The equations are proprietary but here is a high level description that might be helpful:
• Points are classified as terrain, building, powerline or tree (vegetation)
• The vegetation points are analyzed to find tree crowns by finding the highest vegetation point in a local area and checking if the points slope downward and outwards from this point. This calculation yields the crown center and radius.
• Where a tree crown was detected the ground height under it is determined from the DEM and the tree height calculated by subtracting the ground height from the highest point in the tree crown.