
Enhancement Business
Digitalization Business
SI Business
Enhancement Business
Digitalization Business
SI Business
Enhancement Business

Gross Profit

Gross Margin (%)
SG&A Expenses

SG&A Expenses Ratio (%)
Operating Profit

Operating Margin (%)
Recurring Profit

Recurring Margin (%)
Net Profit

Net Margin (%)

3,373
2,311
506
555
158
21
61
6.9
4.3
11.1
989
675
592
329
182
603
72
35
84
16
5
27
7.3
5.2
14.3
5.0
3.1
4.6
19
509
2,843
-5
33
213
-26.3
6.5
7.5
643
19.1
400
11.9
242
7.2
248
7.4
165
4.9

3,987
2,985
493
508
311
37
30
10.4
7.5
6.1
934
815
1,062
318
244
610
75
84
148
20
24
24
8.1
10.4
14.0
6.5
10.2
4.0
64
1,082
2,840
0
125
253
0.0
11.6
8.9
863
21.6
483
12.1
379
9.5
390
9.8
264
6.6

614
673
-12
-47
153
15
-30
3.5
3.2
-5.0
-55
140
470
-11
62
7
3
49
63
4
19
-3
0.8
5.2
-0.3
1.5
7.1
-0.6
45
573
-3
5
92
40
26.3
5.1
1.4
220
2.5
83
0.2
137
2.3
142
2.4
98
1.7

18.2
29.1
-2.4
-8.5
95.9
69.9
-50.0

-5.6
20.7
79.4
-3.3
34.4
1.2
3.9
142.3
75.4
25.0
339.0
-11.3

231.4
112.4
-0.1
95.9
69.9
18.9

34.2
20.8
56.5
57.1
59.0

3,710
2,677
585
447
220
37
55
8.2
6.3
12.3
1,073
729
673
367
204
664
90
55
77
37
16
37
8.4
7.5
11.4
10.1
7.8
5.6
13
656
3,043
-4
59
256
-30.8
9.0
8.4
683
18.4
373
10.1
310
8.4
355
9.6
235
6.3

4,073
3,082
443
548
436
53
118
14.1
12.0
21.5
927
881
1,104
339
232
591
67
79
137
14
16
56
7.2
9.0
12.4
4.1
6.9
9.5
75
1,207
2,792
1
169
198
1.3
14.0
7
856
21.0
488
12.0
367
9.0
362
8.9
238
5.8

364
405
-142
101
216
16
63
5.9
5.6
9.2
-146
152
431
-28
28
-73
-23
24
60
-23
0
19
-1.2
1.4
1.0
-6.0
-0.9
3.9
62
551
-251
5
110
-58
32.1
5.0
-1.3
173
2.6
115
1.9
57
0.7
8
-0.7
3
-0.5

9.8
15.1
-24.3
22.6
98.2
43.2
114.5

-13.6
20.9
64.0
-7.6
13.7
-11.0
-25.6
43.6
77.9
-62.2
0.0
51.4

476.9
84.0
-8.2
186.4
-22.7

25.3
30.9
18.5
2.2
1.5

7,083
4,988
1,091
1,002
378
58
116
7.6
5.3
11.6
2,062
1,404
1,265
696
386
1,267
162
90
161
53
21
64
7.9
6.4
12.8
7.7
5.4
5.0
32
1,165
5,886
-9
92
469
-28.1
7.9
8.0
1,326
18.7
773
10.9
552
7.8
603
8.5
400
5.7

8,060
6,067
936
1,056
589
68
88
9.7
7.3
8.4
1,861
1,696
2,166
657
476
1,201
142
163
285
34
40
80
7.7
9.6
13.2
5.2
8.6
6.7
139
2,289
5,632
1
294
451
0.7
12.8
8.0
1,718
21.3
971
12.1
746
9.3
752
9.3
502
6.2

977
1,079
-155
54
211
10
-28
2.1
2.0
-3.2
-201
292
901
-39
90
-66
-20
73
124
-19
19
16
-0.2
3.2
0.4
-2.5
3.2
1.7
107
1,124
-254
10
202
-18
28.8
4.9
0.0
392
2.6
198
1.1
194
1.5
149
0.8
102
0.5

13.8
21.6
-14.2
5.3
55.8
17.7
-23.5

100.0
110.4
-15.9
5.5
108.8
5.2
-14.4

100.0
75.3
11.6
13.1
79.0
9.1
11.8

-9.7
20.8
71.2
-5.6
23.3
-5.2
-12.2
80.7
76.8
-35.4
93.9
25.4

-20.6
29.9
92.2
-4.0
9.2
-6.8
-10.3
37.6
63.9
-9.8
9.8
8.2

55.2
50.3
64.2
19.5
14.1
35.6
19.0
21.8
38.2
4.6
5.4
10.7

332.4
96.4
-4.3
To profit
220
-3.9

10.9
115.0
-26.0
5.2
104.1
-9.3
-

1.7
28.4
69.9
0.1
39.4
60.5
-

29.6
25.7
35.1
24.6
25.3

(Note) Values for H1 FY 2022 (Q1 and Q2) are actual results, while values for H2 (second half) and the full year are the Company’s forecasts. Unlessotherwise noted, figures have been prepared by Alpha-Win Research Dept. based on the financial results summary and financial results briefing
supplemental materials. Due to processing of data such as rounding during calculations, values for the same item may slightly differ throughout this Report.

Short Report

2/9This 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 First Section)

Issued: 11/16/2021【Figure 3】Quarterly Change in
Operating Profit (Unit: million yen)

【Figure 2】Quarterly Change in Sales(Unit: million yen)
4,500

450

4,000

400

3,500

350

3,000

300

2,500

250

2,000

200

1,500

150

1,000

【Figure 4】Quarterly Change in Operating
Margin (Unit: %)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%

100

500

0.0%

50

0
FY 2014

FY 2015

FY 2016

FY 2017Q1

FY 2018
Q2Q3

FY 2019
Q4

FY 2020

FY 2021

FY 2022

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022

0
FY 2014

FY 2015

FY 2016

FY 2017Q1

FY 2018

FY 2019

Q2

Q4

Q3

FY 2020

FY 2021

FY 2022

Q1

Q2

Q3

Q4

FY

Results by Industry (four industries)
・Sales decline of business for the finance industry and industries in the “other” category was compensated by thesignificant sales growth from the distribution, transportation, and telecommunications industries, resulting in a
double-digit increase in overall sales. Regarding operating profit, although profit was halved for the financeindustry due to the decrease in system construction projects for credit card companies and other factors, profit
from the remaining three industry categories all increased by more than 50%. Overall, in addition to the sales
growth, cost reduction and profit improvement measures had been successful, and the profit margin improved for
all industries except the finance industry.
・Businesses with the transportation and telecommunications industries, which include systems for transportcompanies, contributed especially significantly to the increase in sales and profit. Their sales were Y2,166 million,
having increased by Y901 million YoY (+71.2%) and accounting for 92% of the overall sales growth. Similarly,
their operating profit was Y285 million, at an increase of Y124 million YoY (+76.8%), accounting for 64% of theoverall increase in profit as the driver of the Company’s overall performance. With the distribution industry,
projects for retailers and general merchandise stores contributed to the results, resulting in a 20% increase in sales
and an 80% increase in profit YoY. With the industries of the “other” category, profit increased due to the increasein projects for the government and real estate companies and the rise in profit margin of the business with the
manufacturing industry and the government.
Results by Business Model (three models)・In line with the strategies and directions set forth in its medium-term management plan, the Company began
disclosing its results by business model starting this fiscal year.
・This H1, in the Enhancement Business which accounts for 70% of sales and 60% of operating profit, projects forthe finance industry and the industries of the “other” category had decreased. Although the Company worked on
optimizing resources, sales decreased by 4.3% and operating profit decreased by 3.9% (Y469 million in theprevious H1 ⇒ Y451 million in this H1; -Y18 million YoY; equivalent to -9% of the overall profit growth in
H1).
・In the SI Business (Lift & Shift: moving the legacy environment to the cloud environment in “Lift,” and stepwise
system reconstruction while optimizing for the cloud environment in “Shift”), which accounts for 28% of sales
and 39% of operating profit, sales doubled and operating profit increased by about 2.2 times (in the same order as
above: Y92 million ⇒ Y294 million; +Y202 million YoY; equivalent to 104% of the overall profit growth in
H1). This growth was due to the increase in the scale of system development projects for the transportation industry,
new cloud projects (microservices*-related projects: *a software development method in which individuallydeveloped, small-scale services are provided as a collection), and co-creation with cloud vendors.
・The Digitalization Business is in the start-up phase and its sales are only 2% of the total, at Y139 million. However,its sales had grown by 4.3 times YoY and profit had also improved to about zero (-Y9 million ⇒ +Y1 million).
Sales by Customer Group・Sales by customer are shown in Figure 5 on page 4. Sales from NRI (Nomura Research Institute) Group amounted
to Y4,184 million (+21% YoY), accounting for 51.9% of the total as the largest customer. Sales from the NRIGroup have been increasing year by year as a general trend. Additionally, the amount of sales growth from the
NRI Group accounted for 75% of the total sales growth of Y976 million in H1. Sales from the four corporategroups of NRI, Fujitsu, Aeon, and Mizuho together accounted for about 80% of the total.
Short Report

3/9This 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 First Section)

Issued: 11/16/2021【Figure 5】H1 Sales by Customer GroupGroup

H1 FY 2021 H1 FY 2022

Unit
NRI
Fujitsu
Aeon
MizuhoOther
Total

Million Yen Million Yen
3,457
4,184
1,325
1,539
394
380
268
297
1,637
1,659
7,083
8,060

% of Total in
Change in Amount
H1 FY 2022%
Million Yen
51.9
727
19.1
213
4.7
-14
3.7
28
20.6
21
100
976

Percent Change% of Total Change

%

%
21.0
16.1
-3.6
10.4
1.3
13.8

74.5
21.8
-1.4
2.9
2.2
100.0

Factors that Contributed to Profit Increase/Decrease in H1・Figure 6 shows the factors that increased or decreased operating profit in this fiscal year’s H1. Sales growth fromthe increase in projects received from the transportation and telecommunications industries and profit growth fromthe consolidation of resources to high-profit projects in the SI Business (improved operation rate through theincrease in the amount of operation, reviewed employee allocation, and improved efficiency) were the significant
factors. These factors offset the increase in costs from the strengthening of the governance system and increased
R&D expenses, and operating profit resulted in a Y194 million increase YoY. In general, the factors that
contributed to increases or decreases in profit in Q1 also continued into Q2.
【Figure 6】Factors that Increased/Decreased Operating Profit in H1

Concentration of
resources on highprofit projects of the SI
Business (Lift & Shift)
Increase in orders
received (transportation,
telecommunications,etc.)

Expansion of derivativedevelopment projects inthe Enhancement
BusinessStrengthening
corporate governanceand management
system(Unit: million yen)

Increase in R&D
expenses

+47
+181
-105

+100

746
-29

552

H1
FY 2021

YoY change:+194 million yen

H1
FY 2022

Progress in H1
・Progress in H1 against the Company’s new forecast for the full year (upward revision announced; details describedlater) was 50.4% for sales (47.9% progress in the previous H1) and 53.4% for operating profit (47.0% progress inthe previous H1). One of the characteristics of the Company is that its business performance tends to fluctuate ona quarterly basis. Over the past ten years including the previous fiscal year, the progress in H1 compared to thefull year was 48.6% for sales and 43.2% for operating profit on a simple average. This H1’s results showed
progress that is greater than the recent years’ average for both sales and profit, partly due to the acquisition ofstrategic IT investment projects and the recording of profitable projects carried over from the previous fiscal year
in Q1.
Number of Employees and Productivity
・In the Company's business model, sales growth is generally directly correlated with the number of employees.
The total number of employees in Japan and overseas has been increasing from 760 in September 2019 → 791
Short Report

4/9This 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 First Section)

Issued: 11/16/2021

in September 2020 (+31 employees or +4.1%) → 815 in September 2021 (+24 employees or +3.0%), and theCompany’s capacity has been increasing stably. However, since there is still strong potential demand for systemdevelopment (DX businesses and non-face-to-face businesses such as those related to remote work, EC, and AI),the Company is somewhat short of staff. Going forward, it plans work further on strengthening mid-career
recruitment too.
・Productivity is improving, with increasing sales per employee in Japan (from previous H1 ⇒ this H1: 10,033
thousand yen / person ⇒ 11,164 thousand yen / person, in an increase of +1,130 thousand yen / person) as well
as operating profit per employee in Japan (in the same order, 782 thousand yen / person ⇒ 1,034 thousand yen /person, in an increase of +251 thousand yen / person).
Balance Sheet
・There has been no significant change in the balance sheet as of the end of H1 (end of September 2021). The
Company has ample liquidity on hand, as cash & deposits have increased further to Y4.7 billion (3.5 months’
worth of average monthly sales; essentially debtless). Its financial standing is also firm, with a current ratio of
343.9% and an equity ratio of 71.0%. Its next challenges would be to effectively utilize its excess capital for
greater return of profit to shareholders and for future growth through M&As, business alliances, investments, andfinancing.

◆Full-year forecast revised up, reflecting the upward revision of H1 results; dividend hikealso announced.
The Company’s Full-Year Forecast
・Reflecting the positive results in H1 that were above expectation, the Company revised upward the initial fullyear forecast that it had announced at the beginning of the fiscal year. Although sales of Y16,000 million (+8.2%
YoY) were kept the same, operating profit was raised from Y1,230 million (+4.7% YoY) ⇒ Y1,400 million(+19.2% YoY; +13.8% from the initial forecast), net profit was raised from Y850 million (+0.7% YoY) ⇒ Y950
million (+12.6% YoY; +12.8% from the initial forecast), and dividend was raised from 20 yen/share ⇒ 23
yen/share (dividend hike of +3 yen/share compared to the initial forecast). These upward revisions reflect the
improvements in profit due to the progress being made in business structure/model reform. As with the previous
fiscal year, the Company is expecting sales and profit growth in the current fiscal year and is planning to achieve
record highs for sales and each of the profit.
H2 Forecast
・The Company's forecast for the second half (H2) of this fiscal year, which is obtained by subtracting the H1 resultsfrom the Company's upwardly revised plan for the full year, is as follows in the order of previous H2 ⇒ this H2:
sales of Y7,705 million ⇒ Y7,940 million (YoY: +Y235 million or +3.0%), operating profit of Y622 million ⇒Y654 million (YoY: +Y32 million or +5.1%), operating margin of 9.3% ⇒ 8.2%, and net profit of Y444 million⇒ Y449 million (YoY: +Y5 million or +1.1%) (see “CE H2” in Figure A on page 8). Compared to H1’s sales
growth rate (+13.8% YoY), final profit growth rate (+25.3% YoY), and operating margin (12.1%), the momentumof growth is expected to decline in H2.
Alpha-Win Research Department’s Full-Year Forecast
・In the previous report (issued on August 13, 2021), we had predicted sales and profit to both exceed the Company’splan since the Q1 results had been solid (sales growth and profitability improvement were greater than expected)
and the Company’s estimates for Q2 and H2 had been conservative (see “Old E” in Figure A on page 8; in theorder of previous company forecast to our forecast, in the unit of million yen, the predictions were 16,000 and
16,100 for sales, 1,230 and 1,270 for operating profit, 850 and 877 for net profit, and the same for dividend at 20
yen per share)
・We had previously analyzed that if the impact of COVID-19 remains small and the Company continues to steadily
receive orders, and if it conducts appropriate control, then the Company has the potential for further upwardrevisions (about 1.3 to 1.5 billion yen for operating profit for this full fiscal year), and that an increase in dividend(by about 2 yen/share) may also be possible depending on the amount of growth of the final profit. The Company’s
new revisions, though, came close to the values that we had expected as the best-case scenario.
・Since the Company's estimates for H2 still seem somewhat conservative, although we kept our full-year sales
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5/9This 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 First Section)

Issued: 11/16/2021

forecast unchanged (kept at +Y100 million compared to the Company's forecast), we revised our previous forecasts
for operating profit and subsequent items to a level close to the Company’s new plan (in the order of our previous
forecast ⇒ our new forecast: operating profit of Y1,270 million ⇒ Y1,425 million, which is +Y25 million
compared to the Company’s forecast, and net profit of Y877 million ⇒ Y965 million, which is +Y15 million
compared to the Company’s forecast). The reason for this revision is as follows.
1. Even considering the fact that a part of the sales growth in H1 had been carried over from the previous fiscal year,
the momentum in receiving orders seems to be maintained. Therefore, taking into account the effect of seasonality
as mentioned earlier, the estimate that sales in H2 will decrease by Y120 million or -1.5% compared to H1 seems
somewhat conservative. In the initial plan, H1 sales had been expected to be Y7,900 million and H2 sales had been
expected to be 8,100 million. However, since the Company did not change its full-year sales forecast even though
H1 sales had exceeded the plan by Y160 million, the planned sales for H2 had to be decreased. Consequently,
although the Company's new sales forecast for H2 is Y7,940 million, there currently is no particular factor that
explains this sales drop compared to H1. Therefore, we believe that H2 sales have the potential to be about Y100
million higher.
2. Expecting to begin actively engaging in sales activities again and have increased upfront investment costs during
this fiscal year’s H2, the Company estimates the operating margin to be 7.8% in the previous H1 ⇒ 8.1% in theprevious H2 ⇒ 9.3% in this H1 ⇒ 8.2% in this H2. This H2’s margin is expected to decrease by 1.1% comparedto the previous H1 and slightly increase by + 0.1% compared to the previous H2. This forecast concerning
profitability, too, seems rather defensive considering the progress being made in the business structure/model
reform.
Alpha-Win’s Forecast of Medium-Term Financial Performance・We revised our financial forecast and dividend forecast (assuming that the dividend payment ratio will be about34%) for next fiscal year onwards upon considering the financial results of this H1 and assuming that IT
investments will recover after the COVID-19 crisis settles down (see “New E” in Figure A on page 8). The increasein sales and improvement of profitability due to the business structure/model reform have been greater than
expected, and are expected to continue to be growth factors for the Company. However, since the expenses related
to sales activities and upfront investment, which have been held down so far, are expected to normalize, weestimated that the operating margin will be at a high level but remain mainly unchanged.
・As users adapt to the changes in a world coexisting with COVID-19, their IT investments are expected to increaseas they develop new business models, strengthen their competitive advantage, work on solving HR shortages,
streamline and speed up operations, and work on DX. Therefore, the Company’s growth potential is large, and we
expect that it will be able to continue to stably increase sales and profit at a rate of about 6-10% per year over the
medium to long term through the expansion of the SI and the Enhancement Business, acquisition of new customers,
development of new businesses, overseas expansion, and improvement of productivity through various measures.

◆ Stock price and characteristics: domestic-demand-oriented, stable growth stock thathas been significantly outperforming the TOPIX over the long term. Current valuation isabout average.
Performance・Over the past approximately 11.5 years, there has been about a 5.3-fold increase in the Company’s stock pricethanks to the growing financial performance, and the stock price has been outperforming the TOPIX significantly(by about +280%). However, over the past twelve months, large-cap, economically sensitive stocks have tended
to outperform the TOPIX, and the Company’s stock has been underperforming due to its small-cap, defensive
characteristic.
Valuation
・Currently, compared to the average valuation of TSE First Section (forecasted P/E of 15.9, actual P/B of 1.3, andsimple average of forecasted dividend yield of 1.9%), the Company’s valuation is mixed – about average for P/E
and high for P/B and dividend yield.
・Compared to its competitors (HIMACS and Toho System Science; see Figure 7 on page 7), its valuation issomewhat high, presumably reflecting the anticipation of growth and the relative premium due to liquidity.
Short Report
6/9This 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 First Section)

Issued: 11/16/2021【Figure 7】Comparison of Valuation with Competitors
Company Name
Code
Stock Price (at 11/16 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)
Sales (this H1's results: same applies below) (million yen)
Sales Growth Rate (%)
Operating Profit (million yen)
Operating Profit Growth Rate (%)
Operating Margin (%)
Sales (company forecast for this full FY: same applies below) (million yen)
Sales Growth Rate (%)
Operating Profit (million yen)
Operating Profit Growth Rate (%)
Operating Margin (%)
Forecasted Dividend Payout Ratio (%)

CUBE SYSTEM(CS: consolidated)

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

2335

4299

4333

1,008
14,616
15.1
2.0
2.3
8.2
0.91
8,060
13.8
746
35.1
9.3%
16,000
8.2
1,400
19.2
8.8%
34.5

1,102
13,679
12.7
1.5
2.7
4.7
0.83
7,902
4.2
750
14.5
9.5%
16,500
6.9
1,500
9.7
9.1%
34.4

1,016
14,088
14.6
1.6
3.0
5.4
1.07
6,916
23
686
64.9
9.9%
13,200
8.3
1230
14.3
9.3%
43.0

Market cap= (shares outstanding) x (market share price [at 11/16/2021 closing])
The companies' planned EPS and dividend values for FY 2022 were used in all P/E and dividend yield calculations.
Actual BPS values of H1 FY 2022 were used in P/B calculations.
EV/EBITDA=(market cap + interest bearing debt - cash&deposits)/(O.P. + depreciation + intangible fixed asset amortization)
P/S=market cap / sales [the companies' forecasts for FY 2022](Note) Prepared by Alpha-Win Research Dept. based on each company’s financial results summary.

Stock Price Outlook
・Over the short term, the Company’s stock price will likely be affected by the Q3 results (quarterly change in the
momentum of YoY growth in financial results and orders received) and the full-year forecast (whether there will
be another upward revision). Some of the risk factors may be the outbreak and spread of the sixth wave of COVID19, change in IT investment trends of Japanese companies (the Company’s users) due to increases in costs such as
resource price and personnel expenses, and the occurrence of unprofitable projects.
・Over the medium term, the following factors should also be noted: changes in sales growth rate, profit growthrate, and profit margins in the next fiscal year and beyond; development of the SI Business, the Digitalization
Business, and new businesses (original products: Cubecoin, Smile Cash Register, etc.) and their contribution toresults; return of profit to shareholders (dividend hikes, share buybacks, and stock splits); and the financial
performance and IT investment trends (especially in DX) of Japanese companies that are its end users.
・We believe that the Company will continue to be viewed as a domestic-demand-oriented, defensive, and stable
growth stock. If it can maintain close to a double-digit growth rate in profit, then its stock price may rise further
in adjusting to the level of P/E and in alignment with the increase in EPS. Considering the low volatility in financial
performance, as well as the growth potential over the medium term and its visibility, we believe that the Company
can be a candidate for long-term investment.

Short Report

7/9This 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 First Section)【 2335 CUBE SYSTEM
FY

2018
2019
2020
2021
2022
2022
2022
2022
2023
s 2023
2024
2024
2020
2021
2020/92021
2020/9
2021
2021
2022

Issued: 11/16/2021

Sector: Information & Communication 】 Figure A

Sales

YoY

O.P.

YoY

R.P.

YoY

N.P.

YoY

EPS

BPS

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

(%)

(Y)

(Y)

(Y)

13,55914,325
14,70814,78816,00016,000
16,100
16,10016,65016,80017,70017,700
3,373
3,987
3,710
4,073
7,083
8,060
7,705
7,940

5.1
5.6
2.7
0.5
8.2
8.2
8.9
8.9
3.4
4.3
6.3
5.4
-0.2
18.2
0.5
9.8
0.2
13.8
0.9
3.0

2.9
5.1
-11.9
60.7
0.7
12.6
3.9
14.3
1.5
3.6
8.4
8.0
229.3
59.0
23.0
1.7
65.5
25.3
0.0
1.1

40.59
43.25
38.69
62.11
62.55
66.69
64.96
71.48
65.93
74.08
71.48
80.00
12.17
19.35
17.30
43.20
29.47
35.30
32.64
31.39

372.23393.29411.96476.52524.68531.20570.61587.87622.09648.83418.69487.51440.07509.03

Old CE
New CE
Old E
New E
Old E
New E
Old E
New E
Q1
Q1
Q2
Q2
H1
H1
H2
CE H2

855
921
959
1,174
1,230
1,400
1,270
1,425
1,290
1,500
1,400
1,600
242
378
310
368
552
746
622
654

9.5
7.8
4.1
22.5
4.7
19.2
8.2
21.4
1.6
5.3
8.5
6.7
141.3
56.5
6.5
18.7
41.0
35.1
9.7
5.1

892
959
976
1,295
1,250
1,420
1,290
1,450
1,310
1,520
1,420
1,620
248
390
355
362
603
752
692
668

10.0
7.5
1.7
32.7
-3.5
9.6
-0.4
12.0
1.6
4.8
8.4
6.6
130.8
57.1
22.4
2.0
51.7
24.6
19.5
-3.5

567
596
525
844
850
950
877
965
890
1,000
965
1,080
165
262
235
239
400
501
444
449

16.0
16.0
18.0
20.0
20.0
23.0
20.0
23.0
20.0
25.0
20.0
27.0
0.0
0.0
8.0
8.0
8.0
8.0

(Note) Prepared by Alpha-Win Research Dept. based on the financial results summary. CE: the Company’s forecast/estimate. E: AlphaWin Research Dept.’s forecast/estimate. Old: previous forecast. New: Current forecast.

【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】
Item

11/16/2021

Item

Figure B
P/E

P/B

Dividend Yield

Dividend Payout Ratio

Stock Price (Y)1,008

Last FY (actual)

16.2

2.1

2.0%

32.2%

Shares Outstanding (thou.)

14,500This FY (est.)

14.1

1.9

2.3%

32.2%

Market Capitalizatoin (million yen)

14,616

Next FY (est.)

13.6

1.7

2.5%

33.7%

71.0%

Last FY's ROE

14.0%

Dilutive Shares (thou.)0

Equity Ratio at H1-End(Note) Estimates have been made by Alpha-Win Research Dept.

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8/9This 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 First Section)

Issued: 11/16/2021【 Stock Chart (end-of-week prices): 2335 CUBE SYSTEM 】 Figure C
(Y)
1,600
1,500
1,400
1,300

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

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

09
/1
6
01
/1
7
05
/1
7
09
/1
7
01
/1
8
05
/1
8
09
/1
8
01
/1
9
05
/1
9
09
/1
9
01
/2
0
05
/2
0
09
/2
0
01
/2
1
05
/2
1
09
/
(M 21
M
/Y
Y
)

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

(Note) From the first week of September 2016 to the third week of November 2021

Period1 month
3 months
6 months
12 months【Performance】
Returnvs. TOPIX
1.0%
-1.5%
-7.8%
-12.4%-3.3%-9.9%-30.3%-47.2%(Note)
・Reflects stock and index prices
through the closing price on 11/16/2021.
・“Vs. TOPIX” is the relative value
after subtracting the TOPIX’s
performance from the performance of
the Company’s stock.
・Performance for the 1-month period isthe comparison between the closing
price on the last day of October and theclosing price on 11/16 (the same applies
to the other periods).

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

Disclaimers
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital
Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win shall not beliable for any consequences including direct or indirect loss, lost profit, or damage resulting from the use ofor reliance on this Report. Investors who read this Report must make their own decisions on all investment
matters and take full responsibility regarding their investment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis of generally accessible
public information and supplemental information including interview(s) by the analyst. Alpha-Win, the writer,
and/or other persons involved in the publication of this Report may already hold, or buy and sell in the future, thestock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject to change
without notice. For the latest (updated) report, please see our website (http://www.awincap.com/). We also do
not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied, photocopied, cited, ortranslated without our consent. For inquiries regarding this Report, please send us an e-mail to info@awincap.com.
However, Alpha-Win and the writer of this Report do not have any obligation to reply to inquiries.
SV2021-1118-2330

Short Report

9/9This 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.