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 fourth quarter (“Q4”) and full year ended December 31,
2016.

Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said,
“GSE closed an outstanding 2016 with a solid fourth quarter,
successfully delivering on our commitments to our customers and our
shareholders. We finished the year with a significantly higher cash
balance of $22.9 million, reflecting GSE’s improved operations and
strong cash flow generation. Our strengthened financial position
enhances our ability to pursue a number of exciting organic and
inorganic growth opportunities that we have identified. Our focus on
organic growth is most recently illustrated by our major contract
expansion in Q4 2016 with EDF Energy to upgrade the control room station
simulation system at their Torness nuclear power plant in the United
Kingdom. As a result of this and other major new orders we won in 2016,
we finished the year with near-record backlog. 2016 was a
transformational year for GSE in many ways. In 2017, we aim to build on
our success to grow revenue and further enhance shareholder value.”

2016 FULL YEAR RECAP

Revenue totaled $53.1 million in 2016, compared to $56.8 million in 2015.

Gross profit increased 18.5% to $15.2 million, or 28.7% of revenue, from
$12.9 million, or 22.6% of revenue in 2015, including $1.5 million for a
write-down of capitalized software development costs in 2015.

Operating income totaled $1.6 million in 2016, up from an operating loss
of $4.1 million in 2015.

Net income rose to $1.4 million, or $0.08 per diluted share, from a net
loss of $4.7 million, or $(0.26) per diluted share, in 2015.

Adjusted net income, excluding the impact of gain/loss from the change
in fair value of contingent consideration, restructuring charges,
stock-based compensation expense, consulting support for finance
restructuring and write-down of capitalized software development costs
increased to $3.6 million, or $0.20 per diluted share, from roughly
breakeven, or $0.00 per diluted share in 2015.

EBITDA totaled $2.4 million in 2016, up from an EBITDA loss of $3.3
million in 2015.

Adjusted EBITDA, excluding the impact of gain/loss from the change in
fair value of contingent consideration, restructuring charges,
stock-based compensation expense, consulting support for finance
restructuring and write-down of capitalized development costs rose 231%
to $4.6 million in 2016 from $1.4 million in 2015.

Q4 2016 RESULTS

Q4 2016 revenue totaled $13.3 million, compared to $14.3 million in Q4
2015, reflecting a 20% decrease in Performance Improvement Solutions
revenue due to timing of hardware revenues in U.S. Nuclear.
Specifically, in Q4 2015 the Company recognized $1.3 million for a large
project when hardware was delivered to the customer and the project was
completed. This decline was partially offset by a 25% increase in
Nuclear Industry Training and Consulting revenue.

(in thousands)				Three Months ended December 31,								Twelve Months ended December 31,
Revenue:				2016				2015				2016				2015
				(unaudited)				(unaudited)				(unaudited)				(audited)
Performance Improvement Solutions				$	8,211			$	10,276			$	35,593			$	37,074
Nuclear Industry Training and Consulting					5,070				4,051				17,508				19,729
Total Revenue				$	13,281			$	14,327			$	53,101			$	56,803

Performance Improvement Solutions new orders totaled $13.1 million in Q4
2016 compared to $9.3 million in Q4 2015. Nuclear Industry Training and
Consulting new orders totaled $3.7 million in Q4 2016 compared to $4.6
million in Q4 2015.

Q4 2016 gross profit was $4.3 million, or 32.7% of revenue, compared to
$4.6 million, or 32.3% of revenue, in Q4 2015.

(in thousands)				Three Months ended December 31,																Twelve Months ended December 31,
Gross Profit:				2016				%				2015				%				2016				%				2015				%
				(unaudited)								(unaudited)								(unaudited)								(audited)
Performance Improvement Solutions				$	3,357			40.9	%			$	4,002			38.9	%			$	12,644			35.5	%			$	11,995			32.4	%
Nuclear Industry Training and Consulting					980			19.3	%				620			15.3	%				2,600			14.9	%				2,402			12.2	%
Total Gross Profit					4,337			32.7	%				4,622			32.3	%				15,244			28.7	%				14,397			25.3	%
Less: Write-down of Capitalized Software Development Costs					–			–					–			–					–			–					1,538			2.7	%
Consolidated Gross Profit				$	4,337			32.7	%			$	4,622			32.3	%			$	15,244			28.7	%			$	12,859			22.6	%

Performance Improvement Solutions gross profit for Q4 2016 was $3.4
million, or 40.9% gross margin, compared to $4.0 million, or 38.9% gross
margin, in Q4 2015. Nuclear Industry Training and Consulting gross
profit for Q4 2016 was $1.0 million, or 19.3% gross margin, compared to
approximately $620,000, or 15.3% gross margin, in Q4 2015.

Selling, general and administrative expenses in Q4 2016 totaled $3.5
million, or 26.2% of revenue, compared to $3.2 million, or 22.2% of
revenue, in Q4 2015. The increase in selling, general, and
administrative expenses resulted from the increase in stock compensation
expense.

Operating income was approximately $699,000 in Q4 2016, compared to $1.2
million in Q4 2015. Operating income included stock compensation expense
of approximately $650,000 in Q4 2016, compared to approximately $149,000
in Q4 2015.

Net income for Q4 2016 totaled $1.0 million, or $0.05 per basic and
diluted share, compared to net income of $1.0 million, or $0.06 per
basic and diluted share, in Q4 2015.

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 43% to $1.9 million, or $0.10 per diluted share,
from $1.3 million, or $0.07 per diluted share, in Q4 2015.

Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) for Q4 2016 was approximately $1.2 million compared to $1.5
million in Q4 2015.

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, increased 17% to $2.1 million in Q4 2016, from $1.8
million in Q4 2015.

BACKLOG AND CASH POSITION

Backlog at December 31, 2016, increased 53% to $73.2 million from $47.9
million at December 31, 2015. Backlog at December 31, 2016, included
$68.8 million of Performance Improvement Solutions backlog and $4.4
million of Nuclear Industry Training and Consulting backlog.

GSE’s cash position at December 31, 2016, was $22.9 million, including
$1.1 million of restricted cash, as compared to $14.6 million, including
$3.6 million of restricted cash, at December 31, 2015.

CONFERENCE CALL

Management will host a conference call today at 4:30 pm Eastern Time to
discuss Q4 and full year 2016 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/IC/CEPage.asp?ID=175649

For those who cannot listen to the live broadcast, an online webcast
replay will be available at www.gses.com
or through June 6, 2017 at the following link: http://www.investorcalendar.com/IC/CEPage.asp?ID=175649.

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.

GSE SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except share and per share data)
				Three Months ended December 31,								Twelve Months ended December 31,
				2016				2015				2016					2015
				(unaudited)				(unaudited)				(unaudited)					(audited)
Revenue				$	13,281			$	14,327			$	53,101				$	56,803
Cost of revenue					8,944				9,705				37,857					42,406
Write-down of capitalized software dev. costs					–				–				–					1,538
Gross profit					4,337				4,622				15,244					12,859
Selling, general and administrative					3,475				3,186				12,507					14,217
Restructuring charges					3				45				490					1,791
Depreciation					89				110				383					493
Amortization of definite-lived intangible assets					71				124				289					494
Operating expenses					3,638				3,465				13,669					16,995
Operating income (loss)					699				1,157				1,575					(4,136	)
Interest income, net					33				21				85					88
Gain (loss) on derivative instruments, net					328				19				(18	)				(40	)
Other income (expense), net					18				89				130					(146	)
Income (loss) before income taxes					1,078				1,286				1,772					(4,234	)
Provision for income taxes					75				260				350					471
Net income (loss)				$	1,003			$	1,026			$	1,422				$	(4,705	)
Basic earnings (loss) per common share				$	0.05			$	0.06			$	0.08				$	(0.26	)
Diluted earnings (loss) per common share				$	0.05			$	0.06			$	0.08				$	(0.26	)
Weighted average shares outstanding – Basic					18,722,743				17,901,414				18,218,681					17,892,891
Weighted average shares outstanding – Diluted					19,073,513				17,902,489				18,512,266					17,892,891

GSE SYSTEMS, INC AND SUBSIDIARIES Selected Balance Sheet Data (in thousands)
				(unaudited) December 31, 2016				(audited) December 31, 2015
Cash and cash equivalents				$	21,747			$	11,084
Restricted cash – current					1,140				1,771
Current assets					43,770				28,414
Long-term restricted cash					–				1,779
Total assets					53,617				39,371
Current liabilities				$	31,731			$	19,708
Long-term liabilities					801				1,295
Stockholders’ equity					21,085				18,368

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:

				Three Months ended December 31,										Twelve Months ended December 31,
				2016					2015					2016					2015
Net income (loss)				$	1,003				$	1,026				$	1,422				$	(4,705	)
Interest income, net					(33	)				(21	)				(85	)				(88	)
Provision for income taxes					75					260					350					471
Depreciation and amortization					160					234					672					987
EBITDA					1,205					1,499					2,359					(3,335	)
Write-down of capitalized software development costs					–					–					–					1,538
Gain (loss) from the change in fair value of contingent consideration					163					110					(207	)				849
Restructuring charges					3					45					490					1,791
Stock-based compensation expense					650					149					1,550					541
Consulting support for finance restructuring					84					–					394					–
Adjusted EBITDA				$	2,105				$	1,803				$	4,586				$	1,384

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 generally accepted
accounting principles (“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:

				Three Months ended December 31,								Twelve Months ended December 31,
				2016				2015				2016					2015
Net income (loss)				$	1,003			$	1,026			$	1,422				$	(4,705	)
Gain (loss) from the change in fair value of contingent consideration					163				110				(207	)				849
Restructuring charges					3				45				490					1,791
Stock-based compensation expense					650				149				1,550					541
Consulting support for finance restructuring					84				–				394					–
Write-down of capitalized software development costs					–				–				–					1,538
Adjusted net income				$	1,903			$	1,330			$	3,649				$	14
Diluted earnings (loss) per common share				$	0.05			$	0.06			$	0.08				$	(0.26	)
Adjusted earnings per common share – Diluted				$	0.10			$	0.07			$	0.20				$	0.00
Weighted average shares outstanding – Diluted					19,073,513				17,902,489				18,512,266					17,892,891

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GSE Systems, Inc.
Chris Sorrells, 410-970-7802
Chief
Operating Officer
or
The Equity Group Inc.
Devin
Sullivan, 212-836-9608
Senior Vice President
dsullivan@equityny.com
or
Kalle
Ahl, CFA, 212-836-9614
Senior Associate
kahl@equityny.com