SYKESVILLE, Md. –
GSE Systems, Inc. (GSE or the Company) (NYSE MKT: GVP), the world
leader in real-time high-fidelity simulation systems and
training/consulting solutions to the power and process industries, today
announced financial results for the second quarter (Q2) ended June 30,
2017.

Q2 2017 OVERVIEW

• Revenue increased 37.9% to $17.1 million, from $12.4 million in Q2
  2016.
• Gross profit rose 40.9% to $5.0 million from $3.6 million in Q2 2016.
• Net income grew to $0.8 million, or $0.04 per diluted share, from $0.1
  million, or $0.01 per diluted share, in Q2 2016.
• Adjusted net income¹ increased 92.5% to $1.6 million, or
  $0.08 per diluted share, from $0.9 million, or $0.05 per diluted
  share, in Q2 2016.
• Adjusted EBITDA increased 71.8% to $2.1 million from $1.2 million in
  Q2 2016.
• New orders totaled $8.1 million in Q2 2017.
• Cash flow provided by (used in) operations was $1.8 million compared
  to $(0.6) million in Q2 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”.

At June 30, 2017

• Cash and equivalents of $24.5 million, including $1.0 million of
  restricted cash, compared to $22.9 million, including $1.1 million of
  restricted cash, at December 31, 2016.
• Working capital of $15.4 million and current ratio of 1.6x.
• No outstanding long-term debt.
• Backlog totaled $68.6 million, compared to $73.2 million at December
  31, 2016.

Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said,
“In Q2 2017, GSE achieved strong revenue and net income growth, driven
by robust 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 backlog
remains strong, reflecting our focus on organic business initiatives and
operational execution. We ended the quarter with almost $25 million of
cash and no debt. I am delighted with our progress in the first half of
2017, and we are well positioned to create additional shareholder value
through organic and inorganic growth initiatives.”

Q2 2017 RESULTS

Q2 2017 revenue increased 37.9% to $17.1 million, from $12.4 million in
Q2 2016, driven by a 32.9% rise in Nuclear Industry Training and
Consulting revenue, primarily due to higher staffing demand from a major
customer, combined with a 40.4% increase in Performance Improvement
Solutions revenue, mainly due to three projects from a major customer.

Performance Improvement Solutions new orders totaled $4.2 million in Q2
2017 compared to $5.8 million in Q2 2016. Nuclear Industry Training and
Consulting new orders totaled $3.9 million in Q2 2017 compared to $3.4
million in Q2 2016.

Q2 2017 gross profit increased to $5.0 million, or 29.3% of revenue,
from $3.6 million, or 28.7 % of revenue, in Q2 2016.

Performance Improvement Solutions gross profit for Q2 2017 was $4.4
million, or 37.6% gross margin, compared to $2.9 million, or 35.0% gross
margin, in Q2 2016. The year-over-year increase in Performance
Improvement Solutions gross margin percent in Q2 2017 primarily reflects
the change in mix of projects with higher margins.

Nuclear Industry Training and Consulting gross profit for Q2 2017 was
$0.6 million, or 11.5% gross margin, compared to approximately $0.6
million, or 15.9% gross margin, in Q2 2016. The year-over-year decrease
in Nuclear Industry Training and Consulting gross margin percentage in
Q2 2017 primarily is due to a lower margin project from a major customer.

Selling, general and administrative expenses in Q2 2017 totaled $3.8
million, or 22.0% of revenue, compared to $2.6 million, or 20.6% of
revenue, in Q2 2016. The increase in selling, general, and
administrative expenses resulted from a $1.2 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 $0.3 million for Q2 2017 and Q2 2016, respectively.

Operating income was approximately $0.8 million in Q2 2017, compared to
operating income of approximately $0.2 million in Q2 2016.

Net income for Q2 2017 totaled approximately $0.8 million, or $0.04 per
basic and diluted share, compared to net income of approximately $0.1
million, or $0.01 per basic and diluted share, in Q2 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, consulting support for finance
restructuring, and Westinghouse bankruptcy related charges increased to
approximately $1.6 million, or $0.08 per diluted share, compared to
approximately $0.9 million, or $0.05 per diluted share, in Q2 2016.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
for Q2 2017 was $1.3 million compared to $0.5 million in Q2 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, consulting support for finance
restructuring, and Westinghouse bankruptcy related charges, totaled
approximately $2.1 million in Q2 2017, compared to approximately $1.2
million in Q2 2016.

BACKLOG AND CASH POSITION

Backlog at June 30, 2017, totaled $68.6 million compared to $73.2
million at December 31, 2016. Backlog at June 30, 2017, included $57.4
million of Performance Improvement Solutions backlog and $11.2 million
of Nuclear Industry Training and Consulting backlog.

GSE’s cash position at June 30, 2017, was $24.5 million, including $1.0
million of restricted cash, 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 Q2 results and 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=17941

For those who cannot listen to the live broadcast, an online webcast
replay will be available at www.gses.com
or through November 14, 2017 at the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=17941

ABOUT GSE SYSTEMS, INC.

GSE Systems, Inc. is a world leader in real-time high-fidelity
simulation, providing a wide range of simulation, training, consulting,
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 generally accepted
accounting principles (“GAAP”). Management believes adjusted net income
and adjusted EPS, in addition to other GAAP measures, are useful to
investors to evaluate the Company’s results because they exclude 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. 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:

View source version on businesswire.com: http://www.businesswire.com/news/home/20170814005869/en/

Company
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