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

Issued: 8/13/2021

Alpha-Win Capital Inc. Research Department
http://www.awincap.com/● Summary◆ 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 include Nomura Research Institute and Fujitsu Group. It develops
systems and provides services mainly for the finance, distribution, transportation, and telecommunicationsindustries. Its strengths are its excellent customer base, extensive experience, high credibility, and the skill andexpertise 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 annual recurring profit growth rate (simple average) was +7.1%; it has been steadily expanding its businessand staying in the black over many years. Its recurring margin has stably been at around 7%, and the increase insales has been contributing directly to increases in profit, dividend, and market capitalization. In FY 2021 (notethat the Company’s fiscal year is March-ending, e.g., FY 2021 ended in March 2021), it achieved record-high sales
and profits. It has also been working on the Digitalization Business as one of its areas of focus.
・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 Q1’s Results: sales grew by +18.2% and operating profit grew significantly by+56.5% YoY, thanks to orders for new strategic IT investment projects received from its
customers and the optimization of resources.
Q1 Summary
・In the first quarter of FY 2022 (April-June 2021: hereinafter, “Q1”), sales were Y3,987 million (+18.2% YoY),
operating profit was Y378 million (+56.5% YoY), recurring profit was Y390 million (+57.1% YoY), and net profit
attributable to owners of the parent (hereinafter, “net profit”) was Y262 million (+59.0% YoY) (see Figures 1-3,
and Figure 4 on page 2).
・Although the new revenue-recognition standard has been adopted starting this fiscal year, its impact has beensmall (sales were decreased by Y89 million, and gross profit and operating profit were each decreased by Y14
million compared to the previous standard), and the Company achieved record-high Q1 sales and profits.
・In addition to the increase in sales, profits increased significantly due to the shift to high-profit projects,
optimization of resources, and reduced cost such as travel expenses for business trips due to COVID-19. Grossmargin increased by about 2.5 percentage points from 19.1% in the previous Q1 to 21.6% in this fiscal year’s Q1(the same order applies below). On the other hand, SG&A expenses had increased by about 20.7% from Y400
million to Y483 million, but the SG&A expenses ratio had increased only slightly from 11.9% to 12.1%. As aresult, the operating margin improved by about 2.3 percentage points from 7.2% to 9.5%. The plan that theCompany had set for Q1 has not been announced, but the results have presumably exceeded its expectations.
【Figure 2】Quarterly Change in
Operating Profit (Unit: million yen)

【Figure 1】Quarterly Change in Sales(Unit: million yen)
4,500

450

4,000

400

【Figure 3】Quarterly Change in O.P. Margin(Unit: %)
12.0%
10.0%

350

3,500
3,000

300

2,500

250

2,000

200

8.0%
6.0%
4.0%

150

1,500

100

1,000

2.0%

50

500

0.0%

0

0
FY 2014

FY 2015

FY 2016

FY 2017Q1

FY 2018
Q2Q3

FY 2019
Q4

Short Report

FY 2020

FY 2021

FY 2022

FY 2014

FY 2015

FY 2016

FY 2017Q1

FY 2018

FY 2019

Q2

Q4

Q3

FY 2020

FY 2021

FY 2022

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Q1

Q2

Q3

Q4

FY

1/8

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 First Section)

Issued: 8/13/2021【Figure 4】Summary of Q1 Results
Q1 Results

Consolidated
Category

Unit: million yen

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 (%)
New RevenueRecognition
Standard

Operating Profit

Operating Margin (%)
Recurring Profit

Recurring Margin (%)
Net Profit

Net Margin (%)

Q1 FY 2021
Apr-Jun 2020

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

Q1 FY 2022
Apr-Jun 2021

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

Change (%)
YoY: %

Change in Amount / Diff.
YoY: million yen / %% of Total Amount of Change%% of Total
%

18.2
29.1
-2.4
-8.5
95.9
69.9
-50.0

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

100.0

16,000

8.2

112.5
11.0
-22.1

100.0
74.9
12.4
12.7
82.3
9.8
7.9

-9.0
22.8
76.6
-1.8
10.1
1.1
2.2
36.0
46.3
2.9
14.0
-2.2

27.7
24.2
31.5
9.4
7.2
18.1
19.8
22.2
39.2
5.3
6.3
6.3

4,300
3,100
3,200

2.1
6.5
9.5

5,400

13.9

320
4,130
11,550

384.8
61.3
-5.0

3.7
67.6
29.4

1.6
27.1
71.2
0.0
33.1
66.9

-

-

-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

Company's Plan for Full FY 2022
Apr 2021 - Mar 2022

1,230
7.0
1,250
7.0
850
5.3

Change (%)
YoY: %

4.7
-3.5
0.7

(Note) In Figures 1-4, values for Q1 FY 2022 are actual results, and values for Q2 and the full year are the Company’s forecasts. Figures
were prepared by Alpha-Win Research Dept. based on the financial results summary and financial results briefing supplemental
materials. Due to processing of data during calculations, values for the same item may slightly differ throughout this Report.

Q1 Results by Segment
・Overall, sales grew by Y614 million and operating profit increased by Y137 million (see Figure 4 for the
information below).
Results by Service Category (three categories)
・In the System Integration Service (SIS), which is its core business, sales grew by Y673 million (+29.1% YoY) to
Y2,985 million. The increase in system construction projects for delivery companies in the transportation industry,electric power companies, and retailers had contributed to this growth. Operating profit increased significantly by
Y152 million (+95.9% YoY) to Y311 million (note that starting this fiscal year, each segment’s profit is disclosed
in terms of operating profit instead of gross profit).
・In the System Outsourcing Service (SOS), sales decreased by Y12 million (-2.4% YoY) to Y493 million due tothe reduced amount of projects for the finance industry (maintenance and operation of stock exchanges, etc.).
However, operating profit increased by Y15 million (+69.9% YoY) to Y37 million.
・In the Professional Service (ProS), sales decreased by Y47 million (-8.5% YoY) to Y508 million and operating
profit decreased by Y30 million (-50.0% YoY) to Y30 million due to the reduction in the amount of consulting
projects and system construction projects for banks run by distribution companies.
Results by Industry (four industries)
・Sales increased for the three industries excluding finance. Thanks to the overall sales growth, cost reduction, andmeasures to improve profit, profits increased for all industries, including finance whose sales had slightly decreased(by -55 million yen or -5.6%) due to the reduction in the amount of projects.
・Sales from the transportation industry (delivery system) and telecommunications industry had increased by Y470
million (+79.4%) YoY to Y1,062 million, accounting for 76.6% of the overall increase in sales. Similarly, theiroperating profit increased by Y63 million (+75.4%) YoY to Y148 million, accounting for 46.3% of the overallprofit growth and contributing significantly to the Company’s overall business performance. Sales and profits had
increased thanks to the increase in projects for retailers in the distribution industry and for electric power companies
and the government in the “other industries” category.
Short Report
2/8This 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: 8/13/2021

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.
・In the Enhancement Business, which accounts for 71% of sales and 67% of operating profit, although projects inexisting areas have shrunk, it had received orders for new derivative-development projects and was able to maintainsales at the same level as the previous Q1. On the other hand, due to resource optimization, operating profit had
grown by Y40 million (+18.9%) YoY to Y253 million.
・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 27% of sales and
33% of operating profit, sales doubled and operating profit grew by a little under four times due to the expansionof the scale of system development projects for the transportation and telecommunications industries, new cloud
projects (microservices*-related projects: *a software development method in which individually developed,
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 small, at 2% of the total. However, its sales
and profits had grown at double-digit rates, and the balance of profit and loss had improved to nearly zero.
Factors that Contributed to Profit Increase/Decrease in Q1
・Figure 5 shows the factors that increased or decreased operating profit in Q1. Sales growth from the continuationof large-scale projects received during the previous fiscal year and from the increase in orders received, as well as
the profit growth due to the consolidation of resources (improvement of operation rate through the increase in theamount of operation, review of employee allocation, and improvement of efficiency), contributed largely to theincrease in profit, offsetting the increase in costs from the strengthening of the governance system and increased
R&D expenses. As a result, operating profit increased by Y136 million (+56.5%) YoY.
【Figure 5】Factors that Increased/Decreased Operating Profit in Q1

Increase in orders fromindustries such astransportation andtelecommunications

Concentration of
resources on highprofit projects of
the SI Business(Lift & Shift)

Increase in derivativedevelopment projects inthe Enhancement
BusinessStrengthening
corporate
governance system(Unit: million yen)

Increase in R&D
expenses

+40

378

+72
-34

-4

+63

242

June 2020+136 million yen
YoY

June 2021(Note) Financial results briefing supplemental materials

Q1 Progress
・Progress in Q1 against the Company’s full-year forecast was 24.9% for sales (progress during previous Q1: 22.8%)
and 30.8% for operating profit (previous Q1: 21.6%). Since the simple average of the progress during Q1 for the
past eight years including the previous fiscal year is 22.6% for sales and 14.9% for operating profit, this Q1’s
progress has significantly exceeded the recent years’ average progress, especially for profit.
・One of the characteristics of the Company is that its business performance tend to fluctuate on a quarterly basis,
with business performance of the fourth quarter (Q4: Jan-Mar) contributing the most to the full-year results (eightyear average: 28.0% of full-year sales and 35.3% of full-year operating profit). The next largest is the second
quarter (Q2 or Jul-Sep; 26.0% and 27.6%, respectively), followed by the third quarter (Q3 or Oct-Dec; 23.4% and22.8%, respectively). Q1 has generally tended to be the smallest in contribution.
Number of Employees and Productivity
・In the Company's current business model, sales growth is generally directly correlated with the number of
employees. The total number of employees in Japan and overseas has been steadily increasing from 707 in June
Short Report

3/8This 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: 8/13/2021

2017 (end of month) ⇒ 745 in June 2018 (+38; +5.4%) ⇒ 766 in June 2019 (+21; +2.8%) ⇒ 799 in June 2020(+33; +4.3%) ⇒ 829 in June 2021 (+30; +3.8%). Its capacity has been increasing stably. However, since there is
still strong potential demand for system development (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. Consequently, the Company
has been working on strengthening recruitment, such as through web interviews, and improving productivity byincreasing sales per employee in Japan (from previous Q1 ⇒ this Q1: 4,737 thousand yen / person ⇒ 5,402
thousand yen / person, in an increase of +665 thousand yen / person) as well as operating profit per employee (339
thousand yen / person ⇒ 513 thousand yen / person, in an increase of +173 thousand yen / person).
Balance Sheet
・There has been no significant change in the balance sheet as of the end of Q1. The Company has ample liquidity
on hand, with cash & deposits of Y4.4 billion (3.3 months’ worth of average monthly sales; essentially debtless).
Its financial standing is also firm, with an equity ratio of 72.3%. 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, businessalliances, investments, and financing.

◆H1 forecast revised up, but no change to the full-year forecast or dividend plan from the
beginning of the FY
H1 Forecast
・The Company has revised its forecast for the first half (H1) upward to reflect the better-than-expected, solid
performance in Q1. Sales were raised from Y7,505 million ⇒ Y7,900 million (+395 million yen or +5.3%),
operating profit was raised from Y555 million ⇒ Y700 million (+145 million yen or +26.1%), and net profit waschanged from Y370 million ⇒ Y466 million (+96 million yen or +25.9%).
The Company’s Full-Year Forecast
・On the other hand, the Company has not changed its full-year forecast announced at the beginning of this fiscal
year: sales of Y16,000 million (+8.2% YoY), operating profit of Y1,230 million (+4.7% YoY), and net profit ofY850 million (+0.7% YoY). The planned dividend of 20 yen per share has also not been changed. This was because
the Company had taken into account the uncertainties over the potential impact of the rapid outbreak of COVID19 variants. In its plan for this fiscal year, the Company expects to increase sales and profits again in continuationfrom the previous fiscal year, as well as achieving consecutive record highs in sales and net profit.
・ The Company has been working on increasing sales activities while taking measures against COVID-19(combination of decentralized/non-face-to-face sales activities using digital technology with in-person sales) andstrengthening its prioritized approach toward customers who are actively conducting strategic IT investments. It
has also been strengthening its sales activities toward its major customers, expanding the existing businesses, anddeveloping new domains/areas of business, and these efforts are gradually becoming reflected in its business results.
Alpha-Win Research Department’s Full-Year Forecast
・Due to the COVID-19 crisis, there had been some stagnation in the Company’s sales activities, especially withnew negotiations. Some of its corporate customers had also been scaling down their IT investments due to worsened
financial performance. Therefore, we had considered the risks of COVID-19 and made a somewhat cautious
forecast for the full year compared to the Company (please refer to the previous report issued on June 7, 2021).
・However, while the customers’ IT investment trends are becoming polarized, the Company has been receiving
orders for strategic or derivative projects from industries with solid business performance, while also shifting tohigh-profit projects and improving resource efficiency. In addition, the amount of orders received and the orderbacklog had increased by about 14.3% and 3.4% YoY, respectively, in Q1. Recently, there seems to be recovering
demand from industries such as finance that had been experiencing a slowdown and increasingly more DX
investments by companies.
・The increase in sales and the improvement of profitability have been greater than expected. Therefore, we reviewed
the full-year forecast and revised sales upward (from previous ⇒ current forecast) from Y15.7 billion ⇒ Y16.1
billion, operating profit from Y1,200 million ⇒ Y1,270 million, and net profit from Y830 million ⇒ Y877 million(Figure 6 on page 5). As a result, our forecast now slightly exceeds the level of financial results expected by theCompany. The reasons are described below.
1. When the expected Q2 results are estimated by subtracting the Q1 results from the upwardly revised H1 forecast,it can be seen that the Company expects sales to increase from Q1 ⇒ Q2 from Y3,987 million ⇒ Y3,913 million,
with the YoY sales growth rate expected to slow down from +18.2% to +5.5%. As mentioned above (see “Q1
Short Report
4/8This 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: 8/13/2021

Progress” on page 3), considering the quarterly fluctuation of results, Q2 tends to exceed Q1 in terms of sales,
profit, and profit margin. Considering this, the Company’s forecast seems somewhat conservative, since it isexpecting Q2’s sales to decrease by Y74 million (-1.9%), operating profit to decrease by Y56 million (-14.8%)
from Y378 million ⇒ Y322 million, and operating margin to worsen by 1.3 percentage points from 9.5% ⇒ 8.2%
compared to Q1.
2. In addition, the Company predicts that sales will increase but profit will decrease due to worsened margin in thesecond half (= full-year forecast minus first-half forecast) compared to the previous fiscal year’s second half. It is
expecting sales of Y8,100 million (+394 million yen or +5.1% YoY), operating profit of Y530 million (-93 million
yen or -14.9% YoY), net profit of Y384 million (-60 million yen or -13.5% YoY), and operating margin of 6.5%
(compared to 8.1% in the first half of the previous fiscal year). Comparing the forecasts of the first and the second
half of this fiscal year, too, the Company’s forecasts seem cautious, since sales are expected to decrease by Y200
million (-2.5% QoQ), profit is expected to decrease by Y170 million (-24.3%), and operating margin is expected
to worsen (8.9% ⇒ 6.5%).
3. Going forward, costs are expected to increase due to development and investment in in-house products (Cubecoin,
Smart Cash Register, etc.) and due to IT investment for COVID-19 measures. However, since the main
uncertainties and risk factors that are expected at present are the sharp decrease in orders due to the spread of
COVID-19 and the occurrence of unprofitable projects (preventive measures have already been taken), there seems
to be no particular factor that may cause a significant slowdown in sales or profit growth after Q1.
・If the impact of COVID-19 remains small and the Company continues to steadily receive orders, and if it conducts
appropriate control, then we believe that the Company has the potential for further upward revisions (operating profit
for the full fiscal year to be about 1.3 to 1.5 billion yen). Depending on the amount of growth of the final profit, we
also believe that an increase in dividend (by about 2 yen/share) may also be possible.
【Figure 6】Financial Forecast
Unit: million yen, %FY 2021 A

Sales
Gross Profit
Gross Margin
SG&A Expenses(% of sales)

Operating Profit(% of sales)

Recurring Profit(% of sales)

Net Profit(% of sales)

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

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

FY 2022 CE

14,789
2,841
19.2%
1,666
11.3%
1,175
7.9%
1,295
8.8%
844
5.7%

16,000

0.5%
2.2%
7.9%
22.5%
32.7%
60.7%

8.2%

1,230
7.7%
1,250
7.8%
850
5.3%

4.7%
-3.5%
0.7%

FY 2022 New E

FY 2022 Old E

Q1 FY 2022 A

Q2 FY 2022 CE

H1 FY 2022 CE

H2 FY 2022 CE

16,100
3,350
20.8%
2,080
12.9%
1,270
7.9%
1,290
8.0%
877
5.4%

15,700
3,300
21.0%
2,100
13.4%
1,200
7.6%
1,220
7.8%
830
5.3%

3,987
862
21.6%
484
12.1%
378
9.5%
390
9.8%
262
6.6%

3,913

7,900

8,100

322
8.2%
315
8.1%
204
5.2%

700
8.9%
705
8.9%
466
5.9%

530
6.5%
545
6.7%
384
4.7%

8.9%
1.6%
24.9%
8.1%
-0.4%
3.9%

6.2%
1.8%
26.1%
2.1%
-5.8%
-1.7%

18.2%
2.5%
20.8%
56.5%
57.1%
59.0%

5.5%

11.5%

5.1%

3.9%
-11.3%-13.2%

26.7%
16.8%
16.4%

-14.9%-21.3%-13.5%(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. A: actual. Old: previous forecast. New: current forecast.

Alpha-Win’s Forecast of Medium-Term Financial Performance
・We have not changed our medium/long-term evaluation of the Company. In this report, we have only revised theforecast for this fiscal year, and kept the forecast for the next fiscal year and beyond the same.
・IT investments are expected to eventually increase as customers adapt to the changes in the world with and after
COVID-19, as 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 islarge. We believe that the Company will be able to continue to stably increase sales and profit at a rate of about 610% per year, if economic conditions normalize, through the expansion of the Enhancement Business, acquisitionof new customers, development of new businesses, overseas expansion, and improvement of productivity throughvarious measures.

◆ Concerning the Transfer to the Prime Market
・According to the first round of assessment by the TSE, the Company satisfies the listing criteria of the “Prime
Market.” Consequently, at the Company’s board of directors meeting convened on August 2021, a resolution to“Select and Apply for the Prime Market” was passed.
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5/8This 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: 8/13/2021◆ Stock price and characteristics: domestic-demand-oriented, stable growth stock thathas been significantly outperforming the TOPIX over the long term. Average valuation.
Performance・Over the past approximately ten years, the Company’s stock price has increased by about four times thanks to its
solid financial performance, and has been outperforming the TOPIX significantly. 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 characteristics.
Valuations
・Its current valuation is somewhat above the average of TSE First Section (TSE First Section’s average: forecasted
P/E of 15.5, actual P/B of 1.3, and simple average of forecasted dividend yield of 1.8%). However, considering thepotential upward revision of this fiscal year’s results and its medium-term growth potential, its valuation does notseem expensive.
・Compared to its competitors (HIMACS and Toho System Science; please see Figure 7), its valuation is somewhat
high, presumably reflecting the anticipation of growth and premium due to liquidity.
Stock Price Outlook
・Over the short term, its stock price will likely be affected by the situation regarding when and how the COVID19 crisis will settle down, as well as this full fiscal year’s financial outlook (whether there will be potential revisions
to profit or dividend). Over the medium term, the following should also be noted as factors that may affect stock
price: changes in sales growth rate, profit growth rate, and margins in the next fiscal year and beyond; developmentof the SI and the Digitalization Business and their contribution to results; return of profit to shareholders (dividend
hike, share buyback, and stock split); and the financial performance and IT investment trends of Japanesecompanies (its end users).
・We believe that if the Company continues to be viewed by the market as a domestic-demand-oriented, defensive,and stable growth stock, and if it can maintain a stable, double-digit annual profit growth rate, then its stock price
may rise further to adjust for the level of P/E and the increase in EPS.

【Figure 7】Comparison of Valuation with Competitors
Company Name
Code
Stock Price (at 8/12 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 (Q1: same applies below) (million yen)
Sales Growth Rate (%)
Operating Profit (million yen)
Operating Profit Growth Rate (%)
Operating Margin (%)

CUBE SYSTEM(CS: consolidated)

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

2335

4299

4333

1,030
14,935
16.5
2.1
1.9
8.7
0.9
3,987
18.2
378
56.5
9.5%

1,084
13,456
14.6
1.4
2.8
5.0
0.8
3,779
0.1
293
1.8
7.8%

954
13,228
13.7
1.5
2.6
4.7
1.0
3,378
23.8
313
96.1
9.3%

Market cap= (shares outstanding) x (market share price [at 8/12/2021 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 Q1 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

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6/8This 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

2018
2019
2020
2021
2022
2022
2023
2024
2018
2019
2020
2021
2021
2022

Sector: Information & Communication 】 Figure A

Sales

FY

YOY

O.P.

(million yen)（%）(million yen)

13,55914,325
14,70814,78816,000
16,10016,65017,700
3,082
3,379
3,373
3,987
11,41512,013

5.1
5.6
2.7
0.5
8.2
8.9
3.4
6.3
1.4
9.6
-0.2
18.2
0.8
5.2

CE
E
E
E
Q1
Q1
Q1
Q1
Q2-Q4
Q2-Q4 CE

Issued: 8/13/2021

855
921
959
1,174
1,230
1,270
1,290
1,400
109
100
242
378
932
852

YOY

R.P.

（%）

(million yen)

9.5
7.8
4.1
22.5
4.7
8.2
1.6
8.5
52.4
-8.8
141.3
56.5
274.3
-8.6

892
959
976
1,295
1,250
1,290
1,310
1,420
132
107
248
390
1,047
860

YOY

N.P.

YOY

EPS

BPS

Dividend（%）(million yen)

(%)

(Y)

(Y)

(Y)

2.9
5.1
-11.9
60.7
0.7
3.9
1.5
8.4
131.3
-34.2
229.3
59.0
355.7
-13.4

40.59
43.25
38.69
62.11
62.55
64.53
65.49
71.01
5.45
3.70
12.17
19.35
49.94
43.20

372.23393.29411.96476.52521.06566.54617.55393.29379.63418.69487.51
-

10.0
7.5
1.7
32.7
-3.5
-0.4
1.6
8.4
80.5
-19.0
130.8
57.1
329.1
-17.9

567
596
525
844
850
877
890
965
76
50
165
262
679
588

16.0
16.0
18.0
20.0
20.0
20.0
20.0
20.0
0.0
0.0
0.0
0.0
-

(Note) CE: the Company’s forecast/estimate. E: Alpha-Win Research Dept.’s forecast/estimate. Q1: Apr-June. Q2-Q4: July-Mar.

【 Stock Price and Valuation Indicators: 2335 CUBE SYSTEM 】
8/12/2021

Item

Item

Figure B
P/E

P/B

Dividend Yield

Dividend Payout Ratio

Stock Price (Y)1,030

Last FY (actual)

16.6

2.2

1.9%

32.2%

Shares Outstanding (thou.)

14,500This FY (est.)

16.0

2.0

1.9%

31.0%

Market Capitalizatoin (million yen)

14,935

Next FY (est.)

15.7

1.8

1.9%

30.5%

72.3%

Last FY's ROE

14.0%

Dilutive Shares (thou.)0

Equity Ratio at Q1-End(Note) Estimates had been made by Alpha-Win Research Dept.

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

Price Relative to TOPIX (right axis)

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
(M
1
M
/Y
Y
)

400

Stock Price (left axis)

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

Period1 month
3 months
6 months
12 months【Performance】
Returnvs. TOPIX
3.3%
0.5%
-1.2%
-2.7%
-5.4%
-10.2%-6.2%-26.9%(Note)
・Reflects stock and index prices
through the closing price on 8/12/2021.
・“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 July and theclosing price on 8/12 (the same applies
to the other periods).

(Note) From the first week of September 2016 to the second week of August 2021

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7/8This 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: 8/13/2021＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊

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.
SV20210812-1600

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8/8This 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.