8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) November 14, 2016

GSE SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-14785	52-1868008
(State of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)
1332 Londontown Blvd., Sykesville, MD 21784
(Address of principal executive offices and zip code)

(410) 970-7800

Registrant's telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation or the registrant under any of the following provisions (see General Instructions A.2 below):

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d - 2(b))

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e - 4 (c))

Form 8-K

Item 2.02 Results of Operations and Financial Condition

On November 14, 2016, GSE Systems, Inc. (the "Company") issued an earnings press release announcing, and hosted a publicly available conference call to discuss, the Company's financial results for the three and nine months ended September 30, 2016. The full text of the press release and the transcript of the conference call are attached as Exhibit 99.1 and Exhibit 99.2, respectively.

The information in this Current Report on Form 8-K is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

99.1 Press release of GSE Systems, Inc., dated November 14, 2016, announcing its financial results for the three and nine months ended September 30, 2016.

99.2 Transcript of conference call hosted by GSE Systems, Inc. on November 14, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GSE SYSTEMS, INC.
Date: November 16, 2016	/s/ Emmett Pepe
	Emmett Pepe
	Chief Financial Officer

EXHIBIT INDEX

Exhibit No. Description

99.1     99.2 Press release of GSE Systems, Inc. dated November 14, 2016, announcing the financial results for the three and nine months ended September 30, 2016.   Transcript of conference call hosted by GSE Systems, Inc. on November 14, 2016.

EX-99.1

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

GSE SYSTEMS ANNOUNCES THIRD QUARTER 2016 FINANCIAL RESULTS

Q3 2016 OVERVIEW

· Revenue totaled $14.4 million, compared to $14.8 million in Q3 2015.

· Selling, general and administrative expenses decreased 20% to $3.0 million, or 21% of revenue, from $3.8 million, or 26% of revenue, in Q3 2015.

· Adjusted EBITDA increased to approximately $605,000 from approximately $75,000 in Q3 2015.

· Operating income rose to $0.4 million, which included restructuring charges of approximately $85,000, from an operating loss of $3.6 million, which included including restructuring charges of $1.6 million and write-down of capitalized software development costs of $1.5 million, in Q3 2015.

· Net income grew to $0.2 million, or $0.01 per diluted share, compared to a net loss of $3.8 million, or $(0.21) per diluted share, in Q3 2015.

· Adjusted net income, excluding the impact of gain/loss from the change in fair value of contingent consideration, restructuring charges, stock-based compensation expense and consulting support for finance restructuring, increased to $0.4 million, or $0.02 per basic and diluted share, from an adjusted net loss of $1.7 million, or $(0.10) per basic and diluted share, in Q3 2015.

· New orders more than doubled to $13.8 million from $5.3 million in Q3 2015, driven by two international projects to modernize nuclear simulators in the UK and Japan.

At September 30, 2016

· Cash and equivalents of $17.4 million, or $0.94 per diluted share, including $3.3 million of restricted cash.

· Working capital of $11.9 million and current ratio of 1.5x.

· $0 long-term debt.

· Backlog totaled $69.3 million, up 45% compared to year-end 2015 backlog of $47.9 million.

· Year-to-date cash flow from operations increased 197% year over year to $3.9 million.

Sykesville, MD – November 14, 2016 - GSE Systems, Inc. ("GSE" or "the Company") (NYSE MKT: GVP), the world leader in real-time high-fidelity simulation systems and training solutions to the power and process industries, today announced financial results for the third quarter ("Q3") ended September 30, 2016.

Kyle J. Loudermilk, GSE's President and Chief Executive Officer, said, "We are pleased to report GSE's fifth consecutive quarter of positive adjusted EBITDA, which grew significantly on a year over year basis in Q3 2016, driven by our efforts to increase our backlog, reduce costs and streamline operations.  This quarter we continued to win important new projects, including two contracts to modernize nuclear simulators in the UK and Japan, which demonstrate the global strength of our innovative simulation solutions.  Our backlog remains strong, we have enhanced our leadership team and Board, and we are actively pursuing exciting organic and inorganic growth opportunities.  We are focused on generating positive revenue growth in 2017 while continuing to generate strong cash flow and improved profitability. Our increasingly strong balance sheet and operational performance put us in a great position to affect our growth strategy."

Q3 2016 RESULTS

Q3 2016 revenue totaled $14.4 million, compared to $14.8 million in Q3 2015, reflecting a 5% increase in Performance Improvement Solutions revenue and a 17% decrease in Nuclear Industry Training and Consulting revenue due to a strategic shift in sales focus to higher margin assignments. However, the slight decrease in Nuclear Industry Training and Consulting gross profit percentage during the three months ended Q3 2016 was primarily due to $1.3 million of revenue recognized from a large customer that had lower than normal margins of approximately 9%.

(in thousands)	Three Months ended September 30,				Nine Months ended September 30,
Revenue:	2016		2015		2016		2015
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Performance Improvement Solutions	$	10,215	$	9,751	$	27,382	$	26,798
Nuclear Industry Training and Consulting		4,213		5,058		12,438		15,678
Total Revenue	$	14,428	$	14,809	$	39,820	$	42,476

Performance Improvement Solutions new orders totaled $10.2 million in Q3 2016 compared to $3.8 million in Q3 2015.  Nuclear Industry Training and Consulting new orders totaled $3.6 million in Q3 2016 compared to $1.5 million in Q3 2015.

Q3 2016 gross profit was $3.7 million, or 25.8% of revenue, compared to $2.1 million, or 13.9% of revenue, in Q3 2015.

(in thousands)	Three Months ended September 30,										Nine Months ended September 30,
Gross Profit:	2016		%			2015		%			2016		%			2015		%
	(unaudited)					(unaudited)					(unaudited)					(unaudited)
Performance Improvement Solutions	$	3,233		31.6	%	$	2,919		29.9	%	$	9,287		33.9	%	$	7,993		29.8	%
Nuclear Industry Training and Consulting		491		11.7	%		676		13.4	%		1,620		13.0	%		1,782		11.4	%
Total Gross Profit		3,724		25.8	%		3,595		24.3	%		10,907		27.4	%		9,775		23.0	%
Less: Write-down of Capitalized  Software Development Costs		-		-			1,538		10.4	%		-		-			1,538		3.6	%
Consolidated Gross Profit	$	3,724		25.8	%	$	2,057		13.9	%	$	10,907		27.4	%	$	8,237		19.4	%

Performance Improvement Solutions gross profit for Q3 2016 was $3.2 million, or 31.6% gross margin, compared to $2.9 million, or 29.9% gross margin, in Q3 2015.  Nuclear Industry Training and Consulting gross profit for Q3 2016 was approximately $491,000, or 11.7% gross margin, compared to approximately $676,000, or 13.4% gross margin, in Q3 2015.  Gross profit in Q3 2015 included a write-down of capitalized software development costs totaling $1.5 million; no such charges were recorded in Q3 2016.

Selling, general and administrative expenses in Q3 2016 decreased 20% to $3.0 million, or 21.1% of revenue, from $3.8 million, or 25.7% of revenue, in Q3 2015.

Operating income for Q3 2016 was approximately $433,000 compared to an operating loss of $3.6 million in Q3 2015.

Net income for Q3 2016 was approximately $168,000, or $0.01 per basic and diluted share, compared to a net loss of $3.8 million, or $(0.21) per basic and diluted share, in Q3 2015.

Adjusted net income, excluding the impact of gain/loss from the change in fair value of contingent consideration, restructuring charges, stock-based compensation expense and consulting support for finance restructuring, increased to $0.4 million, or $0.02 per basic and diluted share, from an adjusted net loss of $1.7 million, or $(0.10) per basic and diluted share, in Q3 2015.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for Q3 2016 was approximately $400,000 compared to an EBITDA loss of $3.5 million in Q3 2015.

Adjusted EBITDA, which excludes the impact of restructuring charges, write-down of capitalized software development costs, gain/loss from the change in fair value of contingent consideration, consulting support for finance restructuring and stock-based compensation expense, increased to approximately $605,000 in Q3 2016 from approximately $75,000 in Q3 2015.

Backlog at September 30, 2016, increased 45% to $69.3 million from $47.9 million at December 31, 2015.  Backlog at September 30, 2016, included $63.5 million of Performance Improvement Solutions backlog and $5.8 million of Nuclear Industry Training and Consulting backlog.

GSE's cash position at September 30, 2016, was $17.4 million, including $3.3 million of restricted cash, as compared to $14.6 million, including $3.6 million of restricted cash, at December 31, 2015.

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/IC/CEPage.asp?ID=175387

For those who cannot listen to the live broadcast, an online webcast replay will be available at www.gses.com or through February 14, 2017 at the following link:

http://www.investorcalendar.com/IC/CEPage.asp?ID=175387

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 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.

Company Contact	The Equity Group Inc.
Chris Sorrells	Devin Sullivan
Chief Operating Officer	Senior Vice President
GSE Systems, Inc.	(212) 836-9608
(410) 970-7802	dsullivan@equityny.com
	Kalle Ahl, CFA
	Senior Associate
	(212) 836-9614
	kahl@equityny.com

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,
	2016			2015			2016			2015
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenue	$	14,428		$	14,809		$	39,820		$	42,476
Cost of revenue		10,704			11,214			28,913			32,701
Write-down of capitalized software dev. costs		-			1,538			-			1,538
Gross profit		3,724			2,057			10,907			8,237
Selling, general and administrative		3,043			3,811			9,032			11,031
Restructuring charges		85			1,600			487			1,746
Depreciation		91			119			294			383
Amortization of definite-lived intangible assets		72			123			219			370
Operating expenses		3,291			5,653			10,032			13,530
Operating income (loss)		433			(3,596	)		875			(5,293	)
Interest income, net		11			19			52			67
Loss on derivative instruments, net		(211	)		20			(346	)		(59	)
Other income (expense), net		15			(156	)		112			(235	)
Income (loss) before income taxes		248			(3,713	)		693			(5,520	)
Provision for income taxes		80			50			275			211
Net income (loss)	$	168		$	(3,763	)	$	418		$	(5,731	)
Basic earnings (loss) per common share	$	0.01		$	(0.21	)	$	0.02		$	(0.32	)
Diluted earnings (loss) per common share	$	0.01		$	(0.21	)	$	0.02		$	(0.32	)
Weighted average shares outstanding - Basic		18,230,148			17,894,272			18,052,019			17,890,020
Weighted average shares outstanding - Diluted		18,470,117			17,894,272			18,287,870			17,890,020

GSE SYSTEMS, INC AND SUBSIDIARIES

Selected Balance Sheet Data (in thousands)

	(unaudited)		(audited)
	September 30, 2016		December 31, 2015
Cash and cash equivalents	$	14,093	$	11,084
Restricted cash – current		1,601		1,771
Current assets		34,839		28,414
Long-term restricted cash		1,735		1,779
Total assets		45,132		39,371
Current liabilities	$	22,943	$	19,708
Long-term liabilities		2,076		1,295
Stockholders' equity		20,113		18,368

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:

	Three Months ended						Nine Months ended
	September 30,						September 30,
	2016			2015			2016			2015
Net income (loss)	$	168		$	(3,763	)	$	418		$	(5,731	)
Interest income, net		(11	)		(19	)		(52	)		(67	)
Provision for income taxes		80			50			275			211
Depreciation and amortization		163			242			513			753
EBITDA		400			(3,490	)		1,154			(4,834	)
Write-down of capitalized software development costs		-			1,538			-			1,538
Gain/Loss from the change in fair value of contingent consideration		(524	)		306			(370	)		739
Restructuring charges		85			1,600			487			1,746
Stock-based compensation expense		412			121			900			392
Consulting support for finance restructuring		232			-			310			-
Adjusted EBITDA	$	605		$	75		$	2,481		$	(419	)

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,
	2016			2015			2016			2015
Net income (loss)	$	168		$	(3,763	)	$	418		$	(5,731	)
Gain/loss from the change in fair value of contingent consideration		(524	)		306			(370	)		739
Restructuring charges		85			1,600			487			1,746
Stock-based compensation expense		412			121			900			392
Consulting support for finance restructuring		232			-			310			-
Adjusted net income	$	373		$	(1,736	)	$	1,745		$	(2,854	)
Earnings (loss) per share - diluted	$	0.01		$	(0.21	)	$	0.02		$	(0.32	)
Adjusted earnings (loss) per share - diluted	$	0.02		$	(0.10	)	$	0.10		$	(0.16	)
Weighted average shares outstanding - Diluted		18,470,117			17,894,272			18,287,870			17,890,020

EX-99.2

Exhibit 99.2

GSE Systems, Inc. Q3 Earnings Call Transcript

November 14, 2016 4:30 PM ET

Participants

Kalle Ahl - IR, The Equity Group

Kyle Loudermilk - President and CEO

Emmett Pepe - CFO

Chris Sorrells - COO

Analysts

Operator

Greetings and welcome to the GSE Systems, Inc. Third Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star-zero during the conference. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kalle Ahl of The Equity Group. Thank you Mr. Ahl, you may begin.

Kalle Ahl

Thank you, Bob, 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 a 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 operating profit, net income and 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 results for any particular period.

So investors should realize and recognize that EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS 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 EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS to the most directly comparable GAAP measures in accordance with SEC Regulation G follows, can be found on the Company's earnings release and on its website.

I'd now like to turn the call over to Mr. Kyle Loudermilk, Chief Executive Officer of GSE Systems. Kyle, please go ahead.

Kyle Loudermilk

Thanks, Kalle, and good afternoon. I'd like to welcome everyone to GSE Systems' Third Quarter 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 third 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 our fifth consecutive quarter of positive adjusted EBITDA which increased more than eightfold over a year-over-year basis demonstrating ongoing positive impact of efforts to optimize our business model while focusing on operational excellence.

We continue to generate strong operating cash flow and strengthen our balance sheet which included cash and equivalents totaling 17.4 million or $0.94 per share at quarter end. Having streamlined our operations and recruited top talent to our leadership team and Board of Directors, we continue to focus on improving our operational performance and on revitalizing GSE's revenue growth through organic and inorganic channels.

New orders this quarter increased by a 160% to approximately 14 million from 5 million in the prior year period driven by two mission critical projects that we won in the UK and Japan in September 2016. These two contracts added over 6 million to our backlog and demonstrate the value that GSE's technical engineering and software solutions deliver to customers across the globe. In the UK, we're deploying a high value, state-of-art nuclear plant simulation system to replace our customers legacy simulation models in computer hardware delivered in the early 1990s.

In Japan, we're providing a key nuclear power plant operator with a modern simulator designed to deliver more comprehensive chain to operators and engineers in the post-Fukushima environment. The new simulator will replace the customer's existing simulator and models. Both the UK and Japan projects will utilize our industry leading High-Fidelity JADE Simulation software. Our quarter-end backlogs stood at 69.3 million, up 45% compared to 47.9 million at the end of 2015, driven by our large international business wins as well as large domestic contracts for full scope simulators we won in March of 2016.

We continue to pursue a number of new business development initiatives to strengthen our backlog further. Globally, we continue to see the greatest activity in the United States followed by our international divisions focused on the UK as that country upgrades its fleet, China, Korea, as well as Japan as the country restarts their nuclear reactors. We are focused on growing our revenue in 2017 as we continue to operationally execute on our near-record backlog, drive organic sales and effectuate our corporate development strategy, which Chris will discuss a little later in the call.

Finally, we welcome Dr. Suresh Sundaram to our Board of Directors. Suresh is a very senior product and marketing executive at Exa Corporation, a publicly-traded simulation software company focused on product engineering solutions and he previously held a variety of leadership roles during a two decade career at Aspen Technology. Suresh was appointed to our Board in September 2016 and will provide us with invaluable insight, experience and relationships in the simulation technology and software industry.

I now would like to turn the call over to Chris Sorrells our COO, who will provide an update on a review of potential acquisition targets as well as some preliminary thoughts on our objectives for 2017. Chris, please go ahead.

Chris Sorrells

Thanks Kyle. Over the past 12 months we delivered on our stated goals and objectives. We stabilized GSE's business, enhanced our leadership team, created more efficient operations by implementing best practices and accountability, began the process of retooling our R&D effort, initiated the process of introducing our senior leadership team and strategy to Wall Street and developed a robust M&A pipeline. We're now squarely focused on driving organic and inorganic growth.

On the M&A front, we've assembled an expanding list of potential acquisition targets across the competitive landscape including software, training, consulting, technical engineering and staffing companies, most of which are focused on our core market, the power industry. Our internal list has risen from 110 potential deals last quarter to approximately 140 acquisition candidates of combined revenues approaching 1 billion. We are vetting this list carefully and have commenced exploratory discussions in those cases where the candidates meet our rigorous evaluation criteria. We are active in the process looking for the right business and cultural fit and an accretive valuation. This brings me to a few of our preliminary goals for the coming year, which we planned to finalize and update during our fourth quarter earnings call in March.

First, atop the list of our objectives for 2017, we aim to close at least one acquisition that complements our core business, enhancing the value we provide customers while meaningfully increasing our revenue and adjusted EBITDA in a way that creates measurable value for shareholders. We are not in a position to discuss related details on this call, but will provide additional color at the appropriate time.

Second, among our organic growth initiatives we are enhancing our R&D efforts and working towards the goal of introducing at least one new software products/product component in 2017; current potential projects include e-learning and enhanced technology enabled training platforms. In addition we are focused on IP protection, improving our delivery methods, and enhancing the usability/features of the software to enhance the client experience and ease of use.

Third, to drive this organic growth we have intelligently retooled our sales force into a very lean team, motivated by a solid commission plan. For areas of international interest where we do not have a presence we will add resellers who have a track record of success and who will be paid only if they are successful in sales. We recently entered into a reseller agreement with a proven entity in the Middle East and we'll look to this as a model to increase our reach globally.

Fourth, we are striving for continued adjusted EBITDA growth in 2017, while maintaining our customer centric service model and stringent quality control program.

And fifth, we will continue to promote the extraordinary benefits of carbon-free base load electricity, the essential role for nuclear power and the critical role we play. We will target the emerging business opportunities in Japan as they restart their nuclear fleet, provide creative solutions to help address NEI's nuclear promise initiative to reduce operating and maintenance cost by $3.50 a megawatt hour by 2020, and continue to advertise the value of our technology to the growing movement of small modular reactors.

The growing awareness and recognition of the importance of nuclear providing zero carbon-base load is demonstrated most recently by the State of New York's Clean Energy Standard. This standard values the emission free energy of New York's nuclear fleet and in doing so provides an emission free subsidy of $1.07 per kilowatt hour. This subsidy helps ensure the states existing nuclear plants remain economically viable and an era of low cost natural gas and levels the playing field with wind and solar subsidies. In addition, numerous other states are in the process of reviewing production subsidies for nuclear power as well as reregulating the power generation market, given the havoc renewable subsidies are playing on the wholesale power market. The New York State Clean Energy Standard provides a compelling template for other states that are seeking for the means to keep emissions low with carbon free nuclear energy.

Finally, we continue to look for ways to improve our operations and next year expect to automate and integrate our reporting functions for finance and professional services which should lead to improved productivity by our engineers and support staff thus improving our capacity to execute and turn our margins. We will provide more color on these and other objectives as 2017 begins.

With that, I'd like to turn it over to Emmett who will review the third quarter financial results.

Emmett Pepe

Thank you, Chris. I will begin with a review of backlog and new business. As Kyle mentioned we ended the quarter with near record backlog of 69.3 million, up 45% from backlog of 47.9 million at December 31 2015. Our backlog at the end of Q3 2016 includes 63.5 million of performance improvement solutions backlog and 5.8 million of nuclear industry training and consulting backlog. In Q3 2016, our performance improvement solutions bookings totaled 10.2 million compared to 3.8 million in Q3 2015, with orders across multiple sectors to multiple geographies. Our pipeline remains strong.

New performance improvement solution contracts in Q3 2016 included 7.4 million for simulator upgrades and services in the nuclear power market, 2.3 million for new full scope simulators and other projects in the fossil power market, 200,000 for various tutorials and simulators for customers in the oil and gas industry and 300,000 for miscellaneous engineering services and training projects. Nuclear industry training and consulting orders totaled 3.6 million in Q3 2016 compared to 1.5 million in Q3 2015.

Now, onto review of our financial results for the third quarter, total revenue for Q3 2016 was 14.4 million, compared to 14.8 million in Q3 2015. Performance improvements solutions revenue increased 5% to 10.2 million in Q3 2016 from 9.8 million in Q3 2015, continuing our positive growth in that area of our business. Gross profit in Q3 2016 was 3.7 million, or approximately 26% of revenue, up from 2.1 million or 14% of revenue in Q3 2015. While total revenue was down slightly, our improved gross profit was a result of GSE's strategic shift in sales focus to higher margin projects.

Net income for Q3 2016 was approximately 168,000 or $0.01 per basic and diluted share compared to a net loss of 3.8 million or $0.21 per basic and diluted share in Q3 2015. This improvement was driven by a higher gross margin as well as substantial decline in SG&A expenses. Q3 2016 SG&A expenses declined 20% to 3 million compared to 3.8 million in the prior year period. Excluding the impact of restructuring charges gain lost on derivative instruments, stock based compensation expense, consulting support for financial restructuring and write down of capitalized software development cost, non-GAAP adjusted EBITDA in Q3 2016 increased approximately to approximately 605,000 from 75,000 in Q3 2015. As Kyle mentioned, GSE's cash position at September 30, 2016 increased to 17.4 million from 14.6 million at December 31, 2015. Our improved cash position reflects strong year-to-date operating cash flow which grew a 197% on year-over-year basis to 3.9 million. This increase in liquidity and capital resources will allow GSE to pursue the organic and inorganic opportunities that Chris detailed earlier in the call.

Since I joined GSE in July, we've been implementing best practices and enhancements to the finance function. One of the initiatives that we've been working on is the new credit facility with more favorable terms to the Company. Given our strength in operations and improved financial performance, we are in a good position in the near-term to finalize a more flexible credit facility arrangement. At the end of my first quarter, we continue to operate with no long-term debt and working capital of 11.9 million.

I'll now turn the conversation back to Kyle.

Kyle Loudermilk

Thanks, Emmett. I'll now ask the operator to open the floor for questions.

Question-and-Answer Session

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star-one on your telephone key pad. A confirmation tone will indicate your line is in the question cue. You may press star-two if you would like to remove your question from the question cue. For the participants using speaker equipment, it may be necessary to pick up your headset before pressing the star key. One moment while we poll for questions.

Thank you, our first question comes from the line of Jay Gottlieb. Please proceed with your question.

Participant

With the forthcoming change in the administration, that will most likely be very favorable to coal, how will that affect you or indirectly affect you, or indirectly effect you, and the nuclear power industry? With the prices of coal theoretically coming down and being more usable?

Kyle Loudermilk

I think it's too early to have a definitive answer for that. I will say the Company is in a great position to move forward from here as we highlighted in our call. And whichever way the outcome of the election went, I really don't think how to bias one way or the other, one of the nominees versus the other. I just think we're just in really solid position to execute our thesis with our strong balance sheet and great capabilities and great people that we have. So, I wish I had a more definitive knowledgeable answer around that for at this point Jay, but I think it's just too early to tell.

Participant

Okay. Thank you.

Operator

Thank you. As a reminder, ladies and gentlemen hit star-one if you would like to ask a question. One moment while we poll for questions.

There are no further questions at this time. I'd like to turn the floor back to Kyle Loudermilk with closing comments.

Kyle Loudermilk

Well, with that I'd like to thank everybody for joining us on today's call. I hope we get the chance to meet and speak with many of you in the coming months. Thank you again for your time and your interest in GSE.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.