Kalle Ahl – Investor Relations-The Equity Group Kyle Loudermilk – President and Chief Executive Officer Chris Sorrells – Chief Operating Officer Emmett Pepe – Chief Financial Officer

Mike Smith – Private Investor

Greetings and welcome to the GSE Systems, Inc. Fourth Quarter and Full Year 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kalle Ahl of The Equity Group. Thank you, please begin.

Thank you, Riya, and good afternoon, everyone. Thank you for joining us today. Before we begin, I would like to remind everyone that statements made during the course of this call may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934. These statements reflect current expectations concerning future events and results. Words such as expect, intend, believe, may, will, should, could, anticipate, and similar expressions are words that are used to identify forward-looking statements, but their absence does not mean a statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks and uncertainties, and other important factors that could cause actual performance or achievements to be materially different from those projected. For a full discussion of these risks, uncertainties, and factors, you are encouraged to read GSE’s documents on file with the Securities and Exchange Commission, including those set forth in periodic reports filed under the forward-looking statements and the Risk Factors section. GSE does not intend to update or revise any forward-looking statements whether as result of new information, future events, or otherwise. On this call, management may refer to EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS, which are not measures of financial performance under generally accepted accounting principles or GAAP. Management believes that these non-GAAP figures in addition to other GAAP measures provide meaningful supplemental information regarding the Companies operational performance. Management uses these non-GAAP measures to evaluate the performance of GSE’s business and make certain operating decisions such as budgeting planning, employee compensation and resource allocation. This information facilitates management’s internal comparisons to GSE’s historical operating results as well as for the operating results of it’s competitors. Since management finds these measures useful GSE believes that investors may benefit by evaluating both non-GAAP and GAAP results. Investors should recognize that these non-GAAP figures 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 measures to their most directly comparable GAAP measures in accordance with SEC Regulation G, can be found in the Company’s earnings release. Now I’d like to turn the call over to GSE’s President and Chief Executive Officer Mr. Kyle Loudermilk. Kyle, please go ahead.

Thanks, Kalle, and good afternoon. I'd like to welcome everyone to GSE Systems' Fourth Quarter and Full Year 2016 Earnings Conference Call. Also on today's call are Chris Sorrells our Chief Operating Officer and Emmett Pepe our Chief Financial Officer. Earlier today, we issued a press release covering our fourth quarter 2016 financial results. Hopefully, you've had a chance to review this news release, but if you have not a copy can be found on our website at www.gses.com under the news section. Today, we reported solid fourth quarter financial results capping off an outstanding turnaround for GSE in 2016. We have successfully delivered on our commitments to our customers and our shareholders. As a result, I'm very proud of our team's collective effort in achieving these results. We recorded fourth quarter, adjusted EBITDA of $2.1 million bringing our full year 2016 adjusted EBITDA to $4.6 million, which is over three times the corresponding figure for full year 2015. Among other highlights this quarter, we continued to generate strong operating cash flow and strengthened our balance sheet. We concluded 2016 with a cash balance of approximately $23 million, up 56% from the start of the year. This quarter we also continue to win important new projects, including a major contract expansion with EDF Energy, to upgrade the control room station simulation system at their Torness nuclear power plant in the United Kingdom. We're using GSE's industry leading JADE suite of software to develop modern sustainable models for their control room simulators. We're also providing classroom simulators and a deep breathing room simulator for students. We expect the implementation phase of this project to commence in mid-2017 and be completed within three years. This project is yet another example of the value that GSE’s technical engineering and software solutions deliver to customers across the globe. Total new orders in the fourth quarter of 2016 rose 21% to $16.8 million from $13.9 million in the prior year quarter driven by the EDF energy contract expansion. As a result of our new business success, we finished the year with near record backlog of $73.2 million up 53% from a backlog of $47.9 million at the end of 2015. Backlog at the end of 2016 includes $68.8 million of performance improvement solutions backlog and $4.4 million of nuclear industry training and consulting backlog. Our pipeline remains robust and we are pursuing a number of new business development initiatives to strengthen our backlog further. Globally we continued to see the greatest activity in the United States followed by our international divisions focused on the UK as that country upgrades its nuclear fleet. China, Korea as well as Japan as that country restarts their nuclear reactors. In our view, the outlook for nuclear in the U.S. and abroad remains positive for our business. In the U.S. for instance there's a growing recognition of the value of carbon free electrical generation from nuclear. Several state legislative initiatives are underway to recognize the critical importance of generating carbon free electricity by providers of nuclear power. A key component of the country's carbon free energy mix, on our last call we discussed New York States clean energy standard, which provides an emissions free subsidy of $0.017 per kilowatt hour that helps ensure the State's existing nuclear power plants remain economically viable in an era of low cost natural gas while helping to level the playing field with wind and solar subsidies. Following suite in December of 2016, Illinois passed The Future Energy Jobs Bill, which similarly recognizes the value of carbon free electrical generation from nuclear. These subsidies, were essential to the Clinton and Quad Cities nuclear plants to remain economically viable. In the process saving over 4,000 high paying jobs while generating more than $22 billion kilowatt hours of carbon free power each year. Nuclear power accounts for more than half of Illinois electricity all without carbon emissions. Several other states that have been evaluating comparable measures include Connecticut, New Jersey Pennsylvania and Ohio. We believe the long-term industry dynamics remain in our favor and we are focused on growing our revenue in 2017 by executing operationally on our backlog, driving organic sales and effectuating our corporate development strategy. I'm very pleased with the direction our business is heading. I’ll now turn the call over to Chris Sorrells our COO who’ll provide some additional context from where we have come from over the past 18 months, as well as an update on our M&A efforts. Chris please go ahead.

Thanks Kyle, to begin I want to take a step back and recap the progress GSE, has made since our leadership transition commenced in August of 2015. Key business and operational improvements in 2016, our first full year with new leadership in place are as follows. We expanded our sales and marketing capability, with a highly skilled and experienced team to grow our revenue as we move forward. We’ve rebuilt our entire R&D and finance team with disciplined and seasoned executives. We proactively improved corporate governance and enhanced the Board of Directors by adding in several highly skilled executives, with strong backgrounds in finance accounting and technology sales and marketing. We incorporated best practices across our entire organization to improve customer service and satisfaction, dramatically improve efficiency, reduce operational risk, enhance employee morale and increase profitability. As a result, we’ve reaped the financial benefits of the hard work of the entire GSE team. Gross margin increased by approximately 600 basis points to 29% from 23% in 2015. SG&A expense decreased by roughly 12% to $12.5 million from $14.2 million in 2015. Excluding the impact of stock based compensation expense, our underlying SG&A decreased by approximately 20% to $2.7 million. Reflecting our effort to streamline operations and introduce accountability into the organization. Adjusted EBITDA rose 231% to $4.6 million from $1.4 million in 2015. Finally we’ve registered a dramatic improvement in cash from operations, which grew to over $10 million compared to $1 million in 2015. Our strong operating performance, along with an enhanced credit facility and the natural processes that freed up restricted cash has resulted in a meaningful improvement to our balance sheet. Our cash position as of year-end stands at just under $23 million, compared to approximately $14 million at the end of quarter-two 2015. During this same time frame restricted cash declined from $4.5 million to $1.1 million. In summary, since August 2015, we have streamlined the operations, strengthened the balance sheet, and significantly expanded backlog. By focusing on talent we’ve recruited top leadership with experienced building and managing larger assets. And appointed excellent new members to our Board with skills that will enhance our thesis. GSE’s stock during this timeframe, has risen from approximately $1.35 per share to $3.20 per share, up approximately 137% as of yesterday's close, which corresponds to an increase in market cap from approximately $24 million to approximately $60 million. We feel this is just the beginning of a long and exciting growth journey. We are now keenly focused on growing the business both through organic and inorganic initiatives. Our M&A pipeline, which did not exist 18 months ago, currently exceeds 150 targets with over $1 billion in combined revenues. We are actively and prudently seeking out companies that offer natural adjacencies to our offerings that have a high potential to add value to our customers as part of our platform. Having conducted primary research for the purpose of creating a competitive landscape now, we are now utilizing more of our resources and time to advance toward a successful value creating transaction. In addition, we have hired two outside companies to help with outreach, including Harvey & Company business broker that is directly reaching out to private companies. And a specialized firm that is conducting outreach to over 5,000 intermediaries, based on this specific deal parameters that we have established. We are seeing promising results, continue to move forward with discussions with some of the more exciting prospects and hopefully we’ll have news to share in the coming quarters. Before I turn the call over to Emmett, I also want to note that in 2017 we plan to be more proactive in our Investor Relations. You can expect to see us speaking at a greater number of investor conferences this year. We presented at the Needham Growth Conference in January and will be presenting at the ROTH Capital Conference next week in Dana Point California. We also hope to incorporate several non-deal road shows into our 2017 calendar. And always welcome chance to speak to investors and analysts. With that I’d like to turn it over to Emmett who will review the fourth quarter financial results.

Thank you Chris, I’ll begin with a review of new business. Our Performance Improvement Solutions segment bookings totaled $13.1 million compared to $9.39 million in Q4 2015, with orders across multiple sectors and multiple geographies. New performance improvement solution contract in the fourth quarter of 2016 included $11.3 million for Simulator upgrades and services in the nuclear power market. $1.1 million for new full scope simulators and other products in the fossil power market. 0.5 million for various tutorials and simulators for customers in the oil and gas industry and a $150,000 for miscellaneous engineering services and training projects. Nuclear industry training and consulting orders totaled $3.7 million in Q4 2016 compared to $4.6 million in Q4 2015. The decrease is primarily a timing difference that we expect to be picked back up in the first quarter of 2017. Now on to review our financial results for the fourth quarter, total revenue for Q4 2016 was $13.3 million, compared to $14.3 million in Q4 2015. Performance improvement solutions revenue in the fourth quarter of 2016 was $8.2 million down from $10.3 million in Q4 of 2015, due to the timing of the hardware revenues in U.S. nuclear. Specifically in Q4 2015, we recognized $1.3 million for a large project when the hardware was delivered to the customer and the project was complete. Nuclear training and consulting revenues increased 25% to $5.1 million in Q4 2016, from $4.1 million in Q4 2015 reflecting our increased work with a large utility company. These related revenues increased from $0.4 million in Q4 2015 to $2 million in Q4 2016. Specifically, the addition of increased support services which generated $1.6 million in revenues in the fourth quarter of 2016 with this utility customer. Gross profit in Q4 2016, was $4.3 million or approximately 33% of revenues compared to $4.6 million or 32% of revenue in Q4 2015. Net income in Q4, 2016 was approximately $1 million or $0.05 per basic and diluted share compared to $1 million or $0.06 per basic and diluted share in Q4 2015. Non-GAAP adjusted net income as defined in our earnings release in Q4 2016 increased to $1.9 million or $0.10 per basic and diluted share from $1.3 million or $0.07 per basic and diluted share in Q4 2015. Non-GAAP adjusted EBITDA as defined in our earnings release in Q4 2016 was $2.1 million in the quarter compared to $1.8 million in Q4 of 2015. Our cash position at December 31, 2016 increased to $22.9 million from $14.6 million at December 31, 2015. We continue to operate, with no long-term debt and have working capital of $12 million at the end of the fourth quarter. We also benefited from establishing a new enhanced credit facility, which removes certain restricted cash covenants and provided more favorable terms for the Company. We are currently in a process of retiring our current letters of credit. We anticipate this will be completed in the first quarter of 2017, which will further reduce our restricted cash balances. The increase in our liquidity, new credit facility and capital resources will allow GSE to pursue the organic and inorganic opportunities that Chris and Kyle detailed earlier in the call. And I'll now turn the conversation back to Kyle.

Thanks Emmett. Operator, please open the floor for questions.

Thank you. [Operator Instructions] Thank you, our first question comes from line of Danny Tsang with [indiscernible]. Please proceed.

Gentlemen congratulations, very well done. It seems like based upon your backlog, you have more business than you can handle. The list of top ten infrastructure support corporations for the new Trump economy and you are in the number three position. I’m just wondering have you established any kind of special liaison to the new Energy Secretary Rick Perry to pitch your products and your services. Is that benefit from this new administration that has a focus on the infrastructure and infrastructure support.

Thanks for the question Danny. It's fair to say no we have not established direct line contact with the new secretary of energy, but we remain encouraged that, as we outline that, we feel we are in a good position to benefit from any favorable trends that may evolve in the nuclear power industry.

I also had a correlated question which is that, based upon the most conservative metrics that I utilize, seems like your stock should be trading for at least $8.45 a share minimum, though it seems its radically undervalued through its – through the metrics that I utilized for evaluation. Can you explain why you think it is a, why it might be undervalued and are you not nervous about a possible takeover term.

Danny we don’t comment on the stock price, we just focus on operating the business and reporting it on a quarterly basis as you see.

Very good. Thanks then.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Mike Smith a Private Investor. Please proceed.

Yes, could you talk more about your current backlog and give us some color around may be the timing of it and the nature of it and along those lines talking about a $1 billion pipeline where the future potentially give us more comments on that.

Sure, and Mike its Chris and we appreciate the question. From the backlog perspective it is at $73.2 million as we mentioned, that is if you go back and track our 21-year public company history pretty much near a high and certainly far in excess of the backlog that we have seen that we have seen over the past three previous years. So a lot of hard work went into that, the big boost in backlog was the large order, we announced last March. If you look at our backlog historically, we tend to burn 60 plus percent of that backlog, there's also a cash and carry component of our business. There is also component of our business that isn't large into backlog, the contracts tend to roll quarter to quarter that is our Hyperspring subsidiary. That business runs $17 million to $20 million a year in revenue. So you can do some math and kind of start to at least map, what 2017 maybe. So needless to say, we feel good about it. In terms of the M&A pipeline, we walk in 18 months ago and wanted to convince ourselves, this is a business that could be scaled. We have gone out and done primary research ourselves, without the use of intermediaries and determine that there is a large ecosystem, that fits naturally with our existing customer base and product offering. 2017 is a key year for the unveiling of that strategy, and we're working hard, we’re not making promises but we do at least provide transparency that goes beyond what you typically see for a Company, in that we talk about the number. We talk about the size that potential could be. Keep in mind, of the number and of the revenue, I mean these aren’t all perfect companies and they may not offer sale and they may not be cultural fits to give you a host of issues that develop. But it shows the potential, and so what we focus on here is under promising over delivering and we focus on accountability and transparency. So we're providing that to you, to tell you that this is a platform we hope to consolidate off of. And we're going to be prudent with your money, we think quite doing our operators and we are diligently working and hopefully we have good stuff to share over the coming quarters.

Okay very good, that is it for me.

Thank you. We have no further questions in queue at this time. I would like to hand the floor back over to Mr. Loudermilk for closing remarks.

Well thanks everybody for joining us in the coming months, I hope to get a chance to meet and speak with many of you, including those that will be attending the ROTH Capital Conference next week. We're very excited for that. Very excited to wrap-up 2016 and looking forward to 2017. Thank you again for your time and interest in GSE.