The consolidated financial statements include the accounts of Echo Global Logistics, Inc. and its subsidiaries (the "Company" or "Echo"). All significant intercompany accounts and transactions have been eliminated in the consolidation. The consolidated statements of operations include the results of entities or assets acquired from the effective date of the acquisition for accounting purposes.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results can differ from those estimates.

The carrying values of the Company's financial instruments, which consist of cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values due to their short-term nature. The fair value of the due to seller liabilities are determined based on the likelihood of the Company making contingent earn-out payments (see Note 3). The fair value of the due from seller asset related to the Command Transportation, LLC ("Command") acquisition was determined based on employee retention criteria which was settled in June 2017 (see Note 3)4). The fair value of the liability component of the Notes (as defined in Note 10)11) was determined using the discounted cash flow analysis discussed in Note 10.11.

Certain customers may receive rebates based on the terms of their agreement with the Company, which are accounted for as variable consideration. Rebates are estimated based on the expected amount to be provided to customers and reduce revenue recognized. The Company has established an implementation team and is evaluating the accounting, transition and disclosure requirements of the new standard. also estimates for possible additional fees based on a portfolio approach.

The Company adopted the practical expedient to recognize commission expense when incurred because the amortization period is also evaluatingless than one year. Commission expense recognition aligns with the effects that the adoption of this standard will haveCompany's revenue recognition policy under ASC 606, as commission expense is recognized on the Company’s financial statements.a relative transit time basis.

The Company's financial assets related to contingent payments that were due from the seller of Command Transportation, LLC ("Command") based upon certain employee retention criteria. As of September 30, 2017,March 31, 2018, there was no remaining balance of the due from seller asset as the criteria were met.

ASC Topic 820 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

Quantitative factors are also considered in these forecasts, including acquisition synergies, growth and sales potential and potential operational efficiencies gained. Changes to the significant inputs used in determining the fair value of the contingent consideration due to seller could result in a change in the fair value of the contingent consideration. However, the correlation and inverse relationship between higher projected financial results to the discount rate applied and probability of meeting the financial targets mitigates the effect of any changes to the unobservable inputs.

The following table provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3) (in thousands):

For the ninethree months ended September 30,March 31, 2018, the Company excluded 40,011 unvested performance and market-based shares from the calculation of diluted earnings per common share because the effect was anti-dilutive. There were no employee

As of September 30, 2017,March 31, 2018, none of the conditions allowing holders of the Notes to convert have been met and no conversion spread exists. As such, the Notes did not have a dilutive impact on diluted earnings (loss) per common share for the three and nine months ended September 30, 2017.March 31, 2018 and 2017, respectively.

During each of the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, the Company did not grant any stock options.

The Company granted 294,820243,267 and 251,221267,788 shares of restricted stock to various employees during the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, respectively.

In 2014, the Company initiated a performance and market-based stock incentive plan for certain executives that provides vesting based on specific financial and market-based performance measurements. The Company granted 99,93397,966 and 91,61299,933 shares of performance and market-based stock during the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, respectively.

On June 1, 2015, the Company and Command, as co-borrowers, entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank. The Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $200 million (the “ABL Facility”). The Company's obligations under the ABL facility are secured, on a first lien priority basis, by certain working capital assets. The initial aggregate principal amount under the ABL Facility may be increased from time to time by an additional $100 million to a maximum aggregate principal amount of $300 million.

Interest is payable at a rate per annum equal to, at the option of the Company, any of the following, plus, in each case, an applicable margin: (a) a base rate determined by reference to the highest of (1) the federal funds effective rate, plus 0.50%, (2) the base commercial lending rate of PNC Bank, National Association and (3) a daily LIBOR rate, plus 1.00%; or (b) a LIBOR rate determined by reference to the costs of funds for deposits in the relevant currency for the interest period relevant to such borrowing adjusted for certain additional costs. The applicable margin is 0.25% to 0.75% for borrowings at the base rate and 1.25% to 1.75% for borrowings at the LIBOR rate, in each case, based on the excess availability under the ABL Facility.

The Company is required to pay a commitment fee in respect to the unutilized commitments under the revolving credit facility. At September 30, 2017,March 31, 2018, the Company's commitment fee was calculated at a rate of 0.375%. The Company recognized interest expense related to the commitment fee and borrowings on the ABL Facility of $0.7 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.

The issuance of letters of credit under the ABL Facility reduces available borrowings. At September 30, 2017,March 31, 2018, there were $0.7 million of letters of credit outstanding. The total draw allowed on the ABL Facility at September 30, 2017,March 31, 2018, as determined by the working capital assets pledged as collateral, was $199.9$200.0 million. After adjusting for the letters of credit, the Company's remaining availability under the ABL Facility at September 30, 2017March 31, 2018 was $199.2$199.3 million.

The Company incurred issuance costs of $3.1 million in 2015 related to the ABL Facility. These issuance costs are being amortized to interest expense using straight-line amortization over the 5 year life of the ABL Facility. For each of the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, the Company recorded $0.5$0.2 million of interest expense related to ABL Facility issuance costs. As there is no outstanding draw on the ABL Facility at September 30, 2017,March 31, 2018, the unamortized issuance costs are presented as a deferred asset on the consolidated balance sheets.

The Notes will be convertible, under certain circumstances and during certain periods, into cash, shares of the Company's common stock, or a combination of cash and shares of common stock at the Company's election, at an initial conversion rate of 25.5428 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $39.15 per share of common stock.

The Company's intent and policy will be to settle the $230 million principal amount of Notes in cash, and any excess conversion premium in shares of common stock. As such, the principal amount of the Notes will not be included in the calculation of diluted earnings (loss) earnings per common share, but any conversion premium that exists will be included in the calculation of diluted earnings (loss) earnings per common share using the treasury stock method. As of September 30, 2017,March 31, 2018, none of the conditions allowing holders of the Notes to convert have been met and no conversion spread exists. As such, the Notes did not have a dilutive impact on diluted lossearnings (loss) per common share for each of the ninethree months ended September 30,March 31, 2018 and 2017.

The undiscounted interest and principal payments due in relation to the Notes from September 30, 2017March 31, 2018 to the maturity of the Notes on May 1, 2020 are as follows:follows (in thousands):

We are a leading provider of technology-enabled transportation and supply chain management solutions. We utilize a proprietary technology platform to compile and analyze data from our multi-modal network of transportation providers to satisfy the transportation and logistics needs of our clients. This model enables us to quickly adapt to and offer efficient and cost-effective solutions for our clients' shipping needs. We focus primarily on arranging transportation by truckload ("TL") and less than truckload ("LTL") carriers. We also offer intermodal (which involves moving a shipment by rail and truck), small parcel, domestic air, expedited and international transportation services. Our core logistics services include rate negotiation, shipment execution and tracking, carrier selection, and management, routing compliance, freight bill payment and audit, payment and performancedispatch, load management and reporting functions, including executive dashboard tools.tracking.

We procure transportation and provide logistics services for clients across a wide range of industries, such as manufacturing, construction, food and beverage, consumer products and retail. Our clients fall into two categories: Transactional and Managed Transportation. We provide brokerage and transportation and logisticsmanagement services to our Transactional clients on a shipment-by-shipment basis, typically with individual or spot market pricing. We typically enter into multi-year contractsagreements with our Managed Transportation clients, which are often on an exclusive basis for a specific transportation mode or point of origin. As part of our value proposition, we also provide core logistics services to these clients.

Our revenue is generated from two different types of clients: Transactional and Managed Transportation. Most of our clients are categorized as Transactional clients. We provide services to our Transactional clients on a shipment-by-shipment basis. We categorize a client as a Managed Transportation client if we have a contract with the client for the provision of services on a recurring basis. Our contracts with Managed Transportation clients typically have a multi-year term and are often on an exclusive basis for a specific transportation mode or point of origin. In several cases, we provide substantially all of a client's transportation and logistics requirements. Our Managed Transportation accounts typically generate higher dollar amounts and volume than our Transactional relationships. For the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, Transactional clients accounted for 79.2%78.5% and 81.5%80.1% of our revenue, respectively, and Managed Transportation clients accounted for 20.8%21.5% and 18.5%19.9% of our revenue, respectively. We expect to continue to grow both our Transactional and Managed Transportation client base in the future, although the rate of growth for each type of client will vary depending on opportunities in the marketplace.

The transportation industry has historically been subject to seasonal sales fluctuations as shipments generally are lower during and after the winter holiday season because many companies ship goods and stock inventories prior to the winter holiday season. While we experience some seasonality, differences in our revenue between periods have been driven primarily by growth in our client base.base and changes in the market environment.

We act primarily as a service provider to add value and expertise in the procurement and execution of transportation and logistics services for our clients. Our pricing structure is primarily variable, although we have entered into a limited number of fixed-fee arrangements that represent an insignificant portion of our revenue. Net revenue equals revenue minus transportation costs. Our transportation costs consist primarily of the direct cost of transportation paid to the carrier.

Our costs and expenses, excluding transportation costs, consist of commissions paid to our sales personnel,personnel; selling, general and administrative expenses to run our business,business; changes in our contingent consideration,consideration; and depreciation and amortization.

Selling, general and administrative expenses, excluding commission expense and changes to contingent consideration, consist of compensation costs for our sales, operations, information systems, finance and administrative support employees as well as occupancy costs, professional fees, stock compensation and other general and administrative expenses. For the the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, our selling, general and administrative expenses were $135.6$50.3 million and $132.5$44.8 million, respectively. For the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, selling, general and administrative expenses as a percentage of net revenue were 55.8%50.3% and 53.7%60.1%, respectively.

Our contingent consideration expense or benefit, is the change in the fair value of our contingent consideration assets and liabilities. The contingent consideration assets and liabilities presented on our consolidated balance sheets reflect the fair value of expected earn-out payments that may be paid or received from the sellers of certain acquired businesses upon the achievement of certain performance measures. The fair values of the contingent consideration assets and liabilities are evaluated on a quarterly basis, and the change in fair value is included in selling, general and administrative expenses in our consolidated statements of operations. For each of the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, we recorded a net expense of $0.6 million and a net benefit of $0.1 million, respectively.million.

Our amortization expense is attributable to amortization of intangible assets acquired from business combinations, including customer and carrier relationships, trade names and non-compete agreements. For the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, amortization expense was $10.7$3.2 million and $11.9$3.6 million, respectively.

Revenue for the three months ended September 30, 2017March 31, 2018 was $509.5$577.1 million, an increase of 10.7%38.8% from $460.2$415.8 million in the comparable period of 2016.2017. The increase in revenue was primarily attributable to an increase of 24.0% in revenue per shipment, along with an increase of 11.9% in volume.

Revenue from Transactional clients for the three months ended September 30, 2017March 31, 2018 was $401.2$453.1 million, an increase of 7.5%36.1% from $373.1$333.0 million in the comparable period of 2016.2017. The increase in Transactional revenue was driven by an increase in both TL and LTL revenue per shipment. Revenue from Transactional clients was 78.7%78.5% of our revenue for the three months ended September 30, 2017,March 31, 2018, a decrease from 81.1%80.1% of our revenue in the comparable period of 2016.2017. The decrease in Transactional revenue as a percent of total revenue was driven by an increase in Managed Transportation volume.

Revenue from Managed Transportation clients for the three months ended September 30, 2017March 31, 2018 was $108.4$124.0 million, an increase of 24.4%49.8% from $87.1$82.8 million in the comparable period of 2016.2017. Revenue from Managed Transportation clients was 21.3%21.5% of our revenue for the three months ended September 30, 2017,March 31, 2018, an increase from 18.9%19.9% of revenue in the comparable period of 2016.2017. This increase was driven by the addition of new clients, along with an increase in revenue per shipment from existing clients.

The contingent consideration fair value adjustment resulted in net expense of $0.3$0.1 million and $0.05 million for each of the three months ended September 30, 2017March 31, 2018 and 2016, respectively.2017. The net expense for 2017 is2018 was the result of adjustments made to the fair value of the contingent liabilities due to financial performance of previous acquisition owners and the time value of money. The fair value of the contingent consideration liabilities reflects the updated probabilities and assumptions as of September 30, 2017.

Income from operations for the ninethree months ended September 30, 2017March 31, 2018 was $9.0$10.5 million, compared to $16.9loss from operations of $0.8 million in the comparable period of 2016.2017. The decreaseincrease in income from operations was primarily due to lowerhigher net revenue margins.revenue.

Interest expense was $11.0$3.8 million for the ninethree months ended September 30, 2017,March 31, 2018, an increase from $10.6$3.6 million of interest expense in the comparable period of 2016.2017. The interest expense in both years primarily relates to our Notes and the ABL Facility.

We recognized income tax benefitexpense of $1.3$2.0 million and income tax expensebenefit of $1.7$1.5 million for the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, respectively. Our effective tax rate for the ninethree months ended September 30, 2017March 31, 2018 was (64.1)%30.0%, compared to an effective tax rate of 27.7%(34.7)% in the comparable period of 2016.2017. The difference in the Company'sour effective tax rate for the ninethree months ended September 30, 2017March 31, 2018 from the Company's statutory federal tax rate of 35%21% was primarily due to a domestic productionan increase in non-deductible expenses, primarily stock based compensation, offset in part by the impact of certain tax deduction for the 2013 tax year recorded in the third quarter of 2017, the tax deficiencies related to share-based payment awards described further in Note 2 to our Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q, and the effect of the 2017 year to date pre-tax loss.credits.

Net lossincome for the ninethree months ended September 30, 2017March 31, 2018 was $0.7$4.7 million, compared to net incomeloss of $4.6$2.9 million in the comparable period of 2016,2017, due to the items previously discussed.

On June 1, 2015, we entered into a Revolving Credit and Security Agreement with PNC Bank (the "Credit Agreement"). The Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $200 million. Our obligations under the ABL Facility are secured, on a first lien priority basis, by certain working capital assets. We are required to pay a commitment fee in respect of the unutilized commitments under the revolving credit facility.

At September 30, 2017,March 31, 2018, there was no outstanding balance on the ABL Facility. The issuance of letters of credit under the ABL Facility also reduces available borrowings. At September 30, 2017,March 31, 2018, there were $0.7 million of letters of credit outstanding. The total draw allowed under the ABL Facility at September 30, 2017,March 31, 2018, as determined by the working capital assets pledged as collateral, was $199.9$200.0 million. After adjusting for the letters of credit, our remaining availability under the ABL Facility at September 30, 2017March 31, 2018 was $199.2$199.3 million.

Our priority is to continue to grow our revenue and net revenue. We anticipate that our operating expenses and planned expenditures will constitute material uses of cash, and we expect to use available cash to expand our sales force, to enhance our

In 2017,2018, we also expect to use $2.9available cash to make approximately $0.6 million of potential contingent earn-out payments, as well as $5.8 million to satisfy the semi-annual Notes coupon payment due May 1, 2018 and November 1, 2017, as well as $42018. In addition, we currently expect to $6use $14 million to $19 million for capital expenditures for the remainder of 2017.2018. We expect our use of cash for working capital purposes and other purposes to be offset by the cash flow generated from operating activities during the same period.

Historically, our average accounts receivable life-cycle has been longer than our average accounts payable life-cycle, meaning that we have used cash to pay carriers in advance of collecting from our clients. We elect to provide this benefit to foster strong relationships with our clients and carriers. As our business grows, we expect this use of cash to continue. The amount of cash we use will depend on the growth of our business.

We do not have any off-balance sheet arrangements.

The discussion of recent accounting pronouncements in Note 2, Recent Accounting Pronouncements, to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q is incorporated herein by reference.

We pass through fluctuations in fuel prices to our clients. As a result, we believe that there is no material risk exposure to fluctuations in fuel prices.

We have exposure to changes in interest rates on our ABL Facility. Borrowings bear interest at one of the following, plus an applicable margin: (1) the federal funds rate, (2) the base commercial lending rate of PNC Bank, or (3) the LIBOR rate, based on the Company's election for each tranche of borrowing. The interest rate on our line of credit fluctuates based on the rates described above. Assuming the $200.0 million ABL Facility was fully drawn, a 1.0% increase in the interest rate selected would increase our annual interest expense by $2.0 million.

Our interest income is sensitive to changes in the general level of U.S. interest rates, in particular because all of our investments are in cash equivalents. Due to the short-term nature of our investments, we believe that there is no material risk exposure.

We do not use derivative financial instruments for speculative trading purposes.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarterly period ended September 30, 2017March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management does not believe that the outcome of any of the legal proceedings to which the Company is a party will have a material adverse effect on its financial position or results of operations.

There have been no material changes from the risk factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2017.

During the three months ended September 30, 2017,March 31, 2018, we did not issue any unregistered securities.

The table below gives information on a monthly basis regarding purchases made by us of our common stock and the number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of restricted stock during the thirdfirst quarter of 2017.2018.

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.