COLUMBIA, Md. –
GSE Systems, Inc. (GSE or the Company) (Nasdaq: GVP), a leader in
real-time high-fidelity simulation systems, training/consulting and
technology-enabled engineering solutions to the power and process
industries, today announced financial results for the first quarter (Q1)
ended March 31, 2018.

RECENT EVENTS

• Acquired True North Consulting, LLC (“True North”) on May 11, 2018 for
  $9.75 million in cash. GSE projects that the acquired business will
  generate, on an annualized basis, revenue of over $10 million and,
  after identified synergies are implemented, adjusted EBITDA of
  approximately $2 million.
• Entered into an amended and restated credit agreement with Citizens
  Bank, consisting of a five-year $5 million revolving line of credit
  and a five-year $25 million delayed draw term loan facility to fund
  the acquisition of True North and future acquisitions. GSE drew down
  approximately $10 million to fund the acquisition of True North.

Q1 2018 OVERVIEW

• Revenue increased 40.1% to $22.9 million from $16.3 million in Q1 2017.
• Gross profit rose 18.8% to $4.9 million from $4.1 million in Q1 2017.
• Net loss totaled $1.5 million, or $(0.08) per diluted share, compared
  to $0.3 million, or $(0.01) per diluted share, in Q1 2017.
• Adjusted net income¹ equaled $0.2 million, or $0.01 per
  diluted share, compared to $0.8 million, or $0.04 per diluted share,
  in Q1 2017.
• Adjusted EBITDA¹ totaled $0.8 million, compared to $1.1
  million in Q1 2017.
• New orders rose to $24.7 million from $19.8 million in Q1 2017.

At March 31, 2018

• Cash and equivalents of $12.4 million, including $0.6 million of
  restricted cash, compared to $20.1 million, including $1.0 million of
  restricted cash, at December 31, 2017.
• Working capital of $11.6 million and current ratio of 1.5x.
• Backlog totaled $72.4 million, compared to $71.4 million at December
  31, 2017.

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,
“GSE had a solid start to 2018, successfully delivering on our
commitments to our customers and our shareholders. We efficiently
executed on our backlog, resulting in year over year revenue growth of
approximately 40% in the first quarter. We are growing our footprint as
a provider of highly skilled professionals and know-how to the nuclear
power industry with the recent addition of True North Consulting. Our
strong balance sheet, along with our acquisition credit facility,
positions us well to advance our strategy of leveraging GSE as an
exciting platform for rolling-up fractured vendor ecosystems serving the
nuclear power industry. We have identified and continue to work towards
capitalizing on a number of exciting organic and inorganic growth
opportunities. 2018 is off to a solid start, and we aim to build on our
success to grow revenue and further enhance shareholder value.”

Q1 2018 RESULTS

Q1 2018 revenue increased 40.1% to $22.9 million, from $16.3 million in
Q1 2017, primarily driven by the acquisition of Absolute Consulting, LLC
(“Absolute”) in September 2017.

(in thousands)				Three months ended
				March 31,
Revenue:				2018								2017
				(unaudited)								(unaudited)
Performance Improvement Solutions				$				9,901				$				9,670
Nuclear Industry Training and Consulting								12,994								6,672
Total Contract Revenue				$				22,895				$				16,342

Performance Improvement Solutions revenue totaled $9.9 million and $9.7
million for the three months ended March 31, 2018 and 2017,
respectively. The increase was mainly driven by an increase of $0.4
million due to more work performed for some major projects, which was
partially offset by a decrease of $0.2 million from international
subsidiaries as a result of the Company’s restructuring plan. We
recorded total Performance Improvement Solutions orders of $5.9 million
and $4.9 million for the three months ended March 31, 2018 and 2017,
respectively.

Nuclear Industry Training and Consulting revenue increased 94.8%
to $13.0 million for the three months ended March 31, 2018 from
$6.7 million for the three months ended March 31, 2017. The increase was
primarily due to the acquisition of Absolute, which contributed $7.4
million to the current period revenue. The increase was partially offset
by a decrease of $1.1 million from Hyperspring due to lower staff
augmentation needs from two major customers. Nuclear Industry Training
and Consulting orders totaled $18.8 million with $9.7 million
attributable to Absolute, and $14.9 million for the three months ended
March 31, 2018 and 2017, respectively.

Q1 2018 gross profit increased to $4.9 million, or 21.4% of revenue,
from $4.1 million, or 25.2% of revenue, in Q1 2017.

(in thousands)				Three months ended
				March 31,
Gross profit				2018												2017
				(unaudited)												(unaudited)
Performance Improvement Solutions				$				3,251				32.8%				$				3,044				31.5%
Nuclear Industry Training and Consulting								1,647				12.7%								1,078				16.2%
Consolidated Gross Profit				$				4,898				21.4%				$				4,122				25.2%

Performance Improvement Solutions gross profit for Q1 2018 was $3.3
million, or 32.8% gross margin, compared to $3.0 million, or 31.5% gross
margin, in Q1 2017. The year-over-year increase in gross margin for
Performance Improvement Solutions for Q1 2018 was mainly due to
increased software sales which generally have a higher gross margin
percentage than other types of contracts. For the three months ended
March 31, 2018 and 2017, the Company’s software sales accounted for 9%
and 5% of the segment revenue, respectively.

Nuclear Industry Training and Consulting gross profit for Q1 2018 was
$1.6 million, or 12.7% gross margin, compared to approximately $1.1
million, or 16.2% gross margin, in Q1 2017. The year-over-year decrease
in gross profit margin during 2018 for Nuclear Industry Training and
Consulting was primarily driven by lower margin from Absolute projects.
For the three months ended March 31, 2018, Absolute contributed 57.1% of
the segment revenue with a gross profit margin of 11.2%.

Selling, general and administrative (SG&A) expenses in Q1 2018 totaled
$4.5 million, or 19.8% of revenue, compared to $3.6 million, or 22.0% of
revenue, in Q1 2017. The year-over-year increase in SG&A expenses was
primarily driven by the acquisition of Absolute, which contributed $0.5
million to Q1 2018 SG&A expenses, as well as higher bonus expense of
$0.3 million mainly due to a new post earnout bonus plan in 2018 for
certain Hyperspring employees and higher one-time professional fees of
$0.3 million associated with the implementation of the new revenue
standard and tax legislation. The increase was partially offset by a
decrease of $0.3 million in contingent consideration expense related to
the 2014 Hyperspring acquisition as the earn-out period expired in
November 2017.

On December 27, 2017, the Board of GSE Systems, Inc. approved an
international restructuring plan to streamline and optimize the
Company’s global operations, and the Company announced a total
restructuring charge of $1.8 million spread out over several quarters,
excluding any tax impacts and cumulative translation adjustments. The
Company recorded a charge of $0.7 million in Q4 2017. For Q1 2018,
restructuring charges totaled $0.9 million, which included severance
expense of $0.3 million, lease termination costs of $0.5 million and
other costs of $0.1 million. As of March 31, 2018, the Company had
recorded accumulated restructuring charges of $1.7 million, and expects
to record the remaining restructuring charges of approximately $0.1
million by the end of Q2 2018. These restructuring charges exclude
cumulative translation adjustment losses of approximately $1.4 million,
assuming currency rates at March 31, 2018, and will be charged against
net income upon liquidation of the respective foreign subsidiaries. The
Company also expects to recognize tax benefits related to the
liquidation of these subsidiaries that may offset the majority of the
currency translation adjustment losses. For the three months ended March
31, 2017, the Company recorded restructuring charges of $45,000, which
represented true-up adjustments related to the restructuring plan
initiated in 2015.

Operating loss was approximately $1.1 million and $57,000 in Q1 2018 and
Q1 2017, respectively. The increase was primarily driven by
restructuring charges to streamline international operations.

Net loss for Q1 2018 totaled approximately $1.5 million, or $(0.08) per
basic and diluted share, compared to $0.3 million, or $(0.01) per basic
and diluted share, in Q1 2017. The increase was primarily driven by
restructuring charges to streamline international operations and higher
tax provisions due to the accruals related to uncertain tax positions
for certain foreign tax contingencies.

Adjusted net income¹, excluding the impact of gain/loss from
the change in fair value of contingent consideration, restructuring
charges, stock-based compensation expense and loss on derivative
instruments, net, was approximately $0.2 million, or $0.01 per diluted
share, compared to approximately $0.8 million, or $0.04 per diluted
share, in Q1 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
for Q1 2018 was negative $0.9 million compared to $37,000 in Q1 2017.

Adjusted EBITDA¹, which excludes the impact of gain/loss from
the change in fair value of contingent consideration, restructuring
charges, stock-based compensation expense and loss on derivative
instruments, net, totaled approximately $0.8 million and $1.1 million
for Q1 2018 and Q1 2017, respectively.

BACKLOG AND CASH POSITION

Backlog at March 31, 2018, increased to $72.4 million from $71.4 million
at December 31, 2017. Backlog at March 31, 2018, included $41.5 million
of Performance Improvement Solutions backlog and $30.9 million of
Nuclear Industry Training and Consulting backlog. True North had
approximately $4.0 million of backlog as of March 31, 2018, which was
not included in the Company’s backlog at March 31, 2018.

GSE’s cash position at March 31, 2018, was $12.4 million, including $0.6
million of restricted cash, as compared to $20.1 million, including $1.0
million of restricted cash, at December 31, 2017. The change in cash
position was primarily driven by the timing difference of cash
collection and payments in different periods. The Company expects its
normalized cash position in the second half of 2018 to approximate $15.0
million after payments are received and costs related to restructuring
costs are completed excluding any future acquisitions payments.

CONFERENCE CALL

Management will host a conference call today at 4:30 pm Eastern Time to
discuss Q1 2018 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/28203

For those who cannot listen to the live broadcast, an online webcast
replay will be available at www.gses.com
or through August 15, 2018 at the following link: http://www.investorcalendar.com/event/28203.

ABOUT GSE SYSTEMS, INC.

GSE Systems, Inc. is a leader in real-time high-fidelity simulation
systems, training/consulting and technology-enabled 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 Columbia, Maryland, Navarre,
Florida, Montrose, Colorado, 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
		March 31,
		2018				2017
		(unaudited)				(unaudited)
Revenue		$	22,895			$	16,342
Cost of revenue			17,997				12,220
Gross profit			4,898				4,122
Operating expenses:
Selling, general and administrative			4,527				3,592
Research and development			329				402
Restructuring charges			917				45
Depreciation			103				76
Amortization of definite-lived intangible assets			150				64
Total operating expenses			6,026				4,179
Operating loss			(1,128	)			(57	)
Interest income, net			22				27
Loss on derivative instruments, net			(156	)			(160	)
Other income (expense), net			25				(3	)
Loss before income taxes			(1,237	)			(193	)
Provision for income taxes			259				73
Net loss		$	(1,496	)		$	(266	)
Basic loss per common share		$	(0.08	)		$	(0.01	)
Diluted loss per common share		$	(0.08	)		$	(0.01	)
Weighted average shares outstanding – Basic			19,514,385				19,094,382
Weighted average shares outstanding – Diluted			19,514,385				19,094,382

GSE SYSTEMS, INC AND SUBSIDIARIES
Selected Balance Sheet Data (in thousands)
				March 31, 2018					December 31, 2017
				(unaudited)					(audited)
Cash and cash equivalents				$	11,763				$	19,111
Restricted cash – current					647					960
Current assets					33,847					36,863
Total assets					53,058					56,855
Current liabilities				$	22,243				$	25,252
Long-term liabilities					1,453					1,931
Stockholders’ equity					29,362					29,672

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 is as follows:

		Three months ended
		March 31,
		2018							2017
Net loss		$				(1,496	)		$				(266	)
Interest income, net						(22	)						(27	)
Provision for income taxes						259							73
Depreciation and amortization						371							257
EBITDA						(888	)						37
Loss from the change in fair value of contingent consideration						–							254
Restructuring charges						917							45
Stock-based compensation expense						627							596
Loss on derivative instruments, net						156							160
Adjusted EBITDA		$				812			$				1,092

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

Adjusted Net Income and adjusted earnings 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,
in accordance with SEC Regulation G is as follows:

		Three months ended
		March 31,
		2018						2017
Net loss		$	(1,496	)				$	(266	)
Loss from the change in fair value of contingent consideration			–						254
Restructuring charges			917						45
Stock-based compensation expense			627						596
Loss on derivative instruments, net			156						160
Adjusted net income		$	204					$	789
Diluted loss per common share		$	(0.08	)				$	(0.01	)
Adjusted earnings per common share – Diluted		$	0.01					$	0.04
Weighted average shares outstanding – Diluted (a)			19,902,752						19,502,057

^(a) During the three months ended March 31, 2018 and 2017,
the Company reported a GAAP net loss and positive adjusted net income.
Accordingly, there were 388,367 and 407,675 dilutive shares from options
and RSUs included in the adjusted earnings per common share calculation
for the three months ended March 31, 2018 and 2017, respectively, that
were considered anti-dilutive in determining the GAAP diluted loss per
common share.

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