Eli Lilly (LLY) — Income, Cash Flow & Balance Sheet Review

Income-statement trends#

Eli Lilly [LLY] posted $45.04B in revenue for FY2024 — an increase of +32.01% year-over-year — while net income jumped to $10.59B (+102.10%) and operating income rose to $17.50B (+62.13%). Those headline moves create a clear, immediate tension: large, high-margin top-line growth coincided with sharply higher absolute R&D and SG&A spend, yet operating leverage pushed margins materially higher in 2024.

Quick answer: Eli Lilly posted $45.04B revenue in FY2024 (+32.01%), with $17.50B operating income and $10.59B net income (+102.10%). Free cash flow fell to $0.41B after $8.4B capex and -$5.38B working-capital use. This combination compressed free-cash-flow yield and increased balance-sheet leverage.

The underlying income-statement trend is visible across four full years of reported results. Revenue moved from $28.32B in 2021 to $45.04B in 2024 — a three-year compound annual growth rate of approximately +16.74% (45.04 / 28.32)^(1/3) - 1. Gross profit expanded from $21.01B (2021) to $36.62B (2024), lifting gross margin to 81.30% in 2024 (36.62 / 45.04 = 81.30%), up from 74.18% in 2021. The margin improvement at the gross level was the first driver of operating-income leverage.

Operating expense behavior explains the rest of the margin story. Total operating expenses increased in absolute terms from $13.07B (2021) to $19.12B (2024), but that rise (+17.66% year-over-year from 2023 to 2024) was smaller than revenue growth (+32.01% Y/Y). As a result operating margin expanded to 38.84% in FY2024 (17.50 / 45.04 = 38.84%), from 31.61% in 2023, reflecting significant operating leverage. R&D and SG&A grew in dollars (R&D: $10.99B in 2024; SG&A: $8.13B in 2024) yet both fell as a percentage of revenue — R&D to 24.40% and SG&A to 18.05% — because revenue expanded faster than those expense lines.

The net-income pattern is volatile but instructive. Net income dropped from $6.24B (2022) to $5.24B (2023) and then rose to $10.59B in 2024 (+102.10% Y/Y). Income before tax nearly doubled to $12.68B in 2024, while the consolidated effective tax rate (income tax / income before tax) was roughly 16.48% in 2024 (2.09 / 12.68), versus 20.00% in 2023 and single-digit rates in 2021–2022. That variability in effective tax rate amplifies swings in net income across years.

Each of the percentage and dollar figures above is calculated from the company’s FY income-statement entries (see reported revenue, gross profit, operating income and net income for FY2021–FY2024). The consistent pattern is higher-margin revenue growth plus controlled operating-expense growth, which produced a step-up in profitability in 2024 rather than short-term cost cutting.

Cash-flow quality#

The cash-flow profile complicates the headline profitability. On the surface, operating cash flow remains sizable at $8.82B in FY2024, but free cash flow (FCF) collapsed to $0.41B after $8.4B of capital expenditures and a -$5.38B working-capital build. That compression turned a company with high accounting profitability into one with very thin near-term free-cash generation.

Operating cash conversion has moved down. Net cash provided by operating activities divided by net income was approximately 83.34% in FY2024 (8.82 / 10.59 = +83.34%), versus 132.08% in 2021 and 121.63% in 2022. The single largest cash drag in 2024 was working capital: the company used $5.38B of cash to build working capital (change in working capital = -$5.38B), a much larger use than in prior years. Depreciation and amortization added back $1.77B of non-cash expense, but that was insufficient to offset the combined uses of capex and working capital.

Free-cash-flow margin (FCF / revenue) fell to +0.92% in 2024 (0.4143 / 45.04 = 0.92%), from 19.04% in 2021 and 16.12% in 2022. The swing to near-zero FCF was driven by the step-up in capital spending (capex / revenue = 18.65% in 2024), acquisitions activity (acquisitions net cash outflows of $947.7MM in 2024) and the working-capital build. The sequence of large capex outlays (FY2023 capex $7.39B, FY2024 $8.4B) indicates the company is materially investing in physical assets and/or capacity, and that investment is currently the dominant use of operating cash.

The pattern raises two quality flags. First, the gap between net income and free cash flow is now wide: net income of $10.59B versus FCF $0.41B in FY2024. Second, the company financed growing shareholder distributions (dividends and repurchases) while simultaneously escalating capex and acquisitions, which affected the balance sheet (see next section). Those dynamics matter because high accounting earnings are not being fully converted into free cash that can reduce debt or accumulate as liquidity.

Balance-sheet changes#

Eli Lilly’s balance sheet expanded substantially in 2024: total assets increased to $78.71B from $64.01B in 2023 (+$14.70B, +22.97%), driven by a $4.19B rise in property, plant & equipment (PP&E) to $17.10B and by higher current assets. Goodwill and intangible assets were roughly stable at $11.94B, indicating the 2024 asset growth is concentrated in tangible investments and current items.

Liabilities rose in step: total liabilities went from $53.14B to $64.44B (+$11.30B). The obvious balance-sheet move is heavier leverage: long-term debt increased to $28.53B (from $18.32B year-over-year) and total debt rose to $33.64B (from $25.23B). Net debt (total debt less cash and equivalents) stood at $30.38B at year-end 2024 (33.64 - 3.27 = 30.38B). At the same time total stockholders’ equity increased to $14.19B (from $10.77B), driven by retained earnings and net income after distributions.

The balance-sheet geometry shows higher leverage supported asset growth: the debt-to-assets ratio increased to 42.75% (33.64 / 78.71 = 42.75%), and the company’s leverage measured as total debt to equity moved to 236.90% (33.64 / 14.19 = 236.90%, or 2.37x). Importantly, the company increased net borrowings in FY2024: net cash from financing activities was $1.23B (a net inflow), while dividends paid ($4.68B) and share repurchases ($2.50B) were cash outflows. Simple arithmetic implies net new borrowing on financing items of approximately $8.41B during the year (1.23 + 4.68 + 2.50 = 8.41B), which closely matches the increase in debt on the balance sheet.

Working capital improved in an absolute sense relative to the prior year’s current-asset base, but the company still used cash to build working capital in 2024 (-$5.38B). Cash at year-end rose modestly to $3.27B (from $2.82B), leaving liquidity still concentrated in current assets rather than cash.

Key ratios and calculations (our math)#

Below are the principal ratios we calculate directly from the FY2024 statements and the supporting line items. All formulas are shown so each figure is traceable to the raw data.

Gross margin (2024) = Gross profit / Revenue = 36.62 / 45.04 = 81.30%.

Operating margin (2024) = Operating income / Revenue = 17.50 / 45.04 = 38.84%.

Net margin (2024) = Net income / Revenue = 10.59 / 45.04 = 23.51%.

Adjusted EBITDA (2024, operating income + D&A) = 17.50 + 1.77 = $19.27B. Note: the reported EBITDA entry in the income statements is $15.23B, which does not reconcile with operating income plus depreciation; we flag this as a data inconsistency and use the operating-income + depreciation definition for leverage measures.

Net-debt / Adjusted EBITDA = 30.38 / 19.27 = 1.58x.

Debt / Equity = Total debt / Total shareholders’ equity = 33.64 / 14.19 = 236.90% (2.37x).

Current ratio = Total current assets / Total current liabilities = 32.74 / 28.38 = 1.15x.

Return on equity (two methods):

• Period-end equity basis: Net income / Equity (EOP) = 10.59 / 14.19 = 74.63%.
• Average-equity basis (recommended practice) = Net income / ((Equity_2024 + Equity_2023)/2) = 10.59 / ((14.19 + 10.77)/2) = 10.59 / 12.48 = 84.85%.

Return on invested capital (ROIC, simple proxy) = NOPAT / (Debt + Equity - Cash)

• NOPAT = Operating income * (1 - effective tax rate). Effective tax rate (2024) = (IncomeBeforeTax - NetIncome) / IncomeBeforeTax = (12.68 - 10.59) / 12.68 = 16.48%.
• NOPAT = 17.50 * (1 - 0.1648) = $14.61B.
• Invested capital proxy = 33.64 + 14.19 - 3.27 = $44.56B.
• ROIC ≈ 14.61 / 44.56 = 32.80%.

Valuation multiples (market snapshot numbers provided):

• Price / Earnings = 684.43 / 15.28 (EPS from quote) = 44.79x (matches quoted P/E).
• Enterprise value (EV) ≈ Market cap + Total debt − Cash = 647.78 + 33.64 − 3.27 = $678.15B. EV / Adjusted EBITDA = 678.15 / 19.27 = 35.20x.

Two notes on methodology and data consistency: first, we compute EBITDA as operating income plus depreciation & amortization from the cash-flow statement, which yields $19.27B; the income-statement field labeled "ebitda" (15.23B) does not reconcile to that definition and appears inconsistent. Second, market multiples use the provided market-cap snapshot of $647.78B and the FY figures above; differences vs third-party published multiples reflect timing (market-cap snapshot) and whether TTM or fiscal-year numbers are used.

What the numbers reveal (not the narrative)#

The income statement shows that revenue growth is real and high-margin: gross and operating margins both expanded in 2024, indicating favorable product mix and operating leverage. Where the headline narrative may emphasize product pricing or policy drivers, the pure financials show a simple mechanical result: strong revenue growth plus controlled operating-expense growth -> materially higher operating profitability.

However, cash-flow dynamics tell a different, complementary story. The company’s conversion of accounting profit into free cash flow weakened sharply because of two large cash drains: capex ($8.4B) and working-capital absorption (-$5.38B). The net effect was FCF of $0.41B on $45.04B revenue — a thin cash yield that increases sensitivity to any slowdown in revenue growth or margin pressure.

Balance-sheet action partially funded the gap. Net debt rose to $30.38B, and the company appears to have increased leverage to finance capex, acquisitions and shareholder distributions (dividends + repurchases). Yet leverage metrics remain within reasonable coverage: net-debt-to-adjusted-EBITDA is ~1.6x, indicating the company still has capacity to service debt from operating earnings. At the same time, debt-to-equity is elevated (~2.37x), and equity is a smaller portion of the capital base (equity / assets ≈ 18.02%), so the balance sheet is noticeably more debt-weighted than in prior years.

In short: profitability and margins improved strongly on the income statement; cash flow after investment and working-capital changes tells a cautionary story; and the balance sheet shows management leaning on debt to fund simultaneous growth investment and shareholder returns.

What this means for investors#

From a purely financial perspective, the FY2024 results mean that Eli Lilly converted a period of accelerating, high-margin sales growth into very strong accounting profitability while simultaneously increasing investment and leverage. That structure — high accounting profits + low near-term free cash flow + rising net debt — changes the set of risks investors should monitor. The company’s ability to translate operating earnings into sustainable free cash flow over the next 12–24 months will be the central variable that determines balance-sheet flexibility.

Key monitoring points that flow directly from the numbers are concrete and measurable: (1) does net cash provided by operating activities continue to track at or above ~$8–9B per year after working-capital normalization; (2) does capex stabilize below ~$6–7B per year so that FCF recovers above at least ~5% of revenue; and (3) does net-debt-to-EBITDA remain in the low single-digit range (the FY2024 outcome of ~1.6x is comfortable, but that can change quickly if FCF remains weak).

The balance between investment and distributions matters. In 2024 the company paid $4.68B in dividends and repurchased $2.50B of stock while also investing heavily in capex and making acquisitions. That mix is visible in the financing numbers: net cash from financing activities was a positive $1.23B, implying net borrowing on the order of $8.41B to fund distributions and investment. If management keeps this pattern while FCF remains compressed, leverage and liquidity ratios will require close attention.

Conclusion#

Eli Lilly’s FY2024 financials show a company that has converted a step-up in revenue into materially improved margins and earnings. The arithmetic is straightforward: revenue growth outpaced expense growth, pushing operating margin to 38.84% and net margin to 23.51%. However, the cash-flow and balance-sheet pictures qualify that success: heavy capex, acquisition outlays and working-capital build reduced free cash flow to $0.41B and led to a net-debt position of $30.38B.

These are not contradictory signals; they are complementary. The income statement shows the payoff of commercial momentum and product mix, and the cash-flow and balance-sheet numbers show management is investing to scale and is willing to use leverage to fund both growth and shareholder returns. The immediate questions are operational and measurable: can operating cash flow and FCF recover to levels that comfortably cover capital spending and distributions without materially increasing leverage metrics? The FY2024 numbers provide the baseline to answer that question in the coming quarters.

All numerical calculations in this report are computed from the FY2021–FY2024 financial statements provided (income statement, balance sheet and cash-flow figures) and from the market-cap and price/EPS snapshot included in the data set.