UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 0-24343

Answerthink, Inc.

(Exact name of Registrant as specified in its charter)

FLORIDA	65-0750100
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification Number)

1001 Brickell Bay Drive, Suite 3000 Miami, Florida	33131
(Address of principal executive offices)	(Zip Code)

(305) 375-8005

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

    Large Accelerated Filer  ¨    Accelerated Filer  x    Non-Accelerated Filer  ¨

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of May 2, 2007, there were 44,990,848 shares of common stock outstanding.

Answerthink, Inc.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 30, 2007 (unaudited) and December 29, 2006 (unaudited)	3
Consolidated Statements of Operations for the Quarters Ended March 30, 2007 (unaudited) and March 31, 2006 (unaudited)	4
Consolidated Statements of Cash Flows for the Quarters Ended March 30, 2007 (unaudited) and March 31, 2006 (unaudited)	5
Notes to Consolidated Financial Statements (unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	14
Item 4. Controls and Procedures	14
PART II OTHER INFORMATION
Item 1. Legal Proceedings	15
Item 5. Other Information	15
Item 6. Exhibits	15
SIGNATURES	16
INDEX TO EXHIBITS	17

2

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

Answerthink, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	March 30, 2007			December 29, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	23,624		$	19,585
Accounts receivable and unbilled revenue, net of allowance of $2,152 and $1,851 at March 30, 2007 and December 29, 2006, respectively		31,106			35,818
Prepaid expenses and other current assets		1,615			1,137
Total current assets		56,345			56,540
Restricted cash		600			600
Property and equipment, net		4,837			5,183
Other assets		3,492			3,870
Goodwill, net		66,826			66,652
Total assets	$	132,100		$	132,845
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,567		$	5,427
Accrued expenses and other liabilities		26,660			24,352
Total current liabilities		31,227			29,779
Accrued expenses and other liabilities, non-current		4,571			4,611
Total liabilities		35,798			34,390
Commitments and contingencies		—			—
Shareholders' equity:
Preferred stock, $.001 par value, 1,250,000 shares authorized, none issued and outstanding		—			—
Common stock, $.001 par value, 125,000,000 shares authorized; 52,047,339 and 51,816,910 shares issued and outstanding at March 30, 2007 and December 29, 2006, respectively		52			52
Additional paid-in capital		280,383			279,621
Treasury stock, at cost, 7,157,655 shares at March 30, 2007 and December 29, 2006		(23,867	)		(23,867	)
Accumulated deficit		(161,522	)		(158,703	)
Accumulated other comprehensive income		1,256			1,352
Total shareholders' equity		96,302			98,455
Total liabilities and shareholders' equity	$	132,100		$	132,845

The accompanying notes are an integral part of the consolidated financial statements.

3

Answerthink, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Quarter Ended
	March 30, 2007			March 31, 2006
Revenues:
Revenues before reimbursements	$	36,161		$	44,896
Reimbursements		3,716			4,935
Total revenues		39,877			49,831
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $264 and $220 of stock compensation expense in 2007 and 2006, respectively)		21,516			26,464
Reimbursable expenses		3,716			4,935
Total cost of service		25,232			31,399
Selling, general and administrative costs (includes $744 and $856 of stock compensation expense in 2007 and 2006, respectively)		17,504			17,791
Restructuring costs		—			6,313
Loss from misappropriation, net of collections		(350	)		279
Total costs and operating expenses		42,386			55,782
Loss from operations		(2,509	)		(5,951	)
Other income (expense):
Interest income		240			189
Interest expense		(2	)		(106	)
Loss before income taxes		(2,271	)		(5,868	)
Income taxes		67			365
Net loss	$	(2,338	)	$	(6,233	)
Basic net loss per common share:
Net loss per common share	$	(0.05	)	$	(0.14	)
Weighted average common shares outstanding		44,778			44,518
Diluted net loss per common share:
Net loss per common share	$	(0.05	)	$	(0.14	)
Weighted average common and common equivalent shares outstanding		44,778			44,518

The accompanying notes are an integral part of the consolidated financial statements.

4

Answerthink, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Quarter Ended
	March 30, 2007			March 31, 2006
Cash flows from operating activities:
Net loss	$	(2,338	)	$	(6,233	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Write-off of leasehold improvements		—			715
Depreciation and amortization		900			1,640
Provision for doubtful accounts		247			389
Loss (gain) on foreign currency translation		10			(108	)
Non-cash compensation expense		1,008			1,076
Gain on sale of property and equipment		(13	)		—
Changes in assets and liabilities:
Decrease (increase) in accounts receivable and unbilled revenue		6,340			(571	)
Increase in prepaid expenses and other assets		(546	)		(157	)
Decrease in accounts payable		(857	)		(1,512	)
(Decrease) increase in accrued expenses and other liabilities		(542	)		1,975
Net cash provided by (used in) operating activities		4,209			(2,786	)
Cash flows from investing activities:
Purchases of property and equipment		(203	)		(570	)
Proceeds from sales of property and equipment		14			—
Decrease in restricted cash		—			3,657
Proceeds from calls, sales and maturities of marketable investments		—			5,000
Cash used in acquisition of business, net of cash acquired		—			(353	)
Net cash provided by (used in) investing activities		(189	)		7,734
Cash flows from financing activities:
Repayments of borrowings		—			(1,101	)
Repayment of loan payable		—			(3,657	)
Proceeds from issuance of common stock		24			238
Net cash provided by (used in) financing activities		24			(4,520	)
Effect of exchange rate on cash		(5	)		2
Net increase in cash and cash equivalents		4,039			430
Cash and cash equivalents at beginning of period		19,585			18,103
Cash and cash equivalents at end of period	$	23,624		$	18,533
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2		$	—
Cash paid for income taxes	$	247		$	196

The accompanying notes are an integral part of the consolidated financial statements.

5

Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The consolidated financial statements of Answerthink, Inc. (“Answerthink” or the “Company”) include the accounts of the Company and all of its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries we are required to consolidate. We consolidate the assets, liabilities, and results of operations of entities in accordance with Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements, Statement of Financial Accounting Standards (“SFAS”) No. 94, Consolidation of All Majority-Owned Subsidiaries – an amendment of ARB No. 51, with related amendments of Accounting Principles Board (“APB”) Opinion No. 18 and ARB No. 43, Chapter 12, and the Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities, as revised.

In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 29, 2006 included in the Form 10-K filed by the Company with the Securities and Exchange Commission. The consolidated results of operations for the quarter ended March 30, 2007 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

2. Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. With regard to common stock subject to vesting requirements or restricted stock units issued to employees, the calculation includes only the vested portion of such stock. Accordingly, common shares outstanding for the basic net loss per share computation are lower than actual shares outstanding.

Net loss per common share assuming dilution is computed by dividing net loss by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period.

Potentially dilutive shares were excluded from the diluted loss per share calculation for the quarters ended March 30, 2007 and March 31, 2006 because their effects would have been anti-dilutive to the loss incurred by the Company. Therefore, the amounts reported for basic and diluted net loss per share were the same for those periods. Potentially dilutive securities which were not included in the diluted loss per share calculation for the quarters ended March 30, 2007 and March 31, 2006 include 865,289 and 1,705,212 shares, respectively, of unvested restricted stock units issued to employees and 75,504 and 327,407 shares, respectively, of common stock issuable upon the exercise of stock options following the treasury stock method.

3. Comprehensive Loss

The Company accounts for comprehensive income under SFAS No. 130, Reporting Comprehensive Income. Comprehensive loss is summarized below (in thousands):

	Quarter Ended
	March 30, 2007			March 31, 2006
Net loss	$	(2,338	)	$	(6,233	)
Change in cumulative foreign currency on translation adjustment		(96	)		(81	)
Change in net unrealized gain on marketable investments		—			27
Comprehensive loss	$	(2,434	)	$	(6,287	)

6

Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

4. Loss from Misappropriation, net of Collections

As described in the Form 8-K filed on November 1, 2006, on or about October 26, 2006, the Company learned of a misappropriation by its former UK disbursement agent which relates to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue. The Company and its former disbursement agent have agreed to settlement terms that, if satisfied, would include the full repayment of the misappropriation. In connection with the settlement, the agent made an initial cash payment to the Company in January 2007 of $350 thousand and has agreed to make additional payments to the Company on or before August 31, 2007 that, when taken together with the initial payment, approximate $2.5 million (at current foreign currency exchange rates). If the payments are not received by this date, the Company can foreclose certain assets pledged by the agent. The agent has guaranteed to pay any amount by which the initial payment, additional cash payments and the net proceeds from the sale of the pledged assets fall below approximately $2.5 million (at current foreign currency exchange rates). This shortfall amount would be repaid in annual installments of not less than approximately $0.1 million per year (at current foreign currency exchange rates) beginning in 2007, together with interest thereon accruing from January 1, 2008. The Company cannot predict whether the former disbursement agent will satisfy the terms of the settlement agreement. Due to this uncertainty, any amounts recovered as a result of the Company’s claim will be accounted for as income in the period collected.

5. Restructuring

The Company recorded restructuring costs of $10.9 million and $5.6 million in fiscal years 2002 and 2001, respectively, for reductions in consultants and functional support personnel and for the closure and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services throughout 2001 and 2002. The Company took steps to reduce its costs to better align its overall cost structure and organization with anticipated demand for its services.

In 2004 and 2003, the Company recorded restructuring costs of $3.7 million and $4.9 million, respectively, to increase existing reserves to account for potentially higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease excess facilities. The 2004 and 2003 restructuring costs consisted of additions of $1.8 million and $3.1 million to the 2002 restructuring accrual and $1.9 million and $1.8 million to the 2001 restructuring accrual, respectively. Also in 2004, the 2002 restructuring accrual was reduced by $370 thousand relating to the final settlement of a lease obligation which was recorded as income from discontinued operations in the consolidated statement of operations for year ended December 31, 2004.

In 2005, the Company recorded restructuring costs of $2.9 million which related to $1.1 million for the consolidation of additional facilities and related exit costs not included in previously established reserves, primarily as a result of the REL Consultancy Group (“REL”) acquisition on November 29, 2005, and $1.8 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities, of which $1.1 million is specifically related to the increase of previously established reserves in order to reflect the negotiated buyout of our New York City lease obligation. As a result of the buyout, the Company was fully released from $20.0 million of future lease obligations, assigned two subleases to the lessor, wrote-off a $1.4 million receivable from the lessor, and paid $3.1 million in cash to the lessor. The remaining $700 thousand related to increases in the reserves to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. The 2005 restructuring costs of $1.8 million related to previously established reserves, which consisted of additions of $1.2 million and $600 thousand to the 2002 and 2001 restructuring accruals, respectively.

In 2006, the Company recorded restructuring costs of $6.3 million, which was comprised of $2.8 million relating to the 2005 restructuring for the consolidation of additional facilities and related exit costs primarily as a result of the REL acquisition and $3.5 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. Included in the $2.8 million is a further reduction of occupied space in our technology-focused facility in Philadelphia and related severance costs for a senior executive as the Company’s primary business model shifts to a proprietary best practice and intellectual capital and strategic advisory services firm.

7

Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. Restructuring (continued)

The following tables set forth the detail and activity in the restructuring expense accruals during the quarter ended March 30, 2007 (in thousands):

2001 Restructuring Accrual

	Accrual Balance at December 29, 2006		Adjustments to Accrual		Expenditures			Accrual Balance at March 30, 2007
Closure and consolidation of facilities and related exit costs	$	2,126	$	—	$	(113	)	$	2,013

2002 Restructuring Accrual

	Accrual Balance at December 29, 2006		Adjustments to Accrual		Expenditures			Accrual Balance at March 30, 2007
Closure and consolidation of facilities and related exit costs	$	3,717	$	—	$	(151	)	$	3,566

2005 Restructuring Accrual

	Accrual Balance at December 29, 2006		Adjustments to Accrual		Expenditures			Accrual Balance at March 30, 2007
Severance and other employee costs	$	147	$	—	$	(130	)	$	17
Closure and consolidation of facilities and related exit costs		1,276		17		(114	)		1,179
	$	1,423	$	17	$	(244	)	$	1,196

6. Accounts Receivable and Unbilled Revenue, Net

Accounts receivable and unbilled revenues, net consisted of the following (in thousands):

	March 30, 2007			December 29, 2006
Accounts receivable	$	29,360		$	32,974
Unbilled revenue		3,898			4,695
Allowance for doubtful accounts		(2,152	)		(1,851	)
	$	31,106		$	35,818

7. Loan Payable

At March 30, 2007, the Company did not have any outstanding loans. At December 30, 2005, the Company had a loan with a financial institution of $3.7 million which was repaid in March 2006.

8

Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

8. Income Taxes

Effective December 30, 2006, the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes. FIN No. 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

As a result of the implementation of FIN No. 48, the Company performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by FIN No. 48. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on December 30, 2006, the Company adjusted the estimated value of its uncertain tax positions by recognizing additional liabilities totaling $481 thousand through a charge to retained earnings, which primarily related to potential state and federal tax exposure. The $481 thousand liability included $311 thousand, which was not expected to be paid within one year, and as such was classified as a non-current liability and was included in the non-current portion of accrued expenses and other liabilities in the consolidated balance sheet as of March 30, 2007. The amount of unrecognized tax positions did not materially change as of March 30, 2007 and we do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.

Penalties and tax-related interest expense are reported as a component of income tax expense. As of December 30, 2006, the total amount of accrued income tax-related interest and penalties was $26 thousand and $237 thousand, respectively. The liability for the payment of interest and penalties did not materially change as of March 30, 2007.

The Company files federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes reflect the most probable outcome. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to our provision for income taxes and our effective tax rate in the period of resolution. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service for years through 2002. All significant state and local, and foreign matters have been concluded for years through 2002.

9. Stock Based Compensation

During the quarter ended March 30, 2007, the Company issued 237,500 restricted stock units at a weighted average grant-date fair value of $3.22. As of March 30, 2007, the Company had 2,006,148 restricted stock units outstanding.

Additionally, during the quarter ended March 30, 2007, 187,971 shares of common stock issued, in connection with an acquisition, to REL employees which were subject to vesting requirements were forfeited at a weighted average grant-date fair value of $3.99. As of March 30, 2007, the Company had 488,724 of these shares outstanding.

10. Litigation

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the financial position, cash flows or results of operations of the Company.

9

Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

11. Geographic and Service Group Information

Revenues were attributed to geographic areas as follows (in thousands):

	Quarter Ended
	March 30, 2007		March 31,    2006
Total Revenues:
Domestic	$	33,157	$	44,099
Foreign		6,720		5,732
Total	$	39,877	$	49,831

Long-lived assets were attributed to geographic areas as follows (in thousands):

	March 30, 2007		December 29, 2006
Long-Lived Assets:
Domestic	$	56,630	$	57,148
Foreign		18,525		18,557
Total	$	75,155	$	75,705

As of March 30, 2007 and December 29, 2006, foreign assets included $18.3 million of goodwill and intangible assets related to REL, a UK based company.

The Company’s revenue was derived from the following service groups (in thousands):

	Quarter Ended
	March 30, 2007		March 31,    2006
The Hackett Group:
Benchmarking and Business Transformation	$	19,303	$	22,977
Membership Advisory Programs		3,613		2,236
Best Practices Solutions		16,961		24,618
Total Revenues	$	39,877	$	49,831

12. Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year presentation.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and the information incorporated by reference in it include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our business and industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward-looking statements include, among others, our ability to effectively integrate acquisitions into our operations, our ability to attract additional and retain existing business, the timing of projects and the potential for contract cancellation by our customers, changes in expectations regarding our industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, foreign currency fluctuations and changes in general economic conditions and interest rates. An additional description of our risk factors is set forth in our Annual Report on Form 10-K for the year ended December 29, 2006. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

Answerthink, Inc. is a leading business and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group, the world’s leading repository of enterprise business process performance metrics and best practice intellectual capital, our business and technology solutions help clients improve performance and maximize returns on technology investments.

The Hackett Group, a strategic advisory firm and an Answerthink company, is a world leader in best practice research, benchmarking, business transformation and working capital management services that empirically define and enable world-class enterprise performance. Only The Hackett Group empirically defines world-class performance in sales, general and administrative (SG&A) and supply chain activities with analysis gained through 3,500 benchmark studies over 14 years at 2,000 of the world’s leading companies.

Answerthink’s combined capabilities include business advisory programs, benchmarking, business transformation, working capital management, business applications and business intelligence, with corresponding offshore support. Answerthink was formed on April 23, 1997.

11

Results of Operations

The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to revenues of such results.

	Quarter Ended
	March 30, 2007					March 31, 2006
Revenues:
Revenues before reimbursements	$	36,161		90.7	%	$	44,896		90.1	%
Reimbursements		3,716		9.3	%		4,935		9.9	%
Total revenues		39,877		100.0	%		49,831		100.0	%
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses		21,516		54.0	%		26,464		53.1	%
Reimbursable expenses		3,716		9.3	%		4,935		9.9	%
Total cost of service		25,232		63.3	%		31,399		63.0	%
Selling, general and administrative costs		17,504		43.9	%		17,791		35.7	%
Restructuring costs		—		0.0	%		6,313		12.7	%
Loss from misappropriation, net of collections		(350	)	(0.9	)%		279		0.6	%
Total costs and operating expenses		42,386		106.3	%		55,782		111.9	%
Loss from operations		(2,509	)	(6.3	)%		(5,951	)	(11.9	)%
Other income:
Interest income, net		238		0.6	%		83		0.2	%
Loss before income taxes		(2,271	)	(5.7	)%		(5,868	)	(11.7	)%
Income tax expense		67		0.2	%		365		0.7	%
Net loss	$	(2,338	)	(5.9	)%	$	(6,233	)	(12.4	)%

Revenues. Revenues for the quarter ended March 30, 2007 decreased by $10.0 million or 20% to $39.9 million from $49.8 million in the quarter ended March 31, 2006. The decrease in revenues for the quarter ended March 30, 2007 was attributable to (1) a decline in revenue in the Best Practices Solutions group of $7.7 million primarily due to the exit of our Lawson and low margin SAP and staff augmentation contracts, and (2) a decline of revenue of $2.3 million in The Hackett Group due to a decline of $3.7 million or 16% in our Benchmarking and Business Transformation business, which primarily related to REL, offset by an increase of $1.4 million or 62% in our Membership Advisory Programs. Reimbursements as a percentage of revenues during the quarters ended March 30, 2007 and March 31, 2006 were comparable at approximately 9% to 10%, respectively.

During the quarter ended March 30, 2007, no customer accounted for revenues equal to or greater than 5% of total revenues. During the quarter ended March 31, 2006, two customers accounted for revenues greater than 5% of total revenues, which together accounted for 11% of total revenues.

Cost of Service. Cost of service primarily consists of salaries, benefits and incentive compensation for consultants and reimbursable expenses associated with projects. Cost of service was $25.2 million in the quarter ended March 30, 2007, a decrease of $6.2 million or 20% compared to the quarter ended March 31, 2006. This decrease was primarily attributable to the decrease in total billable headcount of 107 compared to the quarter ended March 31, 2006. Consultant headcount was 563 as of March 30, 2007 compared to 670 as of March 31, 2006, a 16% decrease. Cost of service as a percentage of revenues during the quarters ended March 30, 2007 and March 31, 2006 was comparable at 63%.

Selling, General and Administrative. Selling, general and administrative expenses decreased 2% to $17.5 million in the quarter ended March 30, 2007 from $17.8 million in the quarter ended March 31, 2006. The overall decrease in selling, general and administrative expenses was primarily attributable to (1) a $740 thousand reduction in depreciation and amortization expense due to fully amortized assets, and (2) a $142 thousand reduction in bad debt expense. These decreases were offset by increases related to (1) professional fees incurred in conjunction with the misappropriation of funds of $183 thousand (see discussion below), and (2) severance costs of approximately $337 thousand.

Restructuring Costs. We recorded restructuring costs of $6.3 million in the quarter ended March 31, 2006 which was comprised of $2.8 million relating to the 2005 restructuring for the consolidation of additional facilities and related exit costs primarily as a

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result of the REL Consultancy Group acquisition and $3.5 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. Included in the $2.8 million is a further reduction of occupied space in our technology-focused facility in Philadelphia and related severance costs for a senior executive as the Company’s primary business model shifts to a proprietary best practice intellectual capital and strategic advisory services firm. We did not record any restructuring costs during the quarter ended March 30, 2007.

Loss From Misappropriation, Net of Collections. The loss from misappropriation, net of collections of $350 thousand for the quarter ended March 30, 2007 related to collections received on funds that were misappropriated by our former UK disbursement agent. We learned of a misappropriation by our former UK disbursement agent, which related to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue. The disbursement agent had been utilized from early 2003 to January 2006 to make payroll, payroll tax and vendor disbursements in our United Kingdom operations.

Income Taxes. We recorded income taxes of $67 thousand for the quarter ended March 30, 2007. This amount reflected an estimated annual 3% tax rate for 2007 for certain U.S. federal and state taxes. For the quarter ended March 31, 2006, we recorded income taxes of $365 thousand which reflected an estimated annual 7% tax rate for 2006 for certain U.S. federal and state taxes. The 2006 federal taxes related to REL’s U.S. entity, as we were unable to utilize our federal net operating loss carryforward to offset REL U.S. income.

Effective December 30, 2006, we adopted FIN No. 48, Accounting for Uncertainty in Income Taxes. As a result of the implementation of FIN No. 48, we performed a comprehensive review of our portfolio of uncertain tax positions in accordance with recognition standards established by FIN No. 48. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on December 30, 2006, we adjusted the estimated value of our uncertain tax positions by recognizing additional liabilities totaling $481 thousand through a charge to retained earnings, which primarily related to potential state and federal tax exposure. The $481 thousand liability included $311 thousand, which was not expected to be paid within one year, and as such was classified as a non-current liability and included in the non-current portion of accrued expenses and other liabilities in the consolidated balance sheet as of March 30, 2007. The amount of unrecognized tax positions did not materially change as of March 30, 2007 and we do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.

Penalties and tax-related interest expense are reported as a component of income tax expense. As of December 30, 2006, the total amount of accrued income tax-related interest and penalties was $26 thousand and $237 thousand, respectively. The liability for the payment of interest and penalties did not materially change as of March 30, 2007.

Liquidity and Capital Resources

We have funded our operations primarily with cash flows generated from operations and the proceeds from our initial public offering. At March 30, 2007, we had $23.6 million in cash and cash equivalents, compared to $19.6 million at December 29, 2006. At March 30, 2007 and December 29, 2006, we had $600 thousand on deposit with a financial institution as collateral for letters of credit and have classified these deposits as restricted cash in the accompanying consolidated balance sheets.

Net cash provided by operating activities was $4.2 million for the quarter ended March 30, 2007, compared to net cash used in operating activities of $2.8 million for the comparable period in 2006. During the quarter ended March 30, 2007, net cash provided by operating activities was primarily attributable to the collections of accounts receivable and unbilled revenue of $6.3 million, which resulted in a decrease in Days Sales Outstanding of 14 days. This increase was primarily offset by (1) higher prepaid expenses and other current assets of $546 thousand, mostly related to prepaid insurance, (2) a decrease of $857 thousand in accounts payable due to the timing of trade payables, and (3) a decrease of $542 thousand in accrued expenses and other liabilities, primarily due to a decrease of accrued commissions, bonus and professional fees, which were mostly offset by higher salary accruals. During the quarter ended March 31, 2006, net cash used in operating activities was primarily attributable to (1) our net loss of $6.2 million adjusted for $3.7 million of non-cash expenses, (2) increases of $571 thousand in accounts receivable and unbilled revenues, (3) $157 thousand in prepaid expenses and other assets and (4) a decrease of $1.5 million in trade accounts payable. These effects were partially offset by an increase of $2.0 million in accrued expenses and other liabilities. Non-cash expenses included depreciation and amortization, provision for doubtful accounts and non-cash compensation expense.

Net cash used in investing activities was $189 thousand for the quarter ended March 30, 2007, compared to cash provided by investing activities of $7.7 million for the quarter ended March 31, 2006. Cash used in investing activities in 2007 was primarily attributable to purchases of property and equipment. Cash from investing activities in 2006 was primarily attributable to maturities of marketable investments of $5.0 million and a decrease in restricted cash of $3.7 million, partially offset by $570 thousand used for the purchase of property and equipment and $353 thousand used for the acquisition of a business.

Net cash provided by financing activities was $24 thousand for the quarter ended March 30, 2007 compared to net cash used in financing activities of $4.5 million for the quarter ended March 31, 2006. Cash provided by financing activities in 2007 was primarily attributable to the exercise of stock options. During the quarter ended March 31, 2006, cash used in financing activities was primarily related to the repayment of the REL Employee Benefit Trust loan of $3.7 million and the repayment of bank overdrafts of $1.1 million, partially offset by $238 thousand of proceeds from the sale of stock as a result of exercises of stock options.

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On July 30, 2002, we announced that our Board of Directors approved the repurchase of up to $5.0 million of our common stock. In 2003, 2004 and 2005, our Board of Directors approved the repurchase of an additional $25.0 million of our common stock, thereby increasing the total program size to $30.0 million. Under the repurchase plan, we may buy back shares of our outstanding stock from time to time either on the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. During the quarter ended March 30, 2007, the Company did not repurchase any shares. As of March 30, 2007, we had repurchased 7.2 million shares of our common stock at an average price of $3.33 per share.

We currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. We may decide to raise additional funds in order to fund expansion, to develop new or enhanced products and services, to respond to competitive pressures or to acquire complementary businesses or technologies. There is no assurance, however, that additional financing will be available when needed or desired.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

At March 30, 2007, our exposure to market risk related primarily to changes in interest rates on our investment portfolio. Our marketable investments consist primarily of short-term fixed interest rate securities. We invest only with high credit quality issuers and we do not use derivative financial instruments in our investment portfolio. We do not believe that a significant increase or decrease in interest rates would have a material impact on the fair value of our investment portfolio.

Exchange Rate Sensitivity

We face exposure to adverse movements in foreign currency exchange rates, as a portion of our revenues, expenses, assets and liabilities are denominated in currencies other than the U.S. Dollar, primarily the British pound and the euro. These exposures may change over time as business practices evolve. Currently, we do not hold any derivatives contracts that hedge our foreign currency risk, but we may adopt such strategies in the future.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) pursuant to Rule 13a-14(c) and Rule 15d-14(c) under the Securities Exchange Act of 1934. Based upon that evaluation, the CEO and CFO concluded that our Disclosure Controls are effective in timely alerting them to material information required to be included in our periodic SEC filings.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II-OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on our financial position cash flows or results of operations.

Item 5. Other Information

None

Item 6. Exhibits

See Index to Exhibits on page 17, which is incorporated herein by reference.

The Exhibits listed in the accompanying Index to Exhibits are filed as part of this report.

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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 thereunto duly authorized.

	Answerthink, Inc.
Date: May 8, 2007	/s/ Grant M. Fitzwilliam
	Grant M. Fitzwilliam
	Executive Vice President, Finance and Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit No.	Exhibit Description
3.1+	Second Amended and Restated Articles of Incorporation of the Registrant, as amended
3.2+	Amended and Restated Bylaws of the Registrant, as amended
31.1	Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

+ Incorporated herein by reference to the Company’s Form 10-K for the year ended December 29, 2000

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