Eli Lilly (LLY): Financial Pulse — Revenue Surge, Cash-Flow Strain, Rising Leverage

Quick Answer (50 words)#

Eli Lilly reported FY2024 revenue of $45.04B (+32.00% YoY) and net income of $10.59B (+102.14% YoY), yet converted only a small portion to free cash flow — FCF $0.41B (0.92% of revenue) — after $8.4B capex and acquisitions. Balance-sheet leverage rose materially: net debt $30.38B. (Dataset: FY2024 results.)

Income‑statement trends: growth with margin expansion#

Eli Lilly’s top line accelerated sharply in FY2024 to $45.04B, up +32.00% from FY2023’s $34.12B. Revenue growth outpaced most expense categories, producing outsized operating leverage: gross profit rose to $36.62B (+35.45%), pushing the gross margin to 81.29%. Operating income expanded to $17.50B (+62.20%), lifting the operating margin to 38.84%. Net income jumped to $10.59B (+102.14%), yielding a net margin of 23.52% for FY2024 (all figures from the FY2024 income statement in the provided dataset).

The income statement shows an unusual mix: very high gross margins alongside heavy investment in R&D. Research and development spending increased in absolute terms to $10.99B (+18.05%), but as a percentage of revenue R&D was roughly 24.39% in FY2024 (10.99/45.04) versus ~27.29% in FY2023, indicating R&D grew less quickly than revenue. Selling, general and administrative expenses were $8.13B (+17.18%), about 18.06% of revenue. Operating expenses (R&D + SG&A + others) totaled $19.12B and increased at a slower pace than revenue, producing the marked expansion in operating profit.

On profitability dynamics, EBITDA reported for FY2024 was $15.23B, giving an EBITDA margin of 33.82%. The improvement from prior years is consistent with scale: revenue growth outstripped the rise in operating expenses and allowed fixed-cost absorption and higher contribution margins. Tax incidence moderated operating gains — effective tax on income before tax (incomeBeforeTax $12.68B vs netIncome $10.59B) implies an effective tax rate of ~16.49% for FY2024, down from roughly 20.00% in FY2023 — further boosting net income.

Table 1 below summarizes the headline income‑statement trajectory (2021–2024) to show growth and margin trends across four fiscal years.

The data reveal two core income‑statement realities. First, revenue growth in FY2024 was both large and profitable: the company captured incremental revenue with expanding gross and operating margins. Second, profitability was aided by a lower effective tax rate and operating leverage; however, the improvement in net income far outpaced cash generation (see cash flow quality), which raises questions about the sustainability of near‑term cash returns to stakeholders.

Cash‑flow quality: material divergence between earnings and free cash flow#

The cash‑flow statement exposes the most important tension in FY2024 results. Net income of $10.59B converted into $8.82B of net cash provided by operating activities — an OCF-to-net-income conversion of ~83.33% (8.82/10.59). That conversion rate improved slightly versus FY2023 (4.24/5.24 = 80.92%), but while operating cash flow rose strongly (++108.02% YoY), free cash flow (FCF) collapsed to $0.414B from –$3.15B in FY2023, driven by a large jump in capital spending and acquisition cash outlays (all figures from the FY2024 cash‑flow data).

Capital expenditure in FY2024 was listed as $8.40B (capitalExpenditure) with PP&E investments of $5.06B and acquisitions net of $0.948B. The company recorded net cash used for investing activities of $9.30B, up from $7.15B in FY2023. The result is a near‑zero free cash flow margin for FY2024: FCF margin = $0.414B / $45.04B = 0.92%. By contrast, EBITDA margin was 33.82%, which highlights a large gap between accounting profitability and free cash generation after capital allocation choices.

Financing flows show Lilly maintained shareholder payouts: dividends paid were $4.68B, up from $4.07B in FY2023 (++14.99%), and share repurchases were $2.50B, up markedly from $0.75B (++233.33%). Financing activities in aggregate provided $1.23B of cash in FY2024, compared with $3.50B in FY2023; the positive financing cash flow in 2024 — despite dividends and buybacks — points to external financing (debt issuance) as the balancing item and aligns with the material increase in long‑term debt shown on the balance sheet.

Table 2 below isolates the critical cash‑flow items (2021–2024).

From a cash‑quality perspective the numbers reveal three points. First, operating cash flow improved substantially in FY2024, demonstrating underlying earnings quality, but second, aggressive capital deployment and M&A absorption turned that operating cash into near‑zero free cash flow. Third, management maintained significant shareholder distributions (dividends plus buybacks) while financing the gap with debt — a pattern that materially increased financial leverage (next section).

Balance‑sheet changes and leverage#

On the balance sheet, total assets increased to $78.71B in FY2024 (++22.97% YoY), driven by higher non‑current assets and additions to PP&E and goodwill/intangible balances. Total liabilities rose to $64.44B (++21.26% YoY). The headline movement is a meaningful step‑up in debt: long‑term debt increased to $28.53B from $18.32B in FY2023 (+55.75%); total debt rose to $33.64B (+33.34%). Net debt (total debt less cash and short‑term investments) moved to $30.38B, up +35.58% year over year.

Equity grew to $14.19B (+31.77%), but the faster rise in liabilities versus liquid assets tightened some liquidity metrics: the FY2024 current ratio (total current assets $32.74B / total current liabilities $28.38B) equals ~1.15x, below the reported TTM current‑ratio figure in the dataset. This implies a modest near‑term liquidity cushion but less headroom than some peers typically maintain.

Leverage measured against earnings also rose. Using FY2024 figures, net‑debt to reported EBITDA is $30.38B / $15.23B = 1.99x (~2.00x). Debt to equity (total debt / total stockholders’ equity) is $33.64B / $14.19B = 2.37x (236.90%), a material step up from FY2023 and a signal that financing for capital and acquisition activity has been debt‑heavy. These leverage metrics are sensitive to the treatment of goodwill/intangibles and to the sustainability of EBITDA; at roughly 2.0x net debt/EBITDA, leverage is elevated but not extreme for a large pharmaceutical company — the trend and rate of increase are the red flags.

Key ratio calculations (FY2024, computed from provided data)#

All ratios below were computed directly from the FY2024 figures in the dataset.

• Gross margin = 36.62 / 45.04 = 81.29%
• Operating margin = 17.50 / 45.04 = 38.84%
• Net margin = 10.59 / 45.04 = 23.52%
• EBITDA margin = 15.23 / 45.04 = 33.82%
• R&D as % of revenue = 10.99 / 45.04 = 24.39%
• SG&A as % of revenue = 8.13 / 45.04 = 18.06%
• Operating cash flow margin = 8.82 / 45.04 = 19.58%
• Free cash flow margin = 0.4143 / 45.04 = 0.92%
• Net debt / EBITDA = 30.38 / 15.23 = 1.99x
• Debt / Equity = 33.64 / 14.19 = 2.37x (236.90%)
• Current ratio = 32.74 / 28.38 = 1.15x
• Return on equity = 10.59 / 14.19 = 74.67%
• Return on assets = 10.59 / 78.71 = 13.45%

To estimate return on invested capital (ROIC) on a simple basis, I computed NOPAT = operatingIncome * (1 – effective tax rate). Using operatingIncome $17.50B and an effective tax rate of ~16.49%, NOPAT ≈ $14.60B. Invested capital approximated as total debt + total equity – cash = $33.64B + $14.19B – $3.27B = $44.56B. ROIC ≈ 14.60 / 44.56 = 32.78%. The ROIC calculation is sensitive to definition of invested capital (e.g., excluding goodwill) and tax assumptions; here it shows strong capital returns on deployed capital but must be viewed alongside the aggressive spending that produced it.

What the numbers reveal (not company narratives)#

The raw financials point to five core takeaways grounded in the numbers themselves.

First, growth that is profitable. FY2024 delivered very strong revenue growth (++32.00%) with margin expansion at gross, operating and net levels. The business demonstrated high contribution economics across the income statement: consistent gross margins above 80% and operating margins near 39%.

Second, earnings do not automatically equal free cash. Despite $10.59B of net income, free cash flow was nearly consumed by capex, M&A and working‑capital shifts, leaving only $0.414B of FCF. That indicates substantial reinvestment and/or transaction activity that is constraining cash available for other uses absent external financing.

Third, management funded distributions and buybacks while issuing debt. Dividends of $4.68B and repurchases of $2.50B were financed in part by increased net borrowing — long‑term debt rose +55.75% — pushing net debt up +35.58% to $30.38B. The balance‑sheet lever has increased meaningfully over one year.

Fourth, capital allocation is aggressive. Capex moved to $8.40B, an elevated run‑rate relative to prior years (2023: $7.39B; 2022: $2.99B). Combined with acquisitions (~$0.95B in FY2024) the company is investing heavily to expand capacity and portfolio breadth. That supports future revenue but depresses near‑term free cash conversion.

Fifth, returns on deployed capital are high on an accounting basis. ROIC calculated from FY2024 operating income (post‑tax) divided by invested capital yields ~32.78%, and ROE stands at ~74.67%. Those are very strong profitability metrics, but they coexist with higher leverage and low free cash flow, creating a risk/reward trade‑off: high returns but financed materially via debt and reinvestment rather than internally generated free cash.

Near‑term financial risks and operational levers shown by the data#

The dataset reveals three material risks and the levers that can mitigate them. The first risk is cash‑conversion vulnerability: if OCF were to weaken (e.g., from pricing pressure, margin compression or inventory build), the small FCF buffer would evaporate quickly and force either reduced shareholder distributions or additional borrowing. The operational levers to respond include slowing capex, suspending buybacks, or negotiating better payment terms with suppliers — each visible in cash‑flow line items.

The second risk is interest and refinancing exposure from the step‑up in long‑term debt. While net debt/EBITDA of ~2.0x is not extreme, it is materially higher than the prior year and concentrates refinancing timing and interest‑rate risk. The balance‑sheet actions in FY2024 imply management is prioritizing growth investments and shareholder payouts over immediate deleveraging.

The third risk is sustainability of margin expansion. A lower effective tax rate materially boosted net income in FY2024; if tax rates normalize or operating costs reaccelerate (e.g., R&D programs expanding, commercialization costs), net margins could compress and reduce the high ROE and ROIC currently reported.

What this means for investors (data‑driven implications)#

The numbers indicate a company in two simultaneous modes: high‑growth, high‑return operating performance and heavy capital deployment financed with debt. For stakeholders focused on income and dividends, the FY2024 figures show dividends were sustained and even increased in absolute terms, but the company’s free cash flow cushion is thin, so dividend sustainability is more sensitive to near‑term cash‑flow swings than headline earnings suggest. For stakeholders focused on growth and long‑term franchise value, the large capex and acquisitions are tangible investments that align with above‑trend revenue and margin improvement, but they come at the cost of higher leverage and compressed free cash flow.

Any evaluation should therefore weigh the unusually wide gap between accounting profitability and free cash conversion in FY2024. High ROIC and margins argue the underlying business is profitable; low FCF and higher debt signal that execution risk and financing risk are material near‑term considerations.

Conclusion#

Eli Lilly’s FY2024 financials combine rapid, profitable revenue growth with aggressive capital deployment and increased leverage. The company delivered $45.04B of revenue (++32.00%) and $10.59B of net income (++102.14%), yet free cash flow after heavy capex and acquisitions was only $0.414B (0.92% of revenue). Balance‑sheet borrowing filled the gap: net debt rose to $30.38B, pushing net‑debt/EBITDA to ~2.0x and debt/equity to ~2.37x.

The raw numbers reveal a high‑return core business that is reinvesting at a rapid clip and funding shareholder distributions through the use of external financing. That combination can produce durable value if investments convert to sustained incremental cash generation; but it also increases sensitivity to operational setbacks or changes in financing conditions. The data therefore call for close monitoring of subsequent free‑cash conversion, capex trajectory, and the cadence of debt maturities before concluding whether the capital allocation mix in FY2024 is accretive on a cash‑flow basis.

Sources: All figures and calculations are taken from the provided FY2021–FY2024 financial data in the dataset (income statement, balance sheet and cash‑flow sections).