Davey Tree's Q3 Net Income Dips 17% Despite Revenue Growth

TL;DR

**Davey Tree's revenue growth is overshadowed by a sharp drop in net income and operating cash flow, signaling margin compression and potential operational inefficiencies.**

AI Summary

The Davey Tree Expert Company reported a decrease in net income for both the three and nine months ended September 27, 2025, despite an increase in revenues. For the three months, net income fell to $21.614 million from $26.024 million in the prior year, a 16.9% decrease. For the nine months, net income decreased to $51.126 million from $53.469 million, a 4.4% decline. Revenues, however, increased by 4.4% to $500.666 million for the three months and by 6.0% to $1,447.947 million for the nine months. Operating costs rose significantly, with operating expenses increasing by 6.8% to $321.065 million for the quarter and by 6.4% to $938.318 million for the nine months. The company's total assets grew to $1,488.084 million as of September 27, 2025, from $1,407.551 million at December 31, 2024, driven by increases in accounts receivable and property and equipment. Cash provided by operating activities decreased substantially to $74.472 million for the nine months ended September 27, 2025, from $109.831 million in the prior year, a 32.2% reduction. The company also noted the seasonality of its business, with higher revenues typically in the second and third quarters.

Why It Matters

Davey Tree's declining net income despite revenue growth signals potential margin pressures or increased operational costs, which could concern investors. The significant drop in cash provided by operating activities, down 32.2% year-over-year, suggests less efficient cash generation from core business, impacting liquidity and future investment capacity. For employees, this could imply tighter cost controls, while customers might see price adjustments to offset rising expenses. In a competitive landscape, this financial performance could make Davey Tree less attractive compared to more profitable peers, potentially affecting its market position and ability to fund strategic initiatives like acquisitions or technology upgrades.

Risk Assessment

Risk Level: medium — The company faces medium risk due to a 16.9% decrease in net income for the three months ended September 27, 2025, and a 32.2% reduction in net cash provided by operating activities for the nine months. This decline in profitability and cash generation, despite revenue growth, indicates potential challenges in cost management and operational efficiency, which could impact future financial stability.

Analyst Insight

Investors should scrutinize Davey Tree's upcoming annual report for detailed explanations of rising operating costs and strategies to improve cash flow and net income margins. Consider holding existing positions but deferring new investments until there's clear evidence of improved profitability and cash generation efficiency.

Financial Highlights

revenue

$1,447.947M

total Assets

$1,488.084M

net Income

$51.126M

revenue Growth

+6.0%

Revenue Breakdown

Key Numbers

• $21.614M — Net Income (Q3 2025) (Decreased 16.9% from $26.024M in Q3 2024)
• $51.126M — Net Income (9M 2025) (Decreased 4.4% from $53.469M in 9M 2024)
• $500.666M — Revenues (Q3 2025) (Increased 4.4% from $479.440M in Q3 2024)
• $1,447.947M — Revenues (9M 2025) (Increased 6.0% from $1,365.903M in 9M 2024)
• $74.472M — Net Cash from Operations (9M 2025) (Decreased 32.2% from $109.831M in 9M 2024)
• $321.065M — Operating Costs (Q3 2025) (Increased 6.8% from $300.535M in Q3 2024)
• $1,488.084M — Total Assets (Sep 27, 2025) (Increased from $1,407.551M at Dec 31, 2024)
• 39,445,684 — Common Shares Outstanding (As of October 31, 2025)

Key Players & Entities

• The Davey Tree Expert Company (company) — Registrant and primary entity in the filing
• $21.614 million (dollar_amount) — Net income for the three months ended September 27, 2025
• $26.024 million (dollar_amount) — Net income for the three months ended September 28, 2024
• $51.126 million (dollar_amount) — Net income for the nine months ended September 27, 2025
• $53.469 million (dollar_amount) — Net income for the nine months ended September 28, 2024
• $500.666 million (dollar_amount) — Revenues for the three months ended September 27, 2025
• $1,447.947 million (dollar_amount) — Revenues for the nine months ended September 27, 2025
• $74.472 million (dollar_amount) — Net cash provided by operating activities for the nine months ended September 27, 2025
• $109.831 million (dollar_amount) — Net cash provided by operating activities for the nine months ended September 28, 2024
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• Seasonality of Business [medium — operational]: The company's business is seasonal, with higher revenues typically in the second and third quarters. This seasonality can impact financial results and cash flow predictability.
• Increased Operating Costs [medium — operational]: Operating expenses rose by 6.8% to $321.065 million for the three months and by 6.4% to $938.318 million for the nine months. This increase outpaced revenue growth in the quarter, contributing to lower net income.
• Decreased Cash Flow from Operations [high — financial]: Cash provided by operating activities decreased by 32.2% to $74.472 million for the nine months ended September 27, 2025, from $109.831 million in the prior year. This significant reduction raises concerns about liquidity and the company's ability to fund operations and investments.
• Competition [medium — market]: The tree care industry is competitive, with numerous local and national players. While specific competitors are not detailed, market share and pricing pressures are inherent risks.
• Environmental and Safety Regulations [medium — regulatory]: As a tree care company, Davey Tree is subject to various environmental, health, and safety regulations. Non-compliance or changes in regulations could lead to fines, operational disruptions, or increased costs.

Industry Context

The tree care industry is characterized by a mix of large national players and numerous local service providers. Key trends include increasing demand for tree health and maintenance services driven by urbanization, aging tree populations, and a greater awareness of the benefits of urban forestry. However, the industry is also sensitive to economic conditions, weather events, and regulatory changes.

Regulatory Implications

Davey Tree operates under a framework of environmental, health, and safety regulations. Compliance with these regulations is crucial to avoid penalties and maintain operational continuity. Changes in labor laws, environmental protection standards, or utility vegetation management requirements could impact operating costs and service delivery.

What Investors Should Do

1. Monitor operating expense trends closely.
2. Analyze the drivers of decreased operating cash flow.
3. Evaluate the impact of seasonality on future quarters.
4. Assess the company's ability to manage growth and costs.

Key Dates

• 2025-09-27: End of Third Quarter and Nine Months — Reporting period for the condensed consolidated financial statements, showing decreased net income despite revenue growth.
• 2025-10-31: Common Shares Outstanding Date — Provides the number of common shares outstanding as of this date, relevant for per-share calculations.
• 2024-12-31: End of Previous Fiscal Year — Balance sheet comparison point for total assets, showing an increase from $1,407.551 million to $1,488.084 million.

Glossary

Condensed Consolidated Statements of Operations

A financial statement that summarizes a company's revenues, expenses, and profits over a specific period. (Shows the decrease in net income for the three and nine months ended September 27, 2025, despite revenue increases.)

Condensed Consolidated Balance Sheets

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time. (Indicates growth in total assets to $1,488.084 million as of September 27, 2025.)

Condensed Consolidated Statements of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, broken down into operating, investing, and financing activities. (Highlights a significant decrease in cash provided by operating activities for the nine months ended September 27, 2025.)

Operating Expenses

Costs incurred by a company in its normal business operations, excluding cost of goods sold. (The increase in operating expenses by 6.8% for the quarter and 6.4% for the nine months contributed to the decline in net income.)

Seasonality of Business

The tendency for a business's sales or revenues to fluctuate during different periods of the year. (A noted factor impacting Davey Tree's financial performance, with higher revenues typically in Q2 and Q3.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Davey Tree Expert Company reported increased revenues for both the three months (4.4% to $500.666M) and nine months (6.0% to $1,447.947M) ended September 27, 2025. However, net income saw a significant decline of 16.9% ($21.614M) for the quarter and a 4.4% decrease ($51.126M) for the nine months. This divergence is largely attributed to a substantial increase in operating expenses, which grew by 6.8% and 6.4% respectively, and a concerning 32.2% reduction in cash provided by operating activities to $74.472M for the nine-month period.

Filing Documents

• davey-20250927.htm (10-Q) — 1988KB
• dt2025q310qex103.htm (EX-10.3) — 58KB
• dt2025q310qex311.htm (EX-31.1) — 10KB
• dt2025q310qex312.htm (EX-31.2) — 10KB
• dt2025q310qex321.htm (EX-32.1) — 5KB
• dt2025q310qex322.htm (EX-32.2) — 5KB
• davey-20250927_g1.jpg (GRAPHIC) — 20KB
• 0001628280-25-048099.txt ( ) — 11154KB
• davey-20250927.xsd (EX-101.SCH) — 57KB
• davey-20250927_cal.xml (EX-101.CAL) — 116KB
• davey-20250927_def.xml (EX-101.DEF) — 294KB
• davey-20250927_lab.xml (EX-101.LAB) — 859KB
• davey-20250927_pre.xml (EX-101.PRE) — 570KB
• davey-20250927_htm.xml (XML) — 2236KB

Financial Information

Part I. Financial Information

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Comprehensive Income (Loss) 4 Condensed Consolidated Statements of Shareholders' Equity 5 Condensed Consolidated Statements of Cash Flows 7 Notes to Condensed Consolidated Financial Statements A — Basis of Financial Statement Preparation 8 B — Seasonality of Business 10 C — Accounts Receivable, Net and Supplemental Balance-Sheet Information 10 D — Business Combinations 11 E — Marketable Securities 12 F — Identified Intangible Assets and Goodwill, Net 13 G — Short and Long-Term Debt and Commitments Related to Letters of Credit 15 H — Leases 18 I — Stock-Based Compensation 20 J — Income Taxes 22 K — Accumulated Other Comprehensive Income (Loss) 23 L — Per Share Amounts and Common and Redeemable Shares Outstanding 25 M — Operations by Business Segment 26 N — Revenue Recognition 29 O — Fair Value Measurements and Financial Instruments 31 P — Commitments and Contingencies 34 Q — The Davey 401KSOP and Employee Stock Ownership Plan 37 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Results of Operations 40 Liquidity and Capital Resources 44 Cash Flow Summary 45 Contractual Obligations Summary and Commercial Commitments 46 Capital Resources 46 Critical Accounting Policies and Estimates 47 Note Regarding Forward-Looking Statements 47 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 48 Item 4.

Controls and Procedures

Controls and Procedures 48 Part II. Other Information 49 Item 1.

Legal Proceedings

Legal Proceedings 49 Item 1A.

Risk Factors

Risk Factors 52 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 53 Item 5. Other Information 54 Item 6. Exhibits 55 Exhibit Index 55

Signatures

Signatures 56 "We," "us," "our," the "Company," "The Registrant," "Davey" and "Davey Tree," unless the context otherwise requires, means The Davey Tree Expert Company and its subsidiaries. - 1 - Index THE DAVEY TREE EXPERT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except per share data dollar amounts) September 27, 2025 December 31, 2024 Assets Current assets: Cash $ 21,871 $ 17,471 Accounts receivable, net 417,406 397,077 Operating supplies 17,124 15,995 Other current assets 106,247 108,410 Total current assets 562,648 538,953 Property and equipment, net 457,650 400,661 Right-of-use assets - operating leases 72,875 90,516 Marketable securities and other investments 52,403 41,686 Insurance receivable 213,051 209,351 Intangible assets, net 18,001 18,301 Goodwill 97,761 94,879 Other assets 13,695 13,204 Total assets $ 1,488,084 $ 1,407,551 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 64,567 $ 57,560 Accrued expenses 92,668 96,860 Current portion of long-term debt and finance lease liabilities 139,325 73,448 Other current liabilities 85,587 94,613 Total current liabilities 382,147 322,481 Long-term debt 329,962 338,655 Lease liabilities - finance leases 23,738 12,221 Lease liabilities - operating leases 42,944 55,565 Self-insurance accruals 90,326 86,092 Litigation accruals 213,051 209,351 Other noncurrent liabilities 14,102 14,046 Total liabilities 1,096,270 1,038,411 Commitments and contingencies (Note P) Redeemable common shares related to 401KSOP and Employee Stock Ownership Plan (ESOP) 7,987 and 8,114 shares at redemption value as of September 27, 2025 and December 31, 2024 203,658 195,551 Common shareholders' equity: Common shares, $ .50 par value, per share; 96,000 shares authorized; 77,841 and 77,713 shares issued and outstanding before deducting treasury shares and which excludes 7,987 and 8,114 shares subject to redemption as of September 27, 2025 an

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