JustSystems Corporation

Investment Summary

JustSystems (TSE:4686) is a Japanese software company that builds personal use, and industry-critical applications for the private and public sector. It is the only acquired subsidiary of Keyence Corp.—the 6th largest company in Japan. Keyence’s growth story is an epic among international business schools that study its industry-defying culture and management process. The company has delivered 12% CAGR in operating profits for 19 years. JustSystems is run in a similar manner—focusing purely on “operating profits per employee”.

Since Keyence became a major shareholder, JustSytem’s operating profits are up 11x (in 16 years) with an average return on assets (ROA) of 11%. This is including its ¥100 billion cash pile, making up almost 80% of the balance sheet’s assets. The company is debt free. Return on non-cash assets range from 25-50%.

JustSystems currently trades at an EV/EBIT of 6.8x, because of two primary reasons. Firstly, investors tend to disregard their cash pile, because—like their parent company—JustSystems has not shown any intention of returning a significant portion of their cash to investors. Secondly, due to the weakness in demand for personal technologies after the pandemic, the growth in the individual license business has slowed down. We believe that even if JustSystems continues to grow at low-mid single digits, the investment would still have a significant rate of return. There is a possibility that the business would grow much faster than this conservative estimate.

JustSystems Corporation (TSE: 4686)

Business History

JustSystems is a 46-year-old Japanese technology company that was an early pioneer in Japanese language input software. The company’s first product, Ichitaro, became Japan’s first widely adopted word processor—comparable to Microsoft Word. While developing Ichitaro, JustSystems simultaneously built ATOK, a conversion system that transforms a string of letters into words (kanji).

Ichitaro dominated Japan’s word processing market, until Microsoft launched MS Word in Japan in 1991. Microsoft’s rapid adoption eroded JustSystems’ dominance, and by 2005 the company had turned loss-making. Debt laden and under the pressure of the global financial crisis, the founders transferred operational control to Keyence Corporation, which acquired a 44% stake in 2009.

Since then, JustSystems has diversified into educational and business intelligence software, increased its operating profit by 11x, and built a formidable cash reserve of ¥90 billion, all while maintaining an effectively debt-free balance sheet.

Business Overview

While company disclosures remain limited, management consistently emphasizes the metric of “operating profit per employee.” Over the past decade, this figure has ballooned to ¥42 million per employee (including temporary staff). This places JustSystems 18th in Japan. Although that rank may seem low, most companies above JustSystems operate in cyclical industries like oil, real estate, or shipping. JustSystems stands out as one of the few companies insulated from commodity pricing or global economic swings.

The company classifies its businesses into 2 segments: individual and corporate licenses.

Individual Licenses

This segment includes software sold as single-user licenses. Some of Justsystem’s products in this segment are:

• Ichitaro (word processor)

• ATOK (language input software)

•  Smile Zemi (tablet-based education)

•  justmyshop.com (e-commerce)

In the most recent fiscal year, individual licenses accounted for ¥29.1 billion in revenue, comprising 71% of total sales.

Legacy products like Ichitaro and ATOK are not expected to deliver significant growth due to the broader decline in desktop/laptop use. To adapt, JustSystems shifted ATOK to a subscription-based model in 2022, often bundling it with Ichitaro to incentivize annual upgrades.

However, Smile Zemi (known domestically as Smile Seminar) presents growth optionality, especially as the product begins expanding into international markets like the U.S. Over the past decade, this segment has the individual licenses segment grown at a 15% CAGR, though sales have slightly dipped in the last two years, due to both waning demand for new technology and the reduced need for “online learning” platforms.

Corporate Licenses

These licenses cater to software that is sold directly to a corporation (multi-user). Most solutions offered are industry-specific such as:

• JUST Government

• JUST Police

• JUST Medical

• JUST.SFA (Sales Force Automation) 

• JUST.DB (No-code database)

In the latest fiscal year, this segment generated ¥11.9 billion, or 29% of total sales.

Contrary to our initial hypothesis, this segment has been flat, growing at a modest 2% CAGR over the past decade. This is likely due to the long lifecycle of legacy enterprise systems, which delays the pace of renewal but ensures predictable recurring revenues.

Influence of Keyence

Keyence, Japan’s 6th largest company by market cap, is best known for its factory automation tools. The company has delivered 12% CAGR in operating profits for 19 years, making it a well-known global compounder.

Keyence’s management philosophy is “maximum added value with minimum capital and people”. The culture emphasizes bottom-up decision-making, where frontline sales staff are empowered to make decisions, and management’s role is to train and support rather than command.

Keyence is also known for its minimal disclosures, lack of earnings calls, and tendency to hoard cash without clear articulation of use. JustSystems mirrors this style. It has remained frugal, with low capex, no public guidance, and little communication around future product releases. Notably, JustSystems remains the only acquisition Keyence has made in its 50-year history.

Investment Thesis

JustSystems has averaged an 11% return on assets (ROA) over the past decade. While this may appear modest, it includes ¥100 billion in idle cash, accounting for 80% of total assets. Adjusted for this, non-cash ROA has ranged between 25-50%, revealing extraordinary capital efficiency. Virtually, a ¥100 increase in net invested capital (accounting for depreciation) would yield at least ¥25 in net profit from the following year!

Despite these returns, JustSystems is highly conservative in capital deployment. In 2025, capex totalled just ¥3 billion, slightly above depreciation. However, the firm has shown a willingness to invest when the opportunity is compelling—e.g., the Smile Seminar rollout.

The company has also focused on improving employee productivity, growing profits while strategically reducing headcount. Unlike many global tech peers, JustSystems has avoided mass layoffs, instead managing workforce transitions gradually. Remarkably, it ranks 11th in Japan for average employee pay, at ¥14.2 million per year. In Tokushima, where the cost of living is far lower than Tokyo or Osaka, JustSystems pays more than double the next-highest company—an indicator of its commitment to talent and culture.

JustSystems’ software is deeply embedded in end-user workflows. Core products like Ichitaro and ATOK are hard to displace once adopted. Its vertical solutions—such as Just Police, Just Government, and especially Just Smile—are integral to Japan’s public digital infrastructure. For example, Just Smile is installed in 80% of Japanese schools, giving it a near-monopoly in education software. The expansion of Smile Zemi into English-speaking markets provides long-term optionality. High switching costs (both monetary and time-based) create a strong defensive moat, supporting stable recurring revenues even during downturns.

Valuation

JustSystems trades at 6.8x EV/EBIT, implying a 15% pre-tax IRR if the business remains flat over the next 10 years. This low multiple is driven by two factors.

1. Cash Accumulation: Similar to Keyence, investors do not expect to see the company return its relatively massive cash pile. This has led to the cash being “written off” by the market. However, we believe cash provides both real and psychological flexibility, allowing JustSystems to take calculated risks during downturns or crises. As long-term investors, we appreciate the company's preference for maintaining a large margin of safety.

   
   

2. Post-pandemic slowdown: Operating profit in 2025 was 6% below 2022 levels, driven by weakness in the individual license segment. We believe that this downturn is cyclical, rather than structural. Even if the company doesn’t replicate its past 15% CAGR, a mid-to-high single-digit growth rate would be sufficient to deliver attractive returns at current valuations.

Disclaimer

The information provided on this website is for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. Qashco Adivsors LLP is not a registered investment advisor. All content represents our views and opinions and should not be relied upon for making investment decisions. We recommend consulting with a licensed financial advisor before making any investment choices. Investing in securities involves risks, and past performance is not indicative of future results.