Updated - Second Quarter 2019
To Our Shareholders:
The second quarter of 2019 produced record revenues of $301,434,000 which was $30,785,000, or 11.4%, above the second quarter of 2018. All service lines contributed to the growth as both operating segments provided solid gains with the Utility segment up 17.7% and the Residential/Commercial segment (“R/C”) up 6.0% compared to the second quarter of 2018. Our positive momentum generated in the first quarter continued into the second quarter leading to a record-setting first half of 2019. We are thrilled with this record-breaking performance and are anticipating positive results for the remainder of the year.
Revenues of $549,323,000 in the first half of 2019 was a record and exceeded 2019 first-half revenues by $70,023,000, or 14.6%. Again, both reporting segments improved in the first half of 2019 with Utility up 18.0% and R/C up 11.5%, compared to the first half of 2018.
For the second quarter of 2019, income from operations was $30,282,000, compared to $29,800,000 for the second quarter 2018. Second-quarter 2019 net income was $19,747,000. For the first half of 2019, income from operations was $33,248,000 and net income was $19,254,000. Both are improvements over the first half of 2018. The increase in income for the first half of 2019 was driven by efficiency and margin improvements in both operating segments. As noted, the positive momentum, from the first quarter, continued into the second quarter, which contributed to an exceptionally strong first-half performance in 2019. With the solid revenue and profitability in the first half of 2019, we were also able to overcome challenges with the wet weather in the northern operations as well as cost increases across the Company in insurance and labor. Our appreciation for the hard work and determination shown by our field personnel to meet the physical demands of our workload and fight through the weather challenges while providing great service to our clients, cannot be overstated.
Along with the Company’s solid operating performance, we remain diligent in our efforts to maintain a strong balance sheet. We continue to generate ample cash flow to manage the business and to maintain excess borrowing capacity, allowing us to take advantage of opportunities as they arise. Cash provided by operating activities was $44,286,000 for the first half of 2019 while cash used for capital expenditures, and stock redemptions were both down slightly for the first half of 2019 compared to the first half or 2018. As the Company grows and business opportunities present themselves, we remain focused on maintaining a strong balance sheet and overall financial position.
Our independent stock valuation firm, Management Planning Inc., determined that our market price, effective June 30, 2019, was $22.60 per share, up to $1.50, or 7.1%, from the December 31, 2018 valuation. Management is pleased with the Company’s operating performance and improved stock price for the first six months of 2019. Our operating performance was the main contributor to the stock increase; however, we also received a positive impact from the peer group performance and the overall market.
As we charge into the second half of 2019, I am incredibly proud of the collaboration, creativity and enthusiasm exhibited every day by the employee-owners of our Company. We have many key initiatives taking place that will continue to solidify Davey’s leadership position in the green industry, and your contributions and support for these efforts are critical. The first half of 2019 was very positive, but we need our teams to remain focused for the second half of the year as there will be many opportunities and challenges that come our way. Fortunately, we have the best employees in the industry, and we will continue to step up and address these opportunities with creativity and integrity. To achieve the Company’s goals, we will maintain our focus on attracting and training exceptional people, fostering a culture of employee safety and business ethics and providing our clients with superior solutions and service. We look forward to a productive second half of 2019, we are excited about the prospects we continue to identify and will remain diligent around focusing on accretive opportunities.
Thank you all for your continued support, efforts, commitment, and encouragement.
Patrick M. Covey
President and Chief Executive Officer