GSE Systems Announces 2014 Second Quarter Financial Results

  GSE Systems Announces 2014 Second Quarter Financial Results

Q2 2014 OVERVIEW

  *Revenue of $8.3 million compared to $11.0 million in Q2 2013.
  *Gross profit of $2.6 million, or 32.0% of revenues, compared to gross
    profit (excluding non-cash charge) of $2.8 million, or 25.5% of revenues,
    in Q2 2013.
  *Net loss of $2.0 million, or $0.11 per diluted share, compared to a net
    loss (excluding non-cash charges) of $1.6 million, or $0.09 per diluted
    share, in Q2 2013.

At June 30, 2014

  *Total cash and equivalents of $18.1 million, or $1.01 per diluted share.
  *Working capital of $21.8 million.
  *$0 long-term debt.
  *Backlog of $36.1 million.

Business Wire

SYKESVILLE, Md. -- August 15, 2014

GSE Systems, Inc. (“GSE” or “the Company”) (NYSE MKT:GVP), a global energy
services solutions provider, today announced financial results for the second
quarter (“Q2”) ended June 30, 2014.

Jim Eberle, Chief Executive Officer of GSE, said, “Our Q2 results reflect the
ongoing challenges of our nuclear and fossil end markets. Although economic
and regulatory uncertainties, especially with respect to coal-fired power
plants, have caused lingering delays in capital expenditure programs, we
booked approximately $15.9 million of new orders during the first six months
of 2014. This business development activity is reflected in our backlog at
June 30, 2014, which rose by $1.3 million from March 31, 2014. We estimate
that potential orders totaling $18.3 million are being delayed by our clients
as they continue to address a dynamic industry landscape.”

Q2 2014 RESULTS

Q2 2014 revenue declined 25.0% to $8.3 million from $11.0 million in Q2 2013.
The decrease in revenue was mainly caused by a $2.4 million decline in revenue
from the $36.6 million Slovakia simulator project, which was completed and
entered warranty in April 2014. In addition, revenue generated from fossil
fuel simulation projects decreased by $1.0 million in Q2 2014 as compared to
Q2 2013, the result of the completion of several large projects in 2013 and a
continued sluggishness in capital spending by fossil fuel utilities.

Gross profit in Q2 2014 was $2.6 million, or 32.0% of revenue, as compared to
$0.6 million, or 5.8% of revenue, in Q2 2013. In Q2 2013 the Company recorded
a $2.2 million non-cash write down of capitalized software development costs.
Excluding this non-cash write down, Q2 2013 gross profit would have been $2.8
million, or 25.5% of revenue.

Sales, general & administrative expenses (SG&A) in Q2 2014 rose 12.8% to $4.5
million from $3.9 million in Q2 2013. This increase was due mainly to higher
software product development expenses and severance and restructuring costs
related to our Swedish operations, partially offset by lower bidding and
proposal costs.

Operating loss for Q2 2014 was $2.0 million compared to an operating loss of
$8.0 million in Q2 2013. In addition to the above-referenced $2.2 million
write down, GSE also incurred a $4.5 million goodwill impairment charge in Q2
2013. Excluding these charges, operating loss for Q2 2013 was $1.3 million.

Net loss for Q2 2014 was $2.0 million, or $0.11 per basic and diluted share,
compared to a net loss of $8.2 million, or $0.45 per basic and diluted share,
in Q2 2013. Excluding the $6.6 million in one-time, non-cash charges, the net
loss for Q2 2013 would have been $1.6 million, or $0.09 per diluted share.

The EBITDA (Earnings before interest, taxes, depreciation and amortization)
loss for Q2 2014 was $1.8 million compared to an EBITDA loss of $1.4 million
in Q2 2013.

Backlog at June 30, 2014 rose to $36.1 million from $34.8 million at March 31,
2014.

GSE’s cash position at June 30, 2014 was $18.1 million, excluding $1.0 million
of restricted cash, as compared to $20.8 million at March 31, 2014.

CONFERENCE CALL

Management will host a conference call today at 9:00 am Eastern Time to
discuss Q2 results and other matters.

Interested parties may participate in the call by dialing:

  *(877) 407-9753 (Domestic) or
  *(201) 493-6739 (International)

The conference call will also be accessible via the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=173016

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 energy 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 St. Marys,
Georgia; Cary, North Carolina; Chennai, India; Nyköping, Sweden;
Stockton-on-Tees, UK; Glasgow, 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)
                                                                            
                   (unaudited)                           (unaudited)
                   Three Months ended                    Six Months ended
                   June 30,                              June 30,
                   2014               2013               2014               2013
                                                                            
                                                                            
Contract           $ 8,276            $ 11,034           $ 17,000           $ 23,417
revenue
Cost of              5,629              8,219              12,129             17,521
revenue
Write-down of
capitalized
software            -                2,174            -                2,174      
development
costs
                                                                            
Gross profit         2,647              641                4,871              3,722
                                                                            
Selling,
general and          4,452              3,946              8,596              8,111
administrative
Goodwill
impairment           -                  4,462              -                  4,462
loss
Depreciation         134                146                273                299
Amortization
of
definite-lived      36               52               72               104        
intangible
assets
Total
operating           4,622            8,606            8,941            12,976     
expenses
                                                                            
Operating loss       (1,975     )       (7,965     )       (4,070     )       (9,254     )
                                                                            
                                                                            
Interest             28                 24                 59                 63
income, net
Gain (loss) on
derivative           5                  (410       )       109                (143       )
instruments
Other income        3                94               (7         )      (11        )
(expense), net
                                                                            
Loss before          (1,939     )       (8,257     )       (3,909     )       (9,345     )
income taxes
                                                                            
Provision
(benefit) for       47               (58        )      101              9          
income taxes
                                                                            
Net loss           $ (1,986     )     $ (8,199     )     $ (4,010     )     $ (9,354     )
                                                                            
                                                                            
Basic loss per     $ (0.11      )     $ (0.45      )     $ (0.22      )     $ (0.51      )
common share
Diluted loss
per common         $ (0.11      )     $ (0.45      )     $ (0.22      )     $ (0.51      )
share
                                                                            
                                                                            
Weighted
average shares      17,887,859       18,299,108       17,887,859       18,320,653 
outstanding -
Basic
Weighted
average shares      17,887,859       18,299,108       17,887,859       18,320,653 
outstanding -
Diluted
                                                                            


GSE SYSTEMS, INC AND SUBSIDIARIES
Selected balance sheet data
(unaudited)
                            June 30, 2014   December 31, 2013
                                                
Cash and cash equivalents     $    18,103       $      15,643
Restricted cash - current          11                  45
Current assets                     36,179              43,944
Long-term restricted cash          1,021               1,021
Total assets                       41,086              48,827
                                                
Current liabilities           $    14,393       $      17,953
Long-term liabilities              78                  487
Stockholders' equity               26,615              30,387
                                                

                            EBITDA Reconciliation

EBITDA is not a measure of financial performance under generally accepted
accounting principles (“GAAP”). Management believes EBITDA, in addition to
operating profit, net income and other GAAP measures, is 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. Investors
should recognize that 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 EBITDA to the most
directly comparable GAAP measure in accordance with SEC Regulation G follows:

                                                           
                       Three Months ended            Six Months ended
                       June 30,                      June 30,
                       2014           2013           2014           2013
                                                                    
Net loss               $ (1,986 )     $ (8,199 )     $ (4,010 )     $ (9,354 )
Interest income,         (28    )       (24    )       (59    )       (63    )
net
Provision
(benefit) for            47             (58    )       101            9
income taxes
Write-down of
capitalized              -              2,174          -              2,174
software
development costs
Depreciation and         170            198            345            403
amortization
Goodwill                -            4,462        -            4,462  
impairment loss
EBITDA                 $ (1,797 )     $ (1,447 )     $ (3,623 )     $ (2,369 )
                                                                    

Contact:

Company
GSE Systems, Inc.
Jim Eberle, 410-970-7950
Chief Executive Officer
or
The Equity Group Inc.
Devin Sullivan, 212-836-9608
Senior Vice President
dsullivan@equityny.com
or
Thomas Mei, 212-836-9614
Associate
tmei@equityny.com
 
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