SYKESVILLE, Md. –
GSE Systems, Inc. (GSE or the Company) (NYSE American: 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 third quarter (Q3) ended September
30, 2017.

Q3 2017 OVERVIEW

• Acquired Absolute Consulting on September 20, adding approximately $40
  million in LTM revenue.
• Revenue increased 6.8% to $15.4 million from $14.4 million in Q3 2016.
• Gross profit rose 5.7% to $4.2 million from $4.0 million in Q3 2016.
• Net loss totaled ($0.6) million, or ($0.03) per diluted share,
  compared to net income of $0.2 million, or $0.01 per diluted share, in
  Q3 2016.
• Adjusted net income¹ increased 65.3% to $0.6 million, or
  $0.03 per diluted share, from $0.4 million, or $0.02 per diluted
  share, in Q3 2016.
• Adjusted EBITDA increased 31.0% to $0.9 million from $0.7 million in
  Q3 2016.
• New orders totaled $9.2 million in Q3 2017.
• Cash flow provided by operations was $0.3 million compared to $2.8
  million in Q3 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 September 30, 2017

• Cash and equivalents of $16.5 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 $11.0 million and current ratio of 1.4x.
• No outstanding long-term debt.
• Backlog totaled $76.4 million, compared to $73.2 million at December
  31, 2016.

Kyle J. Loudermilk, GSE’s President and Chief Executive Officer, said,
“In Q3 2017, GSE delivered year-over-year growth in revenue, adjusted
net income and adjusted EBITDA. We completed our acquisition of Absolute
Consulting, significantly enhancing GSE’s position as the ‘go to’
provider of consulting solutions to the power industry, with a
particular focus on nuclear power. Our combination with Absolute makes
us a company of scale, with trailing twelve-month revenue of
approximately $100 million. It is also a significant proof point of our
thesis that GSE is a terrific platform for consolidating a fragmented
vendor ecosystem for nuclear power. Absolute Consulting will begin to
contribute meaningfully to our consolidated results in the fourth
quarter. Our backlog remains strong, reflecting our focus on organic
business initiatives and operational execution. We ended the quarter
with approximately $16.5 million of cash and no debt. I am delighted
with our progress so far in 2017, and with a robust and active M&A
pipeline, we look forward to scaling GSE further.”

Q3 2017 RESULTS

Q3 2017 revenue increased 6.8% to $15.4 million, from $14.4 million in
Q3 2016, driven by a 58.4% rise in Nuclear Industry Training and
Consulting revenue, primarily resulting from an increase of $1.5 million
due to higher staffing demand from a major customer and ten days of
revenue of $1.2 million from Absolute Consulting following its
acquisition. These increases were partially offset by a 14.5% decrease
in Performance Improvement Solutions revenue, mainly due to lower
revenues from our foreign subsidiaries of approximately $0.8 million and
a revenue adjustment of approximately $0.5 million related to a customer
contract, which was offset by a similar adjustment to cost of revenue.

(in thousands)		Three months ended				Nine months ended
		September 30,				September 30,
Revenue		2017		2016		2017		2016
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Performance Improvement Solutions		$8,737		$10,215		$30,093		$27,382
Nuclear Industry Training and Consulting		6,672		4,213		18,783		12,438
Total Revenue		$15,409		$14,428		$48,876		$39,820

Performance Improvement Solutions new orders totaled $2.9 million in Q3
2017 compared to $10.2 million in Q3 2016. Due to timing difference, a
few key orders slipped into the fourth quarter. Nuclear Industry
Training and Consulting new orders totaled $6.3 million in Q3 2017
compared to $3.6 million in Q3 2016.

Q3 2017 gross profit increased to $4.2 million, or 27.4% of revenue,
from $4.0 million, or 27.7% of revenue, in Q3 2016.

(in thousands)		Three months ended								Nine months ended
		September 30,								September 30,
Gross Profit:		2017		%		2016		%		2017		%		2016		%
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Performance Improvement Solutions		$2,904		33.2%		$3,507		34.3%		$10,337		34.3%		$9,871		36.0%
Nuclear Industry Training and Consulting		1,320		19.8%		491		11.7%		3,026		16.1%		1,620		13.0%
Total Gross Profit		$4,224		27.4%		$3,998		27.7%		$13,363		27.3%		$11,491		28.9%

Performance Improvement Solutions gross profit for Q3 2017 was $2.9
million, or 33.2% gross margin, compared to $3.5 million, or 34.3% gross
margin, in Q3 2016. The year over year decrease in gross profit
percentage for Performance Improvement Solutions during Q3 2017 was
primarily driven by three major nuclear simulation projects with lower
margin.

Nuclear Industry Training and Consulting gross profit for Q3 2017 was
$1.3 million, or 19.8% gross margin, compared to approximately $0.5
million, or 11.7% gross margin, in Q3 2016. The year over year increase
in Nuclear Industry Consulting and Training gross profit percentage for
Q3 2017 was primarily driven by the change in the mix of projects with
higher margins, which reflected the segment’s focus on entering higher
margin contracts.

Selling, general and administrative expenses in Q3 2017 totaled $4.4
million, or 28.4% of revenue, compared to $2.9 million, or 20.3% of
revenue, in Q3 2016. The increase in selling, general, and
administrative expenses was primarily due to $0.7 million of higher
contingent consideration expense related to the fair value adjustments
related to the Company’s November 2014 Hyperspring acquisition, the
one-time transaction costs of $0.5 million related to the acquisition of
Absolute Consulting on September 20, 2017, and a higher non-cash stock
compensation expense of $0.2 million.

Research and development costs, net of capitalized software, totaled
approximately $0.4 million for Q3 2017 and Q3 2016, respectively.

Operating loss was approximately $(0.6) million in Q3 2017, compared to
operating income of approximately $0.4 million in Q3 2016.

Net loss for Q3 2017 totaled approximately ($0.6) million, or ($0.03)
per basic and diluted share, compared to net income of approximately
$0.2 million, or $0.01 per basic and diluted share, in Q3 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, acquisition-related expenses, and Westinghouse bankruptcy
related charges increased to approximately $0.6 million, or $0.03 per
diluted share, compared to approximately $0.4 million, or $0.02 per
diluted share, in Q3 2016.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
for Q3 2017 was $(0.3) million compared to $0.5 million in Q3 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, acquisition-related expenses, and Westinghouse bankruptcy
related charges, totaled approximately $0.9 million in Q3 2017, compared
to approximately $0.7 million in Q3 2016.

BACKLOG AND CASH POSITION

Backlog at September 30, 2017, totaled $76.4 million compared to $73.2
million at December 31, 2016. Backlog at September 30, 2017, included
$51.8 million of Performance Improvement Solutions backlog and $24.6
million of Nuclear Industry Training and Consulting backlog, $12.7
million of which was attributable to Absolute. At December 31, 2016, the
Company’s backlog was $73.2 million: $68.8 million for the Performance
Improvement Solutions business segment and $4.4 million for Nuclear
Industry Training and Consulting. Excluding Absolute, total backlog
decreased approximately $9.5 million from $73.2 million at December 31,
2016 to $63.7 million at September 30, 2017. The decrease in backlog is
primarily due to 2016 backlog that was converted to revenues during 2017
and has only been partially backfilled by new orders. Excluding
Absolute, Nuclear Industry Training and Consulting’s backlog increased
$7.5 million during 2017 primarily due to increased orders from
Hyperspring’s two largest customers.

GSE’s cash position at September 30, 2017, was $16.5 million, including
$1.0 million of restricted cash, compared to $22.9 million, including
$1.1 million of restricted cash, at December 31, 2016. The decrease in
cash was primarily due to the all-cash acquisition of Absolute during Q3
2017 for $8.9 million, which included a pre-closing working capital
adjustment of $0.1 million.

CONFERENCE CALL

Management will host a conference call today at 4:30 pm Eastern Time to
discuss Q3 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/event/21370

For those who cannot listen to the live broadcast, an online webcast
replay will be available at www.gses.com
or through February 14, 2018 at the following link:
http://www.investorcalendar.com/event/21370

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 Navarre, Florida;
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				Nine Months ended
		September 30,				September 30,
		2017		2016		2017		2016
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenue		$15,409		$14,428		$48,876		$39,820
Cost of revenue		11,185		10,430		35,513		28,329
Gross profit		4,224		3,998		13,363		11,491
Selling, general and administrative		4,374		2,936		11,740		8,606
Research and development		353		381		1,103		1,010
Restructuring charges		–		85		45		487
Depreciation		79		91		254		294
Amortization of definite-lived intangible assets		50		72		148		219
Operating expenses		4,856		3,565		13,290		10,616
Operating income		(632)		433		73		875
Interest income, net		15		11		60		52
Gain (loss) on derivative instruments, net		71		(211)		226		(346)
Other income (expense), net		33		15		(4)		112
(Loss) income before income taxes		(513)		248		355		693
Provision for income taxes		92		80		399		275
Net (loss) income		($605)		$168		($44)		$418
Basic earnings per common share		($0.03)		$0.01		$0.00		$0.02
Diluted earnings per common share		($0.03)		$0.01		$0.00		$0.02
Weighted average shares outstanding – Basic		19,280,770		18,230,148		19,204,778		18,052,019
Weighted average shares outstanding – Diluted		19,280,770		18,470,117		19,204,778		18,287,870

GSE SYSTEMS, INC AND SUBSIDIARIES Selected Balance Sheet Data (in thousands)
		(unaudited)
		September 30, 2017		December 31, 2016
Cash and cash equivalents		$15,525		$21,747
Restricted cash – current		960		1,140
Current assets		38,057		43,802
Total assets		51,038		53,656
Current liabilities		$27,010		$31,386
Long-term liabilities		1,515		1,149
Stockholders’ equity		22,513		21,121

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. 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 EBITDA and Adjusted EBITDA to the most directly comparable GAAP
measure in accordance with SEC Regulation G follows:

		Three Months ended				Nine Months ended
		September 30,				September 30,
		2017		2016		2017		2016
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net (loss) income		($605)		$168		($44)		$418
Interest income, net		(15)		(11)		(60)		(52)
Provision for income taxes		92		80		399		275
Depreciation and amortization		247		276		754		809
EBITDA		(281)		513		1,049		1,450
Loss (gain) from the change in fair value of contingent consideration		139		(525)		436		(370)
Restructuring charges		–		85		45		487
Stock-based compensation expense		627		412		1,873		900
Consulting support for finance restructuring		–		232		–		310
Acquisition-related expense		454		–		473		–
Westinghouse bankruptcy related expense		–		–		122		–
Adjusted EBITDA		$ 939		$ 717		$ 3,998		$ 2,777

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:

		Three Months ended				Nine Months ended
		September 30,				September 30,
		2017		2016		2017		2016
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net income		($605)		$168		($44)		$418
Gain/loss from the change in fair value of contingent consideration		139		(525)		436		(370)
Restructuring charges		–		85		45		487
Stock-based compensation expense		627		412		1,873		900
Consulting support for finance restructuring		–		232		–		310
Acquisition-related expense		454		–		473		–
Westinghouse bankruptcy related expense		–		–		122		–
Adjusted net income		$615		$372		$2,905		$1,745
Earnings per share – diluted		$(0.03)		$0.01		$0.00		$0.02
Adjusted earnings per share – diluted (a)		$0.03		$0.02		$0.15		$0.10
Weighted average shares outstanding – Diluted (a)		19,702,742		18,470,117		19,601,661		18,287,870

(a) During the three months and nine months ended September 30, 2017,
the Company reported a GAAP net loss and positive adjusted net income.
Accordingly, there were 421,972 and 396,883 dilutive shares from options
and RSUs included in the adjusted earnings per common share calculation
for the three and nine months ended September 30, 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
Chief
Operating Officer
410-970-7802
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Senior Vice President
212-836-9608
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Kalle
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Senior Associate
212-836-9614
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