Pattern Energy Reports Second Quarter 2018 Financial Results

Pattern Energy Reports Second Quarter 2018 Financial Results

PR Newswire

- Declares dividend of $0.4220 per Class A common share for third quarter 2018 -

SAN FRANCISCO, Aug. 9, 2018 /PRNewswire/ -- Pattern Energy Group Inc. (the "Company" or "Pattern Energy") (((NASDAQ &, TSX:PEGI) today announced its financial results for the 2018 second quarter.

Pattern Energy Group Inc. Logo (PRNewsFoto/Pattern Energy Group LP)

Highlights

(Comparisons made between fiscal Q2 2018 and fiscal Q2 2017 results, unless otherwise noted)

  • Proportional gigawatt hours ("GWh") sold of 2,263 GWh, up 7%
  • Net cash provided by operating activities of $95.7 million
  • Cash available for distribution ("CAFD") of $58.7 million, up 19% and on track to meet full year guidance(1)
  • Net loss of $1.8 million
  • Adjusted EBITDA of $108.4 million, up 18%
  • Revenue of $139.9 million, up 30%
  • Declared a third quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter's dividend
  • Announced an agreement to sell the Company's operations in Chile, which principally consist of its 81 megawatt ("MW") owned interest in the 115 MW El Arrayán Wind project ("El Arrayán Wind") for which Pattern Energy will receive cash consideration of $68.5 million
  • Returned the Santa Isabel project in Puerto Rico to full generating capacity with the consent of the Puerto Rico Electric Power Authority ("PREPA")
  • Since April 1, 2018, and including a funding to be made today, invested $50.9 million in Pattern Energy Group 2 LP ("Pattern Development 2.0"); Pattern Energy's ownership level will increase to approximately 29% following a redemption to occur shortly at Pattern Development 2.0

"It was a great quarter with CAFD up 19%, as production was solid and our disciplined cost management initiatives delivering results. We are on track to achieve our targeted CAFD(1) for the year," said Mike Garland, President and CEO of Pattern Energy. "At 29% ownership of Pattern Development 2.0, we will have achieved our target ownership level in the development business which we believe will provide meaningful value to shareholders. Our identified ROFO ("right of first offer") list with Pattern Development 2.0 has grown by four new projects since our original investment in June of last year. We anticipate the first realized development transaction gains by the end of 2018 or early 2019, and returns from those gains will be retained and reinvested in the development business. Developing, owning and operating one of the very best portfolios in the renewables market can be challenging, but we are in a great position to generate long-term value in this exciting market."

(1) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended June 30, 2018.

Financial and Operating Results

Pattern Energy sold 2,262,811 megawatt hours ("MWh") of electricity on a proportional basis in the second quarter of 2018 compared to 2,111,627 MWh sold in the same period last year.  Pattern Energy sold 4,398,526 MWh of electricity on a proportional basis for the six months ended June 30, 2018 ("YTD 2018") compared to 4,135,510 MWh sold in the same period last year. The 7% increase in the quarterly period was primarily due to volume increases as a result of acquisitions in 2017 and 2018 and favorable wind compared to last year, partially offset by curtailment at the Santa Isabel project. Production for the quarter was 2% below the long-term average forecast for the period.

Net cash provided by operating activities was $95.7 million for the second quarter of 2018 compared to $113.4 million for the same period last year. Net cash provided by operating activities was $123.5 million for YTD 2018 as compared to $157.2 million for the same period last year. The decrease in the quarterly period of $17.7 million was primarily due to $2.9 million in increased transmission costs due to acquisitions in 2017, increased interest payments of $3.6 million, and increased payments of $43.1 million in payable, accrued and current liabilities, due primarily to the timing of payments. The decrease to net cash provided by operating activities was partially offset by a $32.9 million increase in revenue (excluding unrealized loss on energy derivative and amortization of power purchase agreements ("PPAs")).

Cash available for distribution was $58.7 million for the second quarter of 2018, compared to $49.2 million for the same period last year. Cash available for distribution was $101.7 million for YTD 2018 compared to $94.4 million for the same period in the prior year. The $9.4 million, or 19.1% increase in the quarterly period was primarily due to a $32.9 million increase in revenues (excluding the unrealized loss on the energy derivative and amortization of PPAs) due to acquisitions in 2017 and early 2018 and a $4.4 million increase in total distributions from unconsolidated investments. The improvement was partially offset by a $8.0 million decrease in network upgrade reimbursement, a $5.6 million increase in distributions to noncontrolling interests, a $3.6 million increase in interest expense (excluding amortization of financing costs and debt discount/premium), a $2.9 million increase in transmission costs, a $2.7 million decrease in other and a $1.9 million increase in principal payments of project-level debt.

Net loss was $1.8 million in the second quarter of 2018, compared to a net loss of $14.7 million for the same period last year. Net loss was $14.4 million for YTD 2018 compared to $12.1 million in the same period last year. The improvement of $12.9 million in the quarterly period was primarily attributable to a $32.2 million increase in revenues due to acquisitions in 2017 and 2018, and a $2.7 million decrease in general and administrative expenses. These improvements were partially offset by increases of $9.6 million in cost of revenues due to the acquisitions in 2017 and 2018, a $4.2 million increase in impairment loss related to Chile assets held for sale, and a $8.1 million increase in other expense primarily related to decreased earnings from unconsolidated investments.

Adjusted EBITDA was $108.4 million for the second quarter of 2018 compared to $91.9 million for the same period last year. Adjusted EBITDA was $212.6 million for YTD 2018 compared to $190.1 million for the same period last year. The $16.5 million increase in the quarterly period was primarily due to a $32.9 million increase in revenue (excluding unrealized loss on energy derivative and amortization of PPAs) primarily attributable to volume increases as a result of the 2017 and 2018 acquisitions and favorable wind compared to last year, partially offset by curtailment at the Santa Isabel project and a $2.7 million decrease in general and administrative expenses primarily due to lower audit and consulting fees in 2018 compared to 2017. The increase was partially offset by a $17.2 million decrease in earnings from unconsolidated investments, a $2.9 million increase in transmission costs, and a $1.2 million increase in net loss on transactions, primarily related to the Chile assets held for sale.

2018 Financial Guidance

Pattern Energy is re-confirming its targeted annual cash available for distribution(2) for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.

(2) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Metrics, of Pattern Energy's 2018 Quarterly Report on Form 10-Q for the period ended June 30, 2018.

Quarterly Dividend

Pattern Energy declared a dividend for the third quarter 2018, payable on October 31, 2018, to holders of record on September 28, 2018 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the third quarter 2018 dividend is unchanged from the second quarter 2018 dividend.

Acquisition Pipeline

Pattern Development 1.0 and Pattern Development 2.0 (together, the "Pattern Development Companies") have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a ROFO on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 706 MW of potential owned capacity and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy's ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.

Below is a summary of the identified ROFO projects that Pattern Energy has the right to purchase from the Pattern Development Companies in connection with its respective purchase rights:

























Capacity (MW)

Identified

ROFO Projects



Status



Location



Construction

Start (1)



Commercial

Operations (2)



Contract

Type



Rated (3)



Pattern

Development-

Owned (4)

Pattern Development 1.0 Projects

























Belle River



Operational



Ontario



2016



2017



PPA



100



43

North Kent



Operational



Ontario



2017



2018



PPA



100



35

Henvey Inlet



In construction



Ontario



2017



2019



PPA



300



150

Pattern Development 2.0 Projects

























Stillwater Big Sky



In construction



Montana



2017



2018



PPA



79



67

Crazy Mountain



Late stage development



Montana



2019



2019



PPA



80



68

Grady



In construction



New Mexico



2018



2019



PPA



220



188

Sumita



Late stage development



Japan



2019



2021



PPA



100



55

Ishikari



Late stage development



Japan



2019



2022



PPA



100



100

























1,079



706





(1)

Represents year of actual or anticipated commencement of construction.





(2)

Represents year of actual or anticipated commencement of commercial operations.





(3)

Rated capacity represents the maximum electricity generating capacity of a project in MW. As a result of weather and other conditions, a project or a turbine will not operate at its rated capacity at all times and the amount of electricity generated will be less than its rated capacity. The amount of electricity generated may vary based on a variety of factors.





(4)

Pattern Development-Owned capacity represents the maximum, or rated, electricity generating capacity of the project in MW multiplied by Pattern Development 1.0's or Pattern Development 2.0's percentage ownership interest in the distributable cash flow of the project.

 

Cash Available for Distribution and Adjusted EBITDA Non-GAAP Reconciliations

The following tables reconcile non-GAAP net cash provided by operating activities to cash available for distribution and net loss to Adjusted EBITDA, respectively, for the periods presented (in thousands):



Three months ended June 30,



Six months ended June 30,



2018



2017



2018



2017

Net cash provided by operating activities(1)

$

95,720





$

113,431





$

123,544





$

157,183



Changes in operating assets and liabilities

(10,079)





(61,379)





18,497





(47,956)



Network upgrade reimbursement

294





8,273





576





8,590



Release of restricted cash









2,488







Operations and maintenance capital expenditures

(10)





(117)





(271)





(263)



Distributions from unconsolidated investments(2)

(1,948)





4,185





4,333





8,390



Other

2,147





4,808





3,007





1,376



Less:















Distributions to noncontrolling interests

(12,088)





(6,517)





(21,275)





(9,164)



Principal payments paid from operating cash flows

(15,374)





(13,445)





(29,177)





(23,771)



Cash available for distribution

$

58,662





$

49,239





$

101,722





$

94,385







(1)

Included in net cash provided by operating activities for the three and six months ended June 30, 2018 and 2017 are the portions of distributions from unconsolidated investments paid from cumulative earnings representing the return on investment.





(2)

Distributions from unconsolidated investments for the three months ended June 30, 2018 includes an adjustment for a March 2018 distribution received in April 2018 previously included in the first quarter 2018 cash available for distribution.







Three months ended June 30,



Six months ended June 30,



2018



2017



2018



2017

Net loss

$

(1,774)





$

(14,684)





$

(14,394)





$

(12,145)



Plus:















Interest expense, net of interest income

27,284





24,238





52,394





46,299



Tax provision

4,410





4,541





11,194





9,316



Depreciation, amortization and accretion

62,766





52,752





125,416





99,979



EBITDA

92,686





66,847





174,610





143,449



Unrealized loss on energy derivative (1)

3,626





4,663





14,673





7,021



(Gain) loss on derivatives

(8,801)





4,751





(14,461)





5,399



Impairment loss

4,238









4,238







Other





807









1,119



Adjustments from unconsolidated investments















Plus, proportionate share from unconsolidated investments:















Interest expense, net of interest income

9,506





9,498





18,974





18,838



Tax benefit

(207)









(207)







Depreciation, amortization and accretion

8,741





8,575





17,509





17,029



Gain on derivatives

(1,379)





(3,272)





(2,714)





(2,788)



Adjusted EBITDA

$

108,410





$

91,869





$

212,622





$

190,067







(1)

Amount is included in electricity sales on the consolidated statements of operations.

Conference Call and Webcast

Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Thursday, August 9, 2018. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 3199694. The replay recording will be available until 11:59 p.m. Eastern Time, August 30, 2018.

A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy's website at www.patternenergy.com. An archived webcast will be available for one year.

About Pattern Energy

Pattern Energy Group Inc. (Pattern Energy) is an independent power company listed on the NASDAQ Global Select Market and Toronto Stock Exchange. Pattern Energy has a portfolio of 24 wind and solar power facilities, including one project it has agreed to acquire and one project it has agreed to sell, with a total owned interest of 2,861 MW in the United States, Canada, Japan and Chile that use proven, best-in-class technology. Pattern Energy's wind and solar power facilities generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. For more information, visit www.patternenergy.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of Canadian securities laws, including statements regarding the ability to achieve the 2018 cash available for distribution target; the ability to fund an additional investment into Pattern Development 2.0 shortly and for redemptions of certain other investors in Pattern Development 2.0 to occur; the ability to consummate the agreement to sell the Company's operations in Chile; the ability of the investments in development to provide meaningful value to shareholders; the timing of the receipt of the first development profits (if ever); and the ability of the Company's portfolio to generate long-term value. These forward-looking statements represent the Company's expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Company's annual report on Form 10-K and any quarterly reports on Form 10-Q. The risk factors and other factors noted therein could cause actual events or the Company's actual results to differ materially from those contained in any forward-looking statement.

 

Contacts:















Media Relations

Matt Dallas

917-363-1333

matt.dallas@patternenergy.com 



Investor Relations

Ross Marshall

416-526-1563

ross.marshall@loderockadvisors.com



 

Pattern Energy Group Inc.

Consolidated Balance Sheets

(In thousands of U.S. Dollars, except share data)

(Unaudited)



June 30,



December 31,



2018



2017

Assets







Current assets:







Cash and cash equivalents

$

116,538





$

116,753



Restricted cash

4,336





9,065



Counterparty collateral

5,824





29,780



Trade receivables

59,371





54,900



Derivative assets, current

16,148





19,445



Prepaid expenses

18,660





17,847



Deferred financing costs, current, net of accumulated amortization of $2,409 and $2,580 as of June 30, 2018 and December 31, 2017, respectively

1,422





1,415



Assets held for sale

307,231







Other current assets

21,726





21,105



Total current assets

551,256





270,310



Restricted cash

10,004





12,162



Major construction advances

48,898







Construction in progress

192,317







Property, plant and equipment, net

3,797,098





3,965,121



Unconsolidated investments

343,512





311,223



Derivative assets

17,341





9,628



Deferred financing costs

8,744





7,784



Net deferred tax assets

3,353





6,349



Finite-lived intangible assets, net

226,422





136,048



Goodwill

57,736







Other assets

27,421





22,906



Total assets

$

5,284,102





$

4,741,531











Liabilities and equity







Current liabilities:







Accounts payable and other accrued liabilities

$

38,799





$

53,615



Accrued construction costs

9,383





1,369



Counterparty collateral liability

5,824





29,780



Accrued interest

14,383





16,460



Dividends payable

42,072





41,387



Derivative liabilities, current

3,188





8,409



Revolving credit facility

201,000







Current portion of long-term debt, net

61,583





51,996



Liabilities related to assets held for sale

207,073







Other current liabilities

25,643





14,018



Total current liabilities

608,948





217,034



Long-term debt, net

1,923,743





1,878,735



Derivative liabilities

24,464





20,972



Net deferred tax liabilities

116,849





56,491



Finite-lived intangible liability, net

58,195





51,194



Contingent liabilities

165,214





62,398



Other long-term liabilities

152,998





106,565



Total liabilities

3,050,411





2,393,389



Commitments and contingencies







Equity:







Class A common stock, $0.01 par value per share: 500,000,000 shares authorized; 98,096,323 and 97,860,048 shares outstanding as of June 30, 2018 and December 31, 2017, respectively

983





980



Additional paid-in capital

1,210,610





1,234,846



Accumulated income (loss)





(112,175)



Accumulated other comprehensive loss

(32,756)





(25,691)



Treasury stock, at cost; 178,346 and 157,812 shares of Class A common stock as of June 30, 2018 and December 31, 2017, respectively

(3,892)





(3,511)



Total equity before noncontrolling interest

1,174,945





1,094,449



Noncontrolling interest

1,058,746





1,253,693



Total equity

2,233,691





2,348,142



Total liabilities and equity

$

5,284,102





$

4,741,531



 

Pattern Energy Group Inc.

Consolidated Statements of Operations

(In thousands of U.S. dollars, except per share data)

(Unaudited)











Three months ended June 30,



Six months ended June 30,



2018



2017



2018



2017

Revenue:















Electricity sales

$

135,951





$

105,736





$

238,098





$

204,170



Other revenue

3,989





2,024





13,501





4,423



Total revenue

139,940





107,760





251,599





208,593



Cost of revenue:















Project expense

33,665





33,405





68,227





62,505



Transmission costs

7,643





4,722





14,833





4,792



Depreciation, amortization and accretion

54,979





48,518





110,431





92,258



Total cost of revenue

96,287





86,645





193,491





159,555



Gross profit

43,653





21,115





58,108





49,038



Operating expenses:















General and administrative

9,089





11,777





19,795





22,901



Related party general and administrative

3,663





3,576





7,731





7,002



Impairment loss

4,238









4,238







Total operating expenses

16,990





15,353





31,764





29,903



Operating income

26,663





5,762





26,344





19,135



Other expense:















Interest expense

(27,709)





(24,839)





(53,153)





(47,394)



Gain (loss) on derivatives

8,801





(4,751)





14,461





(5,399)



Earnings (loss) in unconsolidated investments, net

(742)





14,519





17,470





31,395



Net loss on transactions

(2,002)





(807)





(3,100)





(1,119)



Other income (expense), net

(2,375)





(27)





(5,222)





553



Total other expense

(24,027)





(15,905)





(29,544)





(21,964)



Net income (loss) before income tax

2,636





(10,143)





(3,200)





(2,829)



Tax provision

4,410





4,541





11,194





9,316



Net loss

(1,774)





(14,684)





(14,394)





(12,145)



Net loss attributable to noncontrolling interest

(34,492)





(28,904)





(183,034)





(32,018)



Net income attributable to Pattern Energy

$

32,718





$

14,220





$

168,640





$

19,873



















Weighted-average number of common shares outstanding















Basic

97,459,472





87,065,591





97,444,016





87,064,110



Diluted

97,496,217





87,217,381





105,662,687





87,257,130



Earnings per share attributable to Pattern Energy















Class A common stock:















Basic

$

0.34





$

0.16





$

1.73





$

0.23



Diluted

$

0.34





$

0.16





$

1.67





$

0.23



Dividends declared per Class A common share

$

0.42





$

0.42





$

0.84





$

0.83



 

Pattern Energy Group Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)







Six months ended June 30,



2018



2017

Operating activities







Net loss

$

(14,394)





$

(12,145)



Adjustments to reconcile net loss to net cash provided by operating activities:







Depreciation, amortization and accretion

110,431





92,258



Contingent liability accretion

5,716







Impairment loss

4,238







Amortization of financing costs

2,526





3,852



Amortization of debt discount/premium, net

2,477





2,227



Amortization of power purchase agreements, net

3,894





1,489



Loss (gain) on derivatives

(1,542)





10,331



Stock-based compensation

2,277





2,768



Deferred taxes

10,914





9,149



Earnings in unconsolidated investments, net

(17,470)





(31,395)



Distributions from unconsolidated investments

33,041





31,710



Other reconciling items

(67)





(1,017)



Changes in operating assets and liabilities:







 Counterparty collateral asset

23,956





9,199



 Trade receivables

(9,689)





(7,995)



 Prepaid expenses

899





2,202



 Other current assets

6,316





(3,638)



 Other assets (non-current)

(1,737)





2,561



 Accounts payable and other accrued liabilities

(13,889)





31,001



 Counterparty collateral liability

(23,956)





(9,199)



 Accrued interest

166





8,569



 Other current liabilities

(7,141)





4,333



 Long-term liabilities

7,858





10,648



 Contingent liabilities

(1,508)





275



 Derivatives

228







Net cash provided by operating activities

123,544





157,183



Investing activities







Cash paid for acquisitions, net of cash and restricted cash acquired

(157,543)





(170,028)



Payment for construction advances/deposits

(53,727)







Payment for construction in progress

(24,644)







Capital expenditures

(7,441)





(39,087)



Distributions from unconsolidated investments

4,333





8,390



Other assets

(319)





7,552



Investment in Pattern Development 2.0

(57,055)







Other investing activities





12



Net cash used in investing activities

(296,396)





(193,161)



Financing activities







Dividends paid

(82,487)





(71,544)



Capital distributions - noncontrolling interest

(21,274)





(9,163)



Payment for financing fees

(6,954)





(7,740)



Proceeds from revolving credit facility

333,000





85,000



Repayment of revolving credit facility

(132,000)





(205,000)



Proceeds from long-term debt

126,775





404,395



Repayment of long-term debt

(34,541)





(74,824)



Repayment of note payable - related party

(909)







Other financing activities

154





(3,618)



Net cash provided by financing activities

181,764





117,506



Effect of exchange rate changes on cash, cash equivalents and restricted cash

(2,388)





2,248



Net increase in cash, cash equivalents and restricted cash including cash classified within current assets and liabilities held for sale

6,524





83,776



Add: Net (decrease) in cash classified within current assets and liabilities held for sale

(13,626)







Net change in cash, cash equivalents and restricted cash

(7,102)





83,776



Cash, cash equivalents and restricted cash at beginning of period

137,980





109,371



Cash, cash equivalents and restricted cash at end of period

$

130,878





$

193,147



Supplemental disclosures







Cash payments for income taxes

$

443





$

288



Cash payments for interest expense

$

48,721





$

33,666



Business combination:







 Assets acquired, net of cash and restricted cash acquired

$

627,241





$

665,014



 Liabilities assumed

352,570





148,456



 Less: Noncontrolling interests

11,113





325,600



 Net assets acquired, net of cash and restricted cash acquired

$

263,558





$

190,958



Schedule of non-cash activities







Change in property, plant and equipment

$

117,103





$

1,110



Change in other assets

$

202





$

2,492



Accrual of dividends

$

87





$



 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/pattern-energy-reports-second-quarter-2018-financial-results-300694587.html

SOURCE Pattern Energy Group Inc.

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