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 acquired intangible assets was determined using a discounted cash flow analysis as further described in Note 3. 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 4)5). The fair value of the liability component of the Notes (as defined in Note 11)12) was determined using the discounted cash flow analysis discussed in Note 11.12.

The Company adopted this standard on January 1, 20182019 using the modified retrospective approach. As a result of using this approach, the Company recognized the cumulative effect adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Upon adoption, the Company elected the package of practical expedients that allows it to (i) not reassess whether an arrangement contains a lease, (ii) carry forward its lease classification as operating or capital leases and (iii) not reassess its previously recorded initial direct costs. In addition, the Company elected the practical expedient to not separate lease and non-lease components whereby both components are accounted for and recognized as lease components.

materialThe adoption of this new standard resulted in the recording of additional net operating lease assets and operating lease liabilities of $21.0 million and $20.9 million, respectively, as of January 1, 2019 to the existing deferred rent balance of $20.3 million. The standard did not impact on the Company's consolidated financial statements due to the short term naturestatement of its performance obligations.operations and had no impact on cash flows. The Company fully describes the adoption and impact of this standard in Note 3 to the consolidated financial statements.13. As part of the adoption of this standard, the Company implemented changes to its accounting policies, practices and internal controls over financial reporting.

On July 6, 2018, the Company acquired Freight Management Plus, Inc. ("Freight Management," or "FMP"), a non-asset based TL and LTL transportation brokerage based in Allison Park, Pennsylvania, and the results of FMP have been included in the Company's consolidated balance sheets.financial statements since the acquisition date. The Company has establishedpurchased the assets and assumed certain liabilities of FMP for $6.7 million in cash payable at closing, subject to working capital adjustments, $0.7 million of common stock, par value $0.0001 per share, and an implementation team and is evaluatingadditional $2.9 million in contingent consideration that may become payable upon the accounting, transition and disclosure requirementsachievement of certain performance measures on or prior to June 30, 2021. The acquisition date fair value of the new standard.total consideration transferred was $10.5 million. As a result of the purchase accounting for the acquisition, the Company recorded $2.3 million of goodwill, $1.4 million as the estimated opening balance sheet fair value of the contingent consideration obligation, and $5.1 million of customer relationship intangible assets. The fair values of the contingent consideration obligation and the customer relationship intangible assets are considered Level 3 fair value estimates. The fair value of the contingent consideration obligation was based on the probability of reaching the financial forecasts of future operating results, an appropriate discount rate, and the Company's historical experience with similar arrangements as further described in Note 5. The fair value of the customer relationship intangible assets was determined using a discounted cash flow analysis based on the current customers of FMP at the time of the acquisition. The amount of goodwill deductible for U.S. income tax purposes is $0.9 million, which excludes the opening balance sheet fair value of the contingent consideration obligation.

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 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 less than one year. Commission expense recognition aligns with the Company's revenue recognition policy under ASC Topic 606, as commission expense is recognized on a relative transit time basis.

The Company does not discloseapplied the valuedisclosure exemption in ASC Topic 606 that permits the omission of unsatisfiedremaining performance obligations for (i) contracts withthat have an original expected lengthduration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.less.

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):

The following is a summary of amortizable intangible assets as of March 31, 20182019 and December 31, 20172018 (in thousands):

The estimated amortization expense for the next five years and thereafter is as follows (in thousands):

The other noncurrent liabilities of $19.7 million and $20.3$0.5 million at March 31, 2018 and2019 consist of the long-term portion of the Company's uncertain tax liability. The other noncurrent liabilities of $18.4 million at December 31, 2017, respectively,2018 consist primarily of the portion of deferred rent in excess of twelve months.months and the long-term uncertain tax liability.

For the three months ended March 31, 2019 and 2018, the Company excluded 10,380 and 40,011 unvested performance and market-based shares, respectively, from the calculation of diluted earnings per common share because the effect was anti-dilutive. There were no employee stock options and no unvested restricted stock excluded from the calculation of diluted earnings per common share. For the three months ended March 31, 2017, 423,796 incremental shares related to stock-based awards were not included in the computation of diluted loss per common share because of the net loss during the period.

As of March 31, 2018,2019, none of the conditions allowing holders of the Notes (as defined in Note 12) 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 months ended March 31, 20182019 and 2017, respectively.2018.

During each of the three months ended March 31, 20182019 and 2017,2018, the Company did not grant any stock options.

The Company granted 243,267357,465 and 267,788243,267 shares of restricted stock to various employees during the three months ended March 31, 20182019 and 2017,2018, respectively.

In 2014, theThe Company initiatedprovides a performance and market-based stock incentive plan for certain executives that provideswith vesting requirements based on specific financial and market-based performance measurements. The Company granted 97,966105,543 and 99,93397,966 shares of performance and market-based stock during the three months ended March 31, 20182019 and 2017,2018, respectively.

On June 1, 2015,October 23, 2018, the Company and Command, as co-borrowers, entered into aAmendment No. 2 to its Revolving Credit and Security Agreement (the “Credit Agreement”"Second Amendment") with, which amends the terms of its existing Revolving Credit and Security Agreement, dated as of June 1, 2015, by and among the Company, the lenders party thereto, and PNC Bank.Bank, National Association, as administrative agent (as amended by the Second Amendment, the "Amended Credit Agreement"). The Amended Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $200$350 million (the “ABL Facility”"Amended ABL Facility")., with an extended maturity date of October 23, 2023. The initial aggregate principal amount under the Amended ABL Facility may be increased from time to time by an additional $150 million to a maximum aggregate principal amount of $500 million; provided that certain requirements are satisfied. The Company's obligations under the Amended ABL facilityFacility 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%0.50% for borrowings at the base rate and 1.25% to 1.75%1.50% for borrowings at the LIBOR rate, in each case, based on the excess availability under the Amended ABL Facility.

The terms of the Amended ABL Facility include various covenants, including a covenant that requires the Company to maintain a consolidated fixed charge coverage ratio at any time (a) a specified default occurs or (b) excess availability falls below certain specified levels.

Under the Amended ABL Facility, the Company is required to pay a commitment fee in respect to the unutilized commitments under the revolving credit facility. At March 31, 2018, the Company's commitment fee wasAmended ABL Facility, calculated at a rate of 0.375%0.25%. The Company recognized interest expense related to the commitment fee and borrowings on the ABL Facility of $0.2 million for each of the three months ended March 31, 2019 and 2018.

The issuance of letters of credit under the ABL Facility reduces available borrowings. AtAs of March 31, 2018,2019, there were $0.7 million of letters of credit outstanding. The total draw allowed on the ABL Facility at March 31, 2018,2019, as determined by the working capital assets pledged as collateral, was $200.0$245.4 million. After adjusting for the letters of credit, the Company's remaining availability under the ABL Facility at March 31, 20182019 was $199.3$244.7 million.

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 remaining 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 per common share, but any conversion premium that exists will be included in the calculation of diluted earnings per common share using the treasury stock method. As of March 31, 2019 and 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 per common share for each of the three months ended March 31, 2019 and 2018.

The undiscounted interest and principal payments due in relation to the Notes from March 31, 20182019 to the maturity of the Notes on May 1, 2020 are as 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 carrier selection, dispatch, load management and 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 management services to our Transactional clients on a shipment-by-shipment basis, typically with individual or spot market pricing. We typically enter into multi-year agreements with our Managed Transportation clients, which are often on an exclusive basis for a specificgenerally with terms of one to three years, to satisfy some, or substantially all, of their transportation mode or point of origin.management needs. 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.Transactional. 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.origin and may apply to one or more modes used by the client. 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 three months ended March 31, 20182019 and 2017,2018, Transactional clients accounted for 78.5%76.6% and 80.1%78.5% of our revenue, respectively, and Managed Transportation clients accounted for 21.5%23.4% and 19.9%21.5% 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 holidaythis season. While we experience some seasonality, differences in our revenue between periods have been driven primarily by growth in our client 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; selling, general and administrative expenses to run our business; changes in our contingent 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 three months ended March 31, 20182019 and 2017,2018, our selling, general and administrative expenses were $50.3$49.9 million and $44.8$50.3 million, respectively. For the three months ended March 31, 20182019 and 2017,2018, selling, general and administrative expenses as a percentage of net revenue were 50.3%50.5% and 60.1%50.3%, respectively.

Our contingent consideration expense 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 fromto 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 three months ended March 31, 20182019 and 2017,2018, we recorded a net expense of $0.3 million and $0.1 million.million, respectively.

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 each of the three months ended March 31, 20182019 and 2017,2018, amortization expense was $3.2 million and $3.6 million, respectively.million.

Revenue for the three months ended March 31, 20182019 was $577.1$538.1 million, an increasea decrease of 38.8%6.8% from $415.8$577.1 million in the comparable period of 2017.2018. Included in our 2019 revenue was $4.7 million of revenue from the acquisition of Freight Management Plus, Inc. ("Freight Management" or "FMP"). The increasedecrease in revenue was primarily attributable to an increasea decrease of 24.0%6.3% in revenue per shipment, along with an increasea decrease of 11.9%0.5% in volume.

Revenue from Transactional clients for the three months ended March 31, 20182019 was $453.1$412.1 million, an increasea decrease of 36.1%9.0% from $333.0$453.1 million in the comparable period of 2017.2018. The increasedecrease in Transactional revenue was driven by an increasea decrease in both TL volume and LTL revenue per shipment. Revenue from Transactional clients was 78.5%76.6% of our revenue for the three months ended March 31, 2018,2019, a decrease from 80.1%78.5% of our revenue in the comparable period of 2017. The decrease in Transactional revenue as a percent of total revenue was driven by an increase in Managed Transportation volume.2018.

Revenue from Managed Transportation clients for the three months ended March 31, 20182019 was $124.0$125.9 million, an increase of 49.8%1.6% from $82.8$124.0 million in the comparable period of 2017.2018. The increase in Managed Transportation revenue was driven by

The contingent consideration fair value adjustment resulted in net expense of $0.3 million and $0.1 million for each of the three months ended March 31, 2019 and 2018, and 2017.respectively. The net expense for 2018both periods 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 net expense for 2017 is the result of adjustments made to the fair value of the contingent assets and liabilities due to financial performance of previous acquisition owners, time value of money and the likelihood of employee retention being met. The fair value of the contingent consideration liabilities reflects the updated probabilities and assumptions as of March 31, 2018.2019.

Income from operations for the three months ended March 31, 20182019 was $10.5$9.1 million, compared to loss from operations of $0.8$10.5 million in the comparable period of 2017.2018. The increasedecrease in income from operations was primarily due to higherlower net revenue.

Interest expense was $3.8$3.4 million for the three months ended March 31, 2018, an increase2019, a decrease from $3.6$3.8 million of interest expense in the comparable period of 2017.2018. The decrease in interest expense is due to a decrease in both years primarily relatesthe amortization of issuance costs and cash interest related to the Amended ABL Facility, and cash interest related to the Notes, offset by the loss on extinguishment of debt recognized upon our Notes and the ABL Facility.

We recognized income tax expense of $2.0$2.2 million and income tax benefit of $1.5$2.0 million for the three months ended March 31, 20182019 and 2017,2018, respectively. Our effective tax rate for the three months ended March 31, 20182019 was 30.0%38.6%, compared to an effective tax rate of (34.7)%30.0% in the comparable period of 2017.2018. The difference in our effective tax rate for each of the three months ended March 31,

Net income for the three months ended March 31, 20182019 was $4.7$3.5 million, compared net loss of $2.9to $4.7 million in the comparable period of 2017,2018, due to the items previously discussed.

On June 1, 2015,October 23, 2018, we entered into aAmendment No. 2 to its Revolving Credit and Security Agreement, withwhich amended the terms of its Revolving Credit and Security Agreement, dated as of June 1, 2015, as amended, by and among the Company, the lenders party thereto, and PNC Bank, (the "CreditNational Association, as administrative agent (as amended, restated or otherwise modified the "Amended Credit Agreement"). The Amended Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $200 million.$350 million (the "Amended ABL Facility"), and a maturity date of October 23, 2023. The initial aggregate principal amount under the Amended ABL Facility may be increased from time to time by an additional $150 million to a maximum aggregate principal amount of $500 million; provided that certain requirements are satisfied. Our obligations under the Amended ABL Facility are secured, on a first lien priority basis, by certain of our working capital assets. We are required to pay a commitment fee in respect of the unutilized commitments under the revolving credit facility.

At March 31, 2018,2019, there was no outstanding balance on the ABL Facility. The issuance of letters of credit under the ABL Facility also reduces available borrowings. At March 31, 2018,2019, there were $0.7 million of letters of credit outstanding. The total draw allowed under the ABL Facility at March 31, 2018,2019, as determined by the working capital assets pledged as collateral, was $200.0$245.4 million. After adjusting for the letters of credit, our remaining availability under the ABL Facility at March 31, 20182019 was $199.3$244.7 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 2018,2019, we also expect to use available cash to make approximately $0.6$0.9 million of potential contingent earn-out payments, as well as $5.8$4.6 million to satisfy the semi-annual Notes coupon payment due May 1, 20182019 and November 1, 2018.2019. In addition, we currently expect to use $14$20 million to $19$24 million for capital expenditures for the remainder of 2018.2019.

We may also opt to use cash to repurchase up to $14.8 million of our common stock or Notes under the remaining authority under our repurchase program. The timing and amount of any common stock or convertible notes repurchases will be determined based on market conditions and other factors. 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 dependdepends 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 onunder 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$350 million ABL Facility was fully drawn, a 1.0% increase in the interest rate selected would increase our annual interest expense by $2.0$3.5 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 March 31, 20182019 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, 2017.2018.

During the three months ended March 31, 2018,2019, 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 first quarter of 2018.2019 (in thousands, except share and per share data).

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.