SYKESVILLE, Md. –
GSE Systems, Inc. (GSE or the Company) (NYSE MKT: GVP), the world
leader in real-time high-fidelity simulation systems and training
solutions to the power and process industries, today announced financial
results for the first quarter (Q1) ended March 31, 2017.

Q1 2017 OVERVIEW

• Revenue increased 25.9% to $16.3 million from $13.0 million in Q1
  2016, the highest quarterly revenue in over 10 years.
• Gross profit rose 13.7% to $4.1 million from $3.6 million in Q1 2016.
• Net loss totaled $0.3 million, or $(0.01) per diluted share, compared
  to net income of $0.1 million, or $0.01 per diluted share, in Q1 2016.
• Adjusted net income¹ equaled $0.6 million, or $0.03 per
  diluted share, compared to $0.5 million, or $0.03 per diluted share,
  in Q1 2016; sixth straight quarter of positive adjusted net income.
• Adjusted EBITDA¹ totaled $0.8 million in both Q1 2017 and
  Q1 2016.
• New orders topped $19.8 million, the second-highest quarterly total in
  7 years.
• Cash flow from operations exceeded $1.3 million compared to $1.6
  million in Q1 2016.

At March 31, 2017

• Cash and equivalents of $22.8 million, including $1.1 million of
  restricted cash, compared to $22.9 million, including $1.1 million of
  restricted cash, at December 31, 2016.
• Working capital of $14.0 million and current ratio of 1.5x.
• No outstanding long-term debt.
• Backlog of $79.6 million, compared to $73.2 million at December 31,
  2016.

¹ Refer to the non-GAAP reconciliation tables at the end of
this press release for a definition of “adjusted EBITDA” and “adjusted
net income”.

Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said,
“In Q1 2017, GSE achieved 26% year-over-year revenue growth, driven by
particularly strong demand for our Nuclear Industry Training and
Consulting staffing services and the advancement of three major nuclear
simulation projects in our Performance Improvement Solutions division.
Our Nuclear Industry Training and Consulting segment achieved record
quarterly orders, revenue, and gross profit, while ending Q1 2017 with
its highest backlog ever. Our reinvigorated sales team generated total
new orders exceeding $19.8 million this quarter and, as we execute on
our near-record backlog, we believe GSE is well positioned for revenue
growth in 2017. Armed with $22.8 million in cash at the end of Q1 2017,
we are seeking and carefully evaluating select inorganic opportunities
that can enhance our growth trajectory, enhance organic growth
opportunities, and in-turn create additional shareholder value.”

Q1 2017 RESULTS

Q1 2017 revenue increased 25.9% to $16.3 million, from $13.0 million in
Q1 2016, driven by a 61.4% rise in Nuclear Industry Training and
Consulting revenue, primarily due to higher staffing demand from a major
customer, combined with a 9.4% increase in Performance Improvement
Solutions revenue.

Performance Improvement Solutions new orders totaled $4.9 million in Q1
2017 compared to $34.8 million in Q1 2016, which included three full
scope simulators. Nuclear Industry Training and Consulting new orders
totaled $14.9 million in Q1 2017 compared to $5.1 million in Q1 2016.

Q1 2017 gross profit increased to $4.1 million, or 25.2% of revenue,
from $3.6 million, or 27.9% of revenue, in Q1 2016.

Performance Improvement Solutions gross profit for Q1 2017 was $3.0
million, or 31.5% gross margin, compared to $3.1 million, or 35.6% gross
margin, in Q1 2016. The year-over-year decrease in Performance
Improvement Solutions gross margin percentage in Q1 2017 primarily
reflects the advancement of three major lower margin nuclear
simulation projects.

Nuclear Industry Training and Consulting gross profit for Q1 2017 was
$1.1 million, or 16.2% gross margin, compared to approximately $0.5
million, or 11.6% gross margin, in Q1 2016. The year-over-year increase
in Nuclear Industry Training and Consulting gross margin percentage in
Q1 2017 primarily reflects the Company’s ongoing focus on entering
higher margin contracts.

Selling, general and administrative expenses in Q1 2017 totaled $3.6
million, or 22.0% of revenue, compared to $2.8 million, or 21.2% of
revenue, in Q1 2016. The increase in selling, general, and
administrative expenses resulted from a $0.7 million year-over-year rise
in corporate charges primarily due to a higher non-cash stock
compensation expense and higher professional fees.

Research and development costs, net of capitalized software, totaled
approximately $402,000 and $354,000 for Q1 2017 and Q1 2016,
respectively.

Operating loss was approximately $57,000 in Q1 2017, compared to
operating income of approximately $215,000 in Q1 2016. Operating
loss/income included non-cash stock compensation expense of
approximately $596,000 in Q1 2017, compared to approximately $247,000 in
Q1 2016.

Net loss for Q1 2017 totaled approximately $266,000, or $(0.01) per
basic and diluted share, compared to net income of approximately
$138,000, or $0.01 per basic and diluted share, in Q1 2016.

Adjusted net income, excluding the impact of gain/loss from the change
in fair value of contingent consideration, restructuring charges,
stock-based compensation expense, and consulting support for finance
restructuring increased to approximately $629,000, or $0.03 per diluted
share, compared to approximately $519,000, or $0.03 per diluted share,
in Q1 2016.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
for Q1 2017 was negative $80,000 compared to $372,000 in Q1 2016.

Adjusted EBITDA, which excludes the impact of gain/loss from the change
in fair value of contingent consideration, restructuring charges,
stock-based compensation expense, and consulting support for finance
restructuring totaled approximately $815,000 in Q1 2017, compared to
approximately $753,000 in Q1 2016.

BACKLOG AND CASH POSITION

Backlog at March 31, 2017, increased 8.7% to $79.6 million from $73.2
million at December 31, 2016. Backlog at March 31, 2017, included $67.0
million of Performance Improvement Solutions backlog and $12.6 million
of Nuclear Industry Training and Consulting backlog.

GSE’s cash position at March 31, 2017, was $22.8 million, including $1.1
million of restricted cash, as compared to $22.9 million, including $1.1
million of restricted cash, at December 31, 2016.

CONFERENCE CALL

Management will host a conference call today at 4:30 pm Eastern Time to
discuss Q1 2017 results as well as other matters.

Interested parties may participate in the call by dialing:

• (877) 407-9753 (Domestic)
• (201) 493-6739 (International)

The conference call will also be accessible via the following link: http://www.investorcalendar.com/event/14838

For those who cannot listen to the live broadcast, an online webcast
replay will be available at www.gses.com
or through August 15, 2017 at the following link: http://www.investorcalendar.com/event/14838.

ABOUT GSE SYSTEMS, INC.

GSE Systems, Inc. is a world leader in real-time high-fidelity
simulation, providing a wide range of simulation, training and
engineering solutions to the power and process industries. Its
comprehensive and modular solutions help customers achieve performance
excellence in design, training and operations. GSE’s products and
services are tailored to meet specific client requirements such as
scope, budget and timeline. The Company has over four decades of
experience, more than 1,100 installations, and hundreds of customers in
over 50 countries spanning the globe. GSE Systems is headquartered in
Sykesville (Baltimore), Maryland, with offices in Huntsville, Alabama;
Chennai, India; Nyköping, Sweden; Stockton-on-Tees, UK; and Beijing,
China. Information about GSE Systems is available at www.gses.com.

FORWARD LOOKING STATEMENTS

We make statements in this press release that are considered
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934. These statements reflect our current expectations
concerning future events and results. We use words such as “expect,”
“intend,” “believe,” “may,” “will,” “should,” “could,” “anticipates,”
and similar expressions to identify forward-looking statements, but
their absence does not mean a statement is not forward-looking. These
statements are not guarantees of our future performance and are subject
to risks, uncertainties, and other important factors that could cause
our actual performance or achievements to be materially different from
those we project. For a full discussion of these risks, uncertainties,
and factors, we encourage you to read our documents on file with the
Securities and Exchange Commission, including those set forth in our
periodic reports under the forward-looking statements and risk factors
sections. We do not intend to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.

EBITDA and Adjusted EBITDA Reconciliation (in thousands)

EBITDA and Adjusted EBITDA are not measures of financial performance
under generally accepted accounting principles (GAAP). Management
believes EBITDA and Adjusted EBITDA, in addition to operating profit,
net income and other GAAP measures, are useful to investors to evaluate
the Company’s results because it excludes certain items that are not
directly related to the Company’s core operating performance that may,
or could, have a disproportionate positive or negative impact on our
results for any particular period. Investors should recognize that
EBITDA and Adjusted EBITDA might not be comparable to similarly-titled
measures of other companies. This measure should be considered in
addition to, and not as a substitute for or superior to, any measure of
performance prepared in accordance with GAAP. A reconciliation of
non-GAAP EBITDA and Adjusted EBITDA to the most directly comparable GAAP
measure in accordance with SEC Regulation G follows:

Adjusted Net Income and Adjusted EPS Reconciliation (in
thousands, except per share amounts)

Adjusted Net Income and adjusted earnings (loss) per share (adjusted
EPS) are not measures of financial performance under GAAP. Management
believes adjusted net income and adjusted EPS, in addition to other GAAP
measures, provide meaningful supplemental information regarding our
operational performance. Our management uses Adjusted Net Income and
other non-GAAP measures to evaluate the performance of our business and
make certain operating decisions (e.g., budgeting, planning, employee
compensation and resource allocation). This information facilitates
management’s internal comparisons to our historical operating results as
well as to the operating results of our competitors. Since management
finds this measure to be useful, we believe that our investors can
benefit by evaluating both non-GAAP and GAAP results. These measures
should be considered in addition to, and not as a substitute for or
superior to, any measure of performance prepared in accordance with
GAAP. A reconciliation of non-GAAP adjusted net income and adjusted EPS
to GAAP net income, the most directly comparable GAAP financial measure,
is as follows:

^(a) During the three months ended March 31, 2017, the Company
reported a GAAP net loss and positive adjusted net income. Accordingly,
there were 407,675 dilutive shares from options and RSUs included in the
adjusted earnings per common share calculation that were considered
anti-dilutive in determining the GAAP diluted loss per common share.

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