Diamond Reports Third Quarter FY07 Results

February 2 2007

Diamond Management & Technology Consultants, Inc. (Nasdaq: DTPI), a premier global management and technology consulting firm, today announced results for its third quarter of fiscal year 2007 (ended December 31, 2006).

Financial Results

In the third quarter of fiscal year 2007, net revenue from continuing operations was $43.7 million, up 6% compared to $41.2 million reported in the prior quarter and up 28% compared to $34.2 million reported in the third quarter of fiscal year 2006. In the third quarter, the Company reported income from continuing operations before taxes of $5.2 million and income from continuing operations after taxes of $2.5 million, or $0.08 per diluted share. In the year ago period, the Company reported income from continuing operations before taxes of $179 thousand and a loss from continuing operations after taxes of ($1.0) million, or ($0.03) per diluted share.

Free cash flow from continuing operations (cash flow provided by operating activities less capital expenditures and free cash flow from discontinued operations) in the third quarter was $11.6 million. During the third quarter, the Company repurchased 1.5 million shares of its common stock for $17.6 million. The Company also declared and paid an annual dividend for the first time. The dividend was paid on December 8, 2006 in the amount of $0.30 per share of common stock outstanding for a total cash payout of $9.7 million. The Company ended the quarter with cash and cash equivalents of $82.4 million.

"Diamond enjoyed a strong third quarter along many dimensions," said Adam Gutstein, President and CEO of Diamond. "Our focus on operational basics and business execution has resulted in strong operational performance across a number of key metrics. We delivered 6% sequential net revenue growth and made further progress driving margin expansion with a pretax margin of 11.8%. We generated free cash flow from continuing operations of $11.6 million as a result of strong operating performance and particularly strong calendar-year- end cash collections. And importantly, our annualized voluntary attrition improved to 10%."

Diamond served 60 clients in continuing operations during the third quarter of fiscal year 2007, compared with 63 clients in the second quarter and 52 in the year-ago period. The Company added 18 new clients in the third quarter compared with 23 in the second quarter and 15 in the year-ago period. The top five clients represented 39% of revenue during the third quarter compared to 41% in the second quarter and 44% in the year-ago period. The Company ended the third quarter with 503 client-serving professionals, compared with 502 in the second quarter and 435 in the year-ago period.

Business Outlook

Fourth Quarter FY07

In the fourth quarter, the Company anticipates its continuing operations to generate net revenue of $44 to $47 million, pretax income of $5.3 to $6.0 million, earnings per diluted share of $0.08 to $0.10, and free cash flow of $4 to $7 million. The Company expects its effective income tax rate to be between 47% and 51%.

Fiscal year 2008

"Our outlook for fiscal year 2008 is positive," continued Gutstein. "While our plan is preliminary and subject to Board review and approval, in fiscal year 2008 we believe we will continue to grow net revenue in the range of 16 to 20 percent. We anticipate full-year pretax margins to be in the range of 13 to 14 percent and EPS of 42 to 48 cents, assuming a full-year effective income tax rate between 46 and 49 percent. We expect to generate full-year free cash flow in the range of 28 to 34 million dollars."

Conference Call

Diamond management will host a conference call today, February 1, 2007, at 8:00 am CT to discuss the results of the quarter. The dial-in number for the conference call is 888-939-6306 for North American callers and 415-908-6256 for international callers. The replay will be available until February 6, 2007 and can be accessed by calling 402-977-9140, then entering passcode number 21320316. The call will be broadcast live and archived on Diamond's web site at http://www.diamondconsultants.com .

About Diamond

Diamond is a management and technology consulting firm. Recognizing that information and technology shape market dynamics, Diamond's small teams of experts work across functional and organizational boundaries to improve growth and profitability. Since the greatest value in a strategy, and its highest risk, resides in its implementation, Diamond also provides proven execution capabilities. We deliver three critical elements to every project: fact-based objectivity, spirited collaboration, and sustainable results. Diamond is headquartered in Chicago, with offices in New York, Washington, D.C., Hartford, London and Mumbai. Diamond is publicly traded on the Nasdaq Global Market under the symbol "DTPI." To learn more, visit http://www.diamondconsultants.com .

Forward-Looking Statements

Statements in this press release that do not involve strictly historical or factual matters are forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws. Forward-looking statements involve estimates, projections, assumptions, risks and uncertainties and speak only as of the date of this release. Actual results may differ materially due to among other things, such factors as the ability of the Company to maintain its pricing and utilization rates and control its costs, recruitment and retention of personnel, possible termination of projects by major clients, collections of receivables, variations in the timing, initiation or completion of client assignments, absence of long-term contracts with clients, growth management, project risks, and technological advances. The risks and uncertainties associated with our business are highlighted in our filings with the SEC, including our Form 10-K for the year ended March 31, 2006.

DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

For the Three Months For the Nine Months

Ended December 31, Ended December 31,

2006 2005 2006 2005

(Un- (Un- (Un- (Un-

audited) audited) audited) audited)

REVENUE:

Net revenue $43,736 $34,244 $125,795 $106,395

Reimbursable expenses 5,422 4,185 16,203 13,288

Total revenue 49,158 38,429 141,998 119,683

PROJECT PERSONNEL EXPENSES:

Project personnel costs before

reimbursable expenses 28,797 25,633 89,280 72,901

Reimbursable expenses 5,422 4,185 16,203 13,288

Total project personnel

expenses 34,219 29,818 105,483 86,189

GROSS MARGIN 14,939 8,611 36,515 33,494

OTHER OPERATING EXPENSES:

Professional development and

recruiting 2,662 1,850 6,914 4,832

Marketing and sales 1,182 776 2,541 2,365

Management and administrative

support 6,892 6,471 20,840 18,642

Restructuring charges (recovery) - 10 (24) 2,360

Total other operating expenses 10,736 9,107 30,271 28,199

INCOME (LOSS) FROM OPERATIONS 4,203 (496) 6,244 5,295

OTHER INCOME, NET 972 675 2,952 2,229

INCOME FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES 5,175 179 9,196 7,524

INCOME TAX EXPENSE 2,631 1,208 4,546 5,923

INCOME (LOSS) FROM CONTINUING

OPERATIONS AFTER INCOME TAXES 2,544 (1,029) 4,650 1,601

DISCONTINUED OPERATIONS:

Gain (loss) on disposal of

discontinued operations,

including income tax benefit

of $574 for the nine months

ended December 31, 2006 (147) - 22,889 -

Income (loss) from discontinued

operations, net of income taxes 457 1,658 1,329 (12,715)

DISCONTINUED OPERATIONS, NET OF

INCOME TAXES 310 1,658 24,218 (12,715)

NET INCOME (LOSS) $2,854 $629 $28,868 $(11,114)

BASIC INCOME (LOSS) PER SHARE OF

COMMON STOCK:

INCOME (LOSS) FROM CONTINUING

OPERATIONS $0.08 $(0.03) $0.14 $0.05

INCOME (LOSS) FROM DISCONTINUED

OPERATIONS 0.01 0.05 0.75 (0.38)

NET INCOME (LOSS) $0.09 $0.02 $0.90 $(0.33)

DILUTED INCOME (LOSS) PER SHARE OF

COMMON STOCK:

INCOME (LOSS) FROM CONTINUING

OPERATIONS $0.08 $(0.03) $0.14 $0.05

INCOME (LOSS) FROM DISCONTINUED

OPERATIONS 0.01 0.05 0.72 (0.36)

NET INCOME (LOSS) $0.08 $0.02 $0.85 $(0.32)

SHARES USED IN COMPUTING BASIC

INCOME (LOSS) PER SHARE 31,647 32,521 32,120 33,254

SHARES USED IN COMPUTING DILUTED

INCOME (LOSS) PER SHARE 33,675 32,521 33,771 34,948

The following amounts of stock-based compensation expense ("SBC") are

included in each of the respective expense categories reported above:

For the Three Months For the Nine Months

Ended December 31, Ended December 31,

2006 2005 2006 2005

(Un- (Un- (Un- (Un-

audited) audited) audited) audited)

Project personnel costs before

reimbursable expenses $2,580 $2,320 $8,323 $6,554

Professional development and

recruiting 21 23 77 51

Marketing and sales 95 79 262 281

Management and administrative support 697 624 2,260 1,663

SBC from continuing operations $3,393 $3,046 $10,922 $8,549

SBC included in income (loss) from

discontinued operations - 933 527 2,851

$3,393 $3,979 $11,449 $11,400

SBC recorded against the gain on

disposal of discontinued operations - - 1,379 -

Total SBC $3,393 $3,979 $12,828 $11,400

DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

December 31, March 31,

ASSETS 2006 2006

(Unaudited) (Unaudited)

Current assets:

Cash and cash equivalents $82,422 $69,899

Accounts receivable, net of

allowance of $630 and $629

as of December 31, 2006 and

March 31, 2006, respectively 11,764 11,908

Deferred tax asset - current portion 1,270 1,457

Prepaid expenses and other current

assets 5,620 3,105

Current assets from discontinued

operations - 21,097

Total current assets 101,076 107,466

Computers, equipment, leasehold

improvements and software, net 2,447 1,431

Restricted cash 6,310 5,493

Deferred tax asset - long-term portion 6,966 8,008

Other assets 1,897 3,322

Non-current assets from discontinued

operations - 2,767

Total assets $118,696 $128,487

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $1,759 $2,260

Income taxes payable 474 899

Accrued compensation 7,526 4,966

Other accrued liabilities 11,294 9,385

Current liabilities of discontinued

operations - 14,746

Total current liabilities 21,053 32,256

Restructuring accrual, less current

portion 394 527

Net tax indemnification obligation 3,168 -

Non-current liabilities from

discontinued operations - 3,816

Total liabilities 24,615 36,599

Stockholders' equity:

Common stock, 31,693 shares

outstanding as of December 31,

2006 and 32,499 shares outstanding

as of March 31, 2006 534,473 546,293

Accumulated other comprehensive

income (loss) (2,688) 2,473

Accumulated deficit (437,704) (456,878)

Total stockholders' equity 94,081 91,888

Total liabilities and stockholders'

equity $118,696 $128,487

DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Three Months For the Nine Months

Ended December 31, Ended December 31,

2006 2005 2006 2005

(Un- (Un- (Un- (Un-

audited) audited) audited) audited)

Cash flows from operating

activities:

Net income (loss) $2,854 $629 $28,868 $(11,114)

Adjustments to reconcile net

income (loss) to net cash

provided by (used in)

operating activities:

Restructuring charges

(recovery) - 36 (478) 11,193

Depreciation and

amortization 481 685 1,410 2,103

Stock-based compensation 3,393 3,979 11,449 11,400

Loss (gain) on sale of

discontinued operations 147 - (22,315) -

Deferred income taxes 2,246 417 1,212 4,521

Changes in assets and

liabilities:

Accounts receivable 4,112 (3,380) (5,359) (4,029)

Prepaid expenses and other (132) 568 (645) 157

Accounts payable (394) 189 (948) (516)

Restructuring accrual (64) (4,072) (1,255) (4,976)

Other assets and

liabilities (899) 720 7,223 (4,634)

Net cash provided by (used in)

operating activities 11,744 (229) 19,162 4,105

Cash flows from investing activities:

Increase in restricted cash (724) - (817) -

Net proceeds from sale of

discontinued operations (129) - 27,920 -

Net purchases of short-term

investments - - - 55,975

Capital expenditures, net (279) (264) (1,934) (1,029)

Other assets - - 47 60

Net cash provided by (used in)

investing activities (1,132) (264) 25,216 55,006

Cash flows from financing activities:

Stock option and employee stock

purchase plan proceeds 5,483 564 7,024 6,279

Shares withheld for employee

withholding taxes (2,587) (980) (5,086) (3,362)

Tender offer cash distributions (1,805) - (1,805) -

Common stock cash dividend (9,716) - (9,716) -

Proceeds due to employees from

employee sales of common stock (2,431) - - -

Tax benefits from employee stock

plans, net of adjustments 823 (23) 2,088 26

Purchase of treasury stock (18,414) (7,237) (26,967) (32,711)

Net cash used in financing

activities (28,647) (7,676) (34,462) (29,768)

Effect of exchange rate changes on

cash 166 449 283 (373)

Net increase (decrease) in cash

and cash equivalents (17,869) (7,720) 10,199 28,970

Cash and cash equivalents at

beginning of period 100,291 78,960 72,223 (1) 42,270

Cash and cash equivalents at end

of period $82,422 $71,240 $82,422 $71,240

Non-cash financing activities:

Treasury stock repurchase

obligation $- $1,625 $- $1,625

Reclassification of stock-

based compensation balance to

additional paid-in capital - - - 2,174

(1) Cash and cash equivalents includes $2,324 of cash and cash equivalents

classified as discontinued operations as of March 31, 2006.