INVESTOR PRESENTATION NASDAQ: GVP September 25, 2019 ENGINEERING AND EXPERT STAFFING PLATFORM FOR THE POWER AND PROCESS INDUSTRIES
FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES This presentation, our remarks, and answers to questions contain statements 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," "anticipate," 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. This presentation, our remarks, and answers to questions include references to adjusted EBITDA, adjusted net income, and adjusted earnings per share (“adjusted EPS”), which do not adhere to generally accepted accounting principles (“GAAP”) . We define EBITDA as earnings before interest, taxes, depreciation and amortization (“EBITDA”) . References to Adjusted EBITDA exclude non-cash loss on impairment, impact of the change in fair value of contingent consideration, restructuring charges, stock-based compensation expense, impact of the change in fair value of derivative instruments, and acquisition-related expense. References to Adjusted net income exclude non-cash loss on impairment, impact of the change in fair value of contingent consideration, restructuring charges, stock-based compensation expense, impact of the change in fair value of derivative instruments, acquisition-related expense, and amortization of intangible assets related to acquisitions. We define adjusted EPS as adjusted net income divided by fully diluted shares of common stock issued and outstanding. EBITDA, Adjusted EBITDA, adjusted net income, and adjusted EPS are reconciled to net income, the most directly comparable GAAP measure, in the financial tables included in the Appendix to this presentation. We believe that this additional information and the reconciliation we provide may be useful to help evaluate our operations. This information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, our GAAP results. With respect to Adjusted EBITDA on a forward-looking basis and as a combined company following certain recent acquisitions, a reconciliation of the difference between this non-GAAP expectation and the corresponding GAAP measure (expected net income) is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, adjustments to the provision for income taxes, depreciation of fixed assets, amortization of intangibles, costs related to restructuring actions and interest expense, and certain anticipated cost synergies, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. Unless otherwise indicated, all results of operations and the financial condition of the Company are as of June 30, 2019 and all market data set forth in this presentation is as of September 23, 2019. We undertake no duty to update or revise the information in light of new information, future events or otherwise, although we may do so from time to time as management believes is appropriate. Any such updating may be made through the filing of reports or documents with the Securities and Exchange Commission, through press releases or through other public disclosures. GSE SYSTEMS, INC. INVESTOR PRESENTATION // 2
WHO IS GSE SYSTEMS ? • We provide engineering and highly-skilled Ticker | Exchange GVP | Nasdaq personnel to the global power and process industries Headquarters Maryland Number of Employees ~475 Performance Improvement Segment Recent price 1 (9/23/19) $1.93 ‒ We are a market leader in simulation Shares outstanding ~20M and engineering programs for the nuclear/fossil power industry Market cap 1 (9/23/19) ~$39M Total cash 1 (6/30/19) ~$10M ‒ We provide computer-based tutorials and simulators to the process industry Total debt 1 (6/30/19) ~$21M Nuclear Training & Consulting Segment Enterprise value 1 ~$46M Revenue (LTM) ~$90M ‒ We staff nuclear power plants with specialized personnel, primarily in EV / Revenue 1 ~0.5x white-collar training and operating roles 1 Enterprise Value and EV/Revenue are estimates based on the Recent Price, Market Cap, Total Cash and Total Debt amounts as of • Our solutions enhance employee and plant the dates provided herein and do not represent the Enterprise Value or EV/Revenue as of the date of this presentation. performance , reduce risk , increase revenue and lower costs for clients GSE SYSTEMS, INC. INVESTOR PRESENTATION // 3
ANNUAL FINANCIAL HIGHLIGHTS 1,2,3 Revenue (in $M) Gross Profit (in $M) $92.2 $23.1 $70.9 $18.5 $16.3 $56.8 $53.1 $12.9 $10.8 $37.5 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Adjusted EBITDA (in $M) 1 Adjusted EPS (Diluted) 1 $0.24 $7.4 $0.20 $0.14 $5.7 $5.0 $0.00 $1.8 $(4.3) $(0.30) 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 1 Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures; see GAAP to non-GAAP reconciliation in Appendix; 2 Only includes Absolute Consulting from September 20, 2017, True North from May 11, 2018 and excludes DP entirely. 3 Fiscal year ended December 31, 2018 is unaudited 4 CAGR = Compound Annual Growth Rate GSE SYSTEMS, INC. INVESTOR PRESENTATION // 4
PRO-FORMA REVENUE MIX – ~$90M (LTM) By Segment By Industry By Geography By End-User 4% 7% 5% 3% 25% 50% 50% 75% 93% 88% Performance Nuclear North America Utilities Improvement Nuclear Training Fossil Europe Other & Consulting Non-Power / Asia Process GSE SYSTEMS, INC. INVESTOR PRESENTATION // 5
BUSINESS MODEL – HOW WE MAKE MONEY Performance Nuclear Training & Software 1 Improvement Consulting % of Revenue: ~50% ~50% <5% 30-40+% 12-15% Gross Margin: 80-90% Primarily Selling: Engineering Modeling & Technical / High-Value Software Modification Services Staffing Business Model: Fixed price, and time and Time and material Sale of perpetual license material contracts contracts with recurring MX, or SaaS annual subscription Accounting: Percent complete, or as As service is performed License upon delivery, service is performed billing occurs ratable recognition over billing occurs life of MX agreement 1 Software is a component of GSE’s Performance Improvement segment GSE SYSTEMS, INC. INVESTOR PRESENTATION // 6
INVESTMENT HIGHLIGHTS ▪ Leadership with an “owner/operator” mentality Aligned, Proven ▪ Experience and skill-set to deliver operational improvements Leadership ▪ Track record of building companies through successful M&A transactions ▪ Expertise from 40+ years of serving clients in the power and process sectors Highly Specialized ▪ Proven and differentiated technology for simulation and training solutions Platform ▪ Difficult-to-replicate technology and base of talented, specialized employees ▪ 40+ years serving a high-barrier-to-entry market Blue Chip ▪ Strong, enduring relationships with blue chip power and process companies Client Base Attractive ▪ Significant discount relative to industry peers Valuation ▪ Focused on delivering strong organic growth from underlying core business Compelling, Scalable ▪ Powerful long-term acquisition platform in place to consolidate a fragmented Acquisition Platform industry ▪ Landscape targeted for roll-up includes markets with combined size of $4+ billion Large Addressable ▪ Favorable industry drivers: recognition of nuclear as a critical source of resilient Markets baseload energy; aging workforce crisis; rising demand for carbon-free electricity GSE SYSTEMS, INC. INVESTOR PRESENTATION // 7
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