Zynga Inc.
Q2 2020 Earnings Call Transcript

Published: 5 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Zynga Second Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Rebecca Lau, Vice President, Investor Relations and Corporate Finance. Thank you. Please go ahead.

[Rebecca Lau:]

[Frank Gibeau:]

Thank you, Rebecca. Good afternoon, everyone, and thank you for joining our call. We are living in unprecedented times and more people than ever before are turning to games for entertainment and a sense of community. With more people staying at home, we saw heightened levels of player engagement, social connection and monetization in our portfolio. Increased player engagement in our live services drove our exceptional Q2 results, including record revenue and bookings performances, and our best operating cash flow in more than eight years. We also executed our transformational acquisition of Peak and are entering Q3 with eight forever franchises, adding significant scale to our live services foundation. Our new game pipeline is also progressing well and we expect to begin releasing new titles later this year. Today, we are raising our full year 2020 revenue and bookings guidance which Ger will provide more details on later in the call. In addition, I am pleased to announce that we have entered into an agreement to acquire Rollic, one of the fastest growing hyper-casual game companies in 2020. With Rollic, we are meaningfully expanding our entry into hyper-casual, one of the largest and fastest growing game categories on mobile, while adding a highly talented team and an extensive network of external developers to Zynga.

[Gerard Griffin:]

Thank you, Frank. We cut off our great first half performance with tremendous Q2 results, delivering our best quarterly revenue and bookings in Zynga history. Strength across our live services delivered better than expected top-line operating leverage. We’re also happy to have -- now have Peak in the Zynga family, having closed this transformational acquisition on July 1st, bringing to Zynga an amazingly talented studio with two top charting franchises in Toon Blast and Toy Blast. Due to the strength in our live services, including a full second year -- half year contribution from Peak, we are raising our full year outlook for revenue and bookings. But first, let’s discuss our Q2 results. Revenue was $452 million, comprised of bookings of $518 million offset by an net increase in deferred revenue of $66 million. Revenue was $22 million ahead of our raised guidance, driven by $18 million bookings beat and a $4 million lower than unexpected net increase in deferred revenue. Broad based trend across our live services drove our top-line beat, in particular stronger than expected performances from our Social Slots portfolio, Words With Friends, CSR2, Empires & Puzzles versus our raised guidance. Revenue was $145 million or 47% up year-over-year, driven by bookings growth of $142 million or 38% year-over-year and a $3 million lower net increase in deferred revenue. Our year-over-year revenue and bookings growth was driven by broad-based trend across our mobile live services, in particular from Empires & Puzzles, Merge Dragons!, Merge Magic! and Game of Thrones Slots Casino. User pay was the driver of our top-line growth, with advertising as expected moderately down year-over-year. The net increase in deferred revenue was $66 million and was driven primarily by bookings from Empires & Puzzles and Merge Dragons! We ended Q2 with a deferred revenue balance of $523 million versus $358 million a year ago. Turning to our Q2 operating expenses. GAAP operating expenses were $402 million, up to $161 million or 67% year-over-year, primarily driven by higher contingent consideration expense, marketing investments and acquisition-related expenses versus our prior year. Our Small Giant games and Gram Games acquisitions continued to perform ahead of our expectations, resulting in $149 million contingent consideration expense, up $125 million year-over-year and $24 million ahead of our guidance.

[Frank Gibeau:]

Thanks, Ger. Before we open the call to live Q&A, I want to take a moment to touch on our current operating environment. First, we hope that all of you are safe and well along with your family, friends and colleagues. In these challenging times, the health and safety of our teams have been a top priority. We’re extremely proud of how Zynga has seamlessly transitioned to a work-from-home configuration, without any material disruptions to our operations and while delivering new features, content, and products for our players. We anticipate that our North American offices will work from home through early 2021 while our international based offices will begin to reopen based on guidance from local authorities. To support our teams over the past several months, we have updated and introduced many new health and wellness benefits, programs and services to assist with work-from-home needs. We also continue to support our communities, and in Q2 we donated over $2 million to a variety of causes. In addition, we are committing $25 million over the next five years towards diversity and inclusion initiatives at Zynga and in the overall gaming industry. In summary, supporting our teams, communities, and Zynga’s founding mission to connect the world through games has never been more important. Our business fundamentals are strong. And we are incredibly excited by the growth and innovation ahead for interactive entertainment. It is increasingly clear that games are emerging as powerful new social networks where people around the world come together to connect, play and socialize. Zynga is uniquely well-positioned within this landscape as a leading mobile-first, free-to-play live services social game company with a portfolio of proven franchises. We are on track to deliver a record year for Zynga in 2020 and are positioned for further growth in 2021 where we expect double-digit growth, top-line growth, potential for further margin expansion, and positive operating cash flow. With that, I would now like to open up the call to your questions.

[Operator:]

Thank you, sir. I show our first question comes from the line of Eric Sheridan from UBS. Please go ahead.

[Eric Sheridan:]

First, maybe a big picture question for you, Frank. I think you’ve done a lot of the acquisitions and I think, generally investors have a pretty good sense of the known titles that you’ve acquired. But, what sort of visibility do you have now out over multiple years? Sort of a big picture question in terms of thinking about what these teams might be able to develop, what a pipeline might look like, just so investors can generally get a sense of what sort of inorganic growth might be layering in on top of some of the organic growth from the titles that they already know about? Just curious even conceptually how that might play out. And then, maybe for the back part of the year, there continued to be a lot of changes in the broad advertising environment. Investors are asking a lot of questions about iOS 14, an IDFA. How are you guys thinking, potentially for headwinds for your advertising revenue, as well as your marketing ROI in the back part of the year, given some of the changes that might be playing in the advertising landscape? Thanks so much.

[Frank Gibeau:]

Thanks for the question, Eric. I’ll take the first one. With regards to the new product pipeline, when we look across all at Zynga, including studios such as NaturalMotion, teams in the North American studios, as well as Gram, Small Giant and now talking about Peak, we have active -- products in development that are planned for 2020-2021 and beyond. We’re literally looking at the expertise that each of those studios brings. And looking at our overall portfolio in terms of where we have the best opportunities to grow the Company. We also have projects planned that are smaller in scale for chat platforms, for the more mass casual platforms that are in active development and tests. And we’re looking for ways in the future to learn from Rollic’s prototyping process. They have an amazing approach to how they prototype games, work with outside developers and bring them to market. So, we think that there’s an opportunity there as well to further enhance and expand our product pipeline, which now encompasses chat, hyper-casual, as well as more traditional mainline mobile games. So, very exciting opportunities for us in the future to continue to grow the Company organically, in addition to what we’ve done in live services and then potentially the future inorganic opportunities. In terms of the second question. If you look at the second half of the year as it relates to acquiring players and also running the advertising network. Obviously, there’s a lot of talk about IDFA and the impact to the overall business, and also just overall trends inside the economy and what’s going to happen. Obviously, a lot of unknowns there. And from our perspective, when we look at our business, our trends and how things are tracking, when we look into the second half, obviously, our advertising businesses is hitting our expectations. We communicated that we felt that would be flat to slightly down. It’s seen a little bit of a recovery here in the second half of Q2. But, in terms of overall growth, I think, it’s really going to start to accelerate when Rollic becomes part of the advertising network in Q4, when we see a sizable increase in MAUs, in addition to a diversification of demos and also regions that we can advertise into. In terms of the actual specific impacts that IDFA will have on acquisition or advertising, CPMs and yield. I think it’s a little too early to tell what will happen there. I think there’s going to be puts and takes. And I think long term, things will settle out. There’ll be new opportunities and new places to innovate. At the same time some traditional tools and tactics might start to lose their effectiveness. So, it will be a little bit choppy here in the early stages. And as Apple rolls out some of its platform shifts, we also still have Android and other platforms that are continuing to operate in the context that we’re currently comfortable with. I would point out that in the case of Rollic, for example, the way that they acquire players does not rely on IDFA. So, we do have sectors of our business in terms of how we go out and organically acquire and also from a paid standpoint, acquire players that probably won’t be that impacted. But there will be other parts that will be, and we’re just not sure by how much and what the mitigating countermeasures will take in terms of how we evolve the business from here.

[Operator:]

I show our next question comes from the line of Alex Giaimo from Jefferies. Please go ahead.

[Alex Giaimo:]

Two questions, maybe one for Frank and then one for Ger. Frank going back to Rollic, can you maybe just provide some background on the company? Maybe how long you’ve been in discussions and what attracted you to that asset specifically? And then, for Ger, just regarding the guidance for both the third quarter and the full year, can you provide a bit of color on what’s assumed from a Peak contribution? Should we still just be run rating that $600 million number you provided at announcement? Thanks, guys.

[Frank Gibeau:]

The opportunity to come together with Rollic really presented itself in the first half of this year. We have been studying hyper-casual now for several years and monitoring the progress and been very impressed with the growth rate of category, the share of voice that it now occupies on the app stores, the number of chart positions in the top 10 and top 20 for installs that are maintained by hyper-casual games. So, we like the category. As we’ve watched it evolve, it has changed over last several years, but it continues to show resiliency and strength and continued growth. As a result, we started to look at ways to build versus buy, to go after this opportunity. And that journey brought us to Rollic in the first part of this year. We were able to meet and talk to them via the meaning that we use in the pandemic, which is Zoom, but we also were able to leverage the great strength that we have in Turkey. So, our Gram team, our Peak team, the Casual Cards group, those management teams were able to meet directly with Rollic, really get to know each other, in addition to us getting to meet them virtually over Zoom. And diligence was a very straightforward exercise. We found a team that is very aggressive, very new in terms of being founded in December 2018. But, if you look at their track record in terms of bringing in outside developers as well as standing up their internal studios, their results in this first part of 2020 have truly been remarkable. Eight of Rollic’s games have reached one or two in terms of most downloaded. They had 250 million plus downloads. And the growth rate just looks surprisingly strong, even through some of these challenges that we see with the pandemic and economic distress. The category is great because it’s -- they’re lightweight games, they are instantly playable, they’re broadly appealing, they’re globally appealing. And it feels like that is an opportunity for us to grow our business. And with the ad model being so strong there, they have a very deep bench of advertising executives and folks that know a lot about how to monetize inside an ad-driven game that we think will help the overall portfolio at Zynga as well. So, very excited to add to our footprint in Turkey. Rollic will maintain what we usually do with acquisitions. And so, they’ve got their culture, they’ve got their approach. We have aligned goals. And over the next several years, we expect that we’re going to be able to grow faster together.

[Gerard Griffin:]

Alex, in terms of assumptions for the second half of the year, yes, I would just continue with what we said when we announced the peak acquisition. That’s the base assumption we’re using for guidance.

[Operator:]

I show our next question comes from the line of Mario Lu from Barclays.

[Mario Lu:]

So, I have one on Peak and one on Battle Pass. So, we talked a lot of opportunities in which Zynga can help monetize these titles, but the question is on the flip side. So, how much knowledge can you leverage from these expertise in the puzzle genre to your own titles such as the upcoming Harry Potter title, as well as Peak’s ability to grow its sister titled Toon Blast, which mirrors the goal of Zynga, such -- title such as Puzzle Combat and Merge Magic! And secondly, on Battle Pass, I find it very interesting that the mechanic currently stands through different genres within your portfolio. Is there any reason why it cannot be applied to all Zynga titles over time? And any color you can provide on how additive it is to bookings for each title?

[Frank Gibeau:]

Thanks, Mario. In terms of the impact that Peak is having on our creative organization, it’s already been a very short period of time since they’ve been part of our studios. But, I’ve been really blown away by the amount of collaboration and teamwork that they’ve already embarked upon with our games. The Harry Potter team and the Peak team have already met multiple times, they’ve been trading bills and notes. And the insights that Peak has developed over the years of building highly retentive games that some of the top of the charts, something that we’re propagating through Zynga. Sidar and his leadership team have been very generous with their time to participate and design brainstorms, reviews of levels, game balancing notes, it’s really been impressive to see how quickly the teams have gelled and are really helping each other. So, it’s only been just a matter of weeks, frankly, since they’ve been engaged. And we’re already seeing the impact come this way, which is really one of the strengths of the model that we have. By keeping the studios decentralized with their own strong cultures and chemistry, the collaboration that we see between Gram and Small Giant, NaturalMotion. Peak and our other studios like Words With Friends and Poker, it’s pretty awesome, thinking about the potential long-term and we’re already seeing it in short-term changes and modifications to existing games. In terms of the second question, we started the Battle Pass obviously off in Small Giant’s products. We like the result. It still has potential to grow. And we’re still tuning it to be the best that it can be. But, a lot of -- as I just mentioned in the prior question, we share a lot and collaborate a lot inside the Company. And so, all the data that the Battle Pass is generating inside Empires & Puzzles was shared with all the Zynga teams. And the important part was to take the basic value proposition that a Battle Pass has for players and express it in a category or franchise appropriate way, like with Hit it Rich! or like with the Gram title. So, the base value proposition is very flexible and has a lot of room to run. You just have to make sure that you implement it in a way that makes sense inside the franchise that it’s going into, and the players see the value proposition of signing up for that path and they really enjoy it. So, we do a lot of testing. And I think that this will be something that can make its way into other parts of the portfolio over time. The important thing is to not rush it, and stifle the engagement or the retention curves by over-monetizing or putting a breakage into the game. So, Mario, we typically take a lot of time testing and implement -- before full implementation goes in. But, we’re very excited by the results.

[Mario Lu:]

That’s very helpful. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Brian Fitzgerald from Wells Fargo. Please go ahead.

[Brian Fitzgerald:]

Thanks. Maybe a follow-up to Alex’s questions and discussion on Rollic. And that’s just -- is this going to be same and the more classic Zynga playbook in terms of integration where you utilize the best practices but you don’t -- you don’t do any rationalization or synergy kind of leverage? And then, to Alex’s question on that run-rate for Peak, is that weighted evenly, or is there differences between Q3s and Q4s?

[Frank Gibeau:]

In terms of the integration of Rollic, it’ll follow our playbook. They will continue to drive their business. They are extremely aggressive and focused on hyper-casual and doing a great job. Our job is to A, not get in the way but B, accelerate their progress wherever we can. So, if there’s things that we can do in data science, UA, our advertising network deals, publishing platform relationships with Apple and Google, all those discussions are well underway. And it’s very exciting to see how the two companies come together. From a synergy standpoint, this is a team that’s less than 40 people in Istanbul. They have a lot of variable resources in terms of the partners that they work with, but it’s a very small team. So, it’s very light footprint and they can then leverage the rest of Zynga’s organizational knowledge, institutional information and capabilities. And that’s kind of the excitement and configuration for Rollic. And then, Ger can take the question on Peak in terms of how it splits out in Q3 and Q4.

[Gerard Griffin:]

Yes. Brian, I would just assume even over the two quarters. That’s how it’s flowed into the current guidance.

[Brian Fitzgerald:]

Got it. Thanks, guys. I appreciate it.

[Operator:]

Thank you. Our next question comes from Colin Sebastian from Baird. Please go ahead. If you have your line muted, please unmute yourself, Colin. Okay. Our next question comes from the line of Doug Creutz from Cowen. Please go ahead.

[Doug Creutz:]

Can you talk a little bit about what you’re seeing in terms of ROIs and UA. And it seems like on your Q1 call, you had indicated you were going to lead into lower ROIs and spent more in Q2. And it looks like you did, maybe not quite as much as you thought you would. How did that evolve during the quarter, and what are you seeing now? Thank you.

[Frank Gibeau:]

We -- the early part of the quarter, in that March, April, May timeframe, the withdrawal of a lot of brand advertisers and entertainment campaigns opened up opportunities for gaming companies to buy with very good deals, very good returns. So, a lot of that activity occupied the first half of the quarter. Once we got to a point where things started to look a little bit different towards the end where brand advertisers came back in and some of the rates went up due to the activity, we frankly had a lot of velocity already in the business and the momentum was good and our organic and engagement curve strong. So, where we didn’t see the returns that we wanted, we pulled back. So, from a combination of elements, we’re being very selective about where we invest. But, that kind of land rush towards a lot of really good deals ended very quickly, because a lot of game companies saw it. But, as things have gone back to elevated levels above Q1, but not at the peak of COVID in May, we still see a good opportunity to grow our businesses, and we’re going after it. But, we’re not necessarily feeling very pressured right now to have to overinvest to it.

[Ger Griffin:]

This is Ger. The only thing I would add sort of building on what Frank just said. If you look at Q2 results, understanding we are dealing with a COVID quarter, if we want to call it that. I think what you saw in terms of the dynamics in live services is that given the performance of our bold beats and the engagement of our players, we obviously were able to optimize the UA spend. So, versus our guidance and versus the prior quarters, that’s why obviously -- when you see that strong bookings and optimization, you can deliver north of 25% flow-through.

[Operator:]

Our next question comes from the line of Matthew Thornton from Trust Securities.

[Matthew Thornton:]

Maybe two, if I could. I guess, first, the pipeline, you talked a little bit about starting to bring titles, and I think it was plural later on this year. I just wondered if you could provide a little more color on, just how you’re thinking about impact in the second half of from new titles. And any updates you might have on some of the other out year kind of projects that you guys have at least announced previously? And then, just secondly, coming back to Rollic for a second, just curious if you can talk a little bit about what that kind of normalized growth rates of that business looks like? Thanks, guys.

[Frank Gibeau:]

Hi, Matt. The new title plan is very much what we communicated in the remarks in terms of the second half, FarmVille 3, Puzzle Combat, and Harry Potter is all -- are all making very good progress in soft launch. And we’re looking at releasing in the second half when we get to a point where the KPIs demonstrate to us that we have games with great long-term engagement retention and we can really open them up for a global market. The thing that I would point out is that we did sight that these games would roll out and build over time. So, the actual contribution in the second half is minimal. The second half is very much live services business combined with Peak, Rollic and new games -- Rollic is not in and new games is very small in terms of what we’re thinking about on a guidance level. With regards to the growth rate on Rollic, this first half is really doing great in terms of how they’re growing. And it’s a little hard to tell exactly how long and what form their growth will sustain. But, it feels very good to us in terms of how they’re bringing in titles, how they’re prototyping, how they’re bringing in the market. Hopefully, with our help, we can see some optimizations and growth even more so than we’re seeing now. But, it’s exciting to have a growth asset like Rollic come in at the second half of the for us and really set us up for what in 2021 could be a great year in terms of growing Rollic.

[Operator:]

Our next question comes from the line of Matthew Cost from Morgan Stanley. Please go ahead.

[Matthew Cost:]

So, when you look at the trends that you’re seeing, I guess, late into Q2 and now as we’re a month into Q3, where is that tracking versus maybe what you expected at the beginning of the year, pre-COVID? And how would you think about sort of where we are on the journey to getting back to a pre-COVID run rate, or put another way, how long do you expect the benefit to stick around for? And then, within the context of the portfolio, you’ve noted that Social Slots and Casual Cards were an area of particular strength? How sustainable do you view that -- the strength in that category relative to the rest of the portfolio? Then, I have one follow up.

[Ger Griffin:]

This is Ger. I’ll take the -- in terms of trends. If you look at Q1, obviously, we had a very strong quarter across the live services portfolio. So, if I sort of ignore Q2 and look to Q3, we’re still showing growth across the live services. So, from that perspective, we’re happy with where the core business is. And it is -- if we hadn’t done peak, we’d still be in a position where we’d be upgrading our guidance, purely based on that aspect of our business. So, from that perspective, we’re happy. What I will say -- and again, there’s still a lot of uncertainty around COVID-19 normalization, go back to normal -- what normal is. So, but we have seen the activity in games in July compared to June is mixed across the board. Some are still growing; some are showing some sort of trends towards what we call a pre-COVID level. But big picture overall, based on our core execution and bold beat strategy, we’re comfortable that we’ve got a resilient and vibrant live service business, and expect to continue that through the end of the year. Obviously, very happy to layer into that the Toy Blast and Toon Blast. And as Frank mentioned, Rollic will come in as long as the deal closes in Q4 to add some additional heft to our advertising business. But big picture, we feel good about the fundamentals of Zynga. There’s a lot of uncertainty in the market in general. But for what we can control, we feel good that we’re executing.

[Matthew Cost:]

Great, thanks. And then, just quickly on margins. Obviously, it was an extraordinary situation in Q2. But, now that you’ve put up what I think is the highest EBITDA margin in almost a decade, I think at this point, where are you on the path to sort of your near and kind of medium-term margin goals?

[Gerard Griffin:]

Well, our full-year guidance is indicating excluding the impact of deferred revenue, we’re going to be printing 22%. So, we’re beyond -- we’ve actually held obviously through the year north of our immediate near-term goal, which was break 20 and sustain and now it’s the path to 25 and beyond. As you said, Q4 of last year was 24%, this quarter was 26%. So, you can see the dynamic where you have a stronger level of engagement or monetization in your business in any given quarter. You can break higher levels. The key though is sustaining over time. And, we’re managing a portfolio and all quarters aren’t equal. And as you can see, we are guiding again north of 20 for this quarter and obviously 22 for the full year. The ultimate outcome for the full year will be a function of how our live services perform. And new games will not be a major factor. They’ll be a factor from a marketing perspective, but if there is -- from a bookings perspective new games in 2020 will be reasonably small compared to the live service performance. But, the main wildcard quite frankly is marketing. As we see strong results in our live services, it gives us more latitude to optimize our user acquisition. And while there’s some uncertainty around what IDFA means, when you look at our diverse portfolio of live service games and the approach and scale of our audience, we do have levers there to continue to manage that effectively. So, I would say, printing 22 this year is a good result. And then, as we look into the following year, it’s going to be the same playbook, continue to execute against our live services, launch these games and steadily scale them. And obviously, we will get a full year contribution from Peak. And if we close Rollic, which we hope to do October 1st, we’ll get a full year contribution from Rollic. So, I think we’ve got the levers to continue to grow, not just the bookings, but also the EBITDA over time and the operating cash flow.

[Matthew Cost:]

Great, thank you.

[Operator:]

Thank you. Our next question comes from the line of Mike Hickey from The Benchmark Company. Please go ahead.

[Mike Hickey:]

Hey Frank, Ger, Rebecca. Thanks for taking my questions, guys, and congrats on a pretty incredible quarter. I guess, just first on Rollic. You sort of look at the success of their games, how much is it sort of creative design versus maybe a data-driven science approach, or maybe something else? Just sort of wondering how they sort of sustain their competitive position?

[Frank Gibeau:]

Hi Mike. Thanks for that question and the comments. When we look at how Rollic builds games, I think one of the things that was so impressive was the top of the funnel for how they actually create products. The combination of their internal studio, which has really generated some of their top installs, but also they have access to a huge network of developers. But to bring in the best and the brightest, if you will of ideas from all over the world, we then put those through -- or Rollic put those through a very vigorous prototype testing process where they’re looking at efficiency in UA, they’re looking at engagement. And then, the game gets basically green lit. And they do this in a matter of days, once the prototypes come in. And so, it’s a very fast moving process. It’s a very scalable process. And it’s one that has a lot of access in terms of internal and external ideas. So, I think over time, it’ll be resilient. I think where hyper-casual companies from times have seen their growth curves bounce a bit, is when they’re unable to manage at the top of the funnel, their releases slow down or the yields don’t generate as much as they hope. So, there’s ways that Rollic is configured that we thought was very innovative and interesting, that would allow us to manage that over time together, coupled with some of the near-term synergies, I think that we can help them with in terms of data science, UA, ad, deals rates and platforms.

[Mike Hickey:]

Thanks, Frank. And then, you obviously noted, looks like you guys want to continue to find success in M&A. Is hyper-casual sort of a new genre or platform you want to continue to build on and M&A, and how robust is that market?

[Frank Gibeau:]

I think, it’s a great point that the talent base is -- in mobile is global, and it’s -- there’s a lot supply of great companies out there, big, small and different categories in different regions of the world. So, consolidation is obviously underway in the interactive category. We’re actively participating in growth through finding partnerships with companies out there. This happened to be a hyper-casual acquisition this time. Last, the one before that was -- Peak was more about forever franchises and AAA studio with titles on the way. So, from our perspective, when we look at what’s next, it’s really a huge opportunity for us in terms of looking for not just more hyper-casual game companies, but potentially other companies. Scale is going to be increasingly important in mobile. And as we exit this year, our MAUs are going to be somewhere in the neighborhood of 160 million, with 40 million DAUs. We have an advertising network; we have a portfolio of eight forever franchises. So, we’re going to be in a position where smaller developers or midsized developers that maybe aren’t able to navigate some of the issues out there are going to be able to partner with Zynga in a way that I think could help them grow and help us grow. So, long term, I think there’s a lot of opportunity still to go there. But, day in and day out what Ger and I and the management team spend all of our time on is growing live services, getting the bold beat out on time, making sure the new game pipeline is tracking. So, it’s going to be a combination of organic and inorganic as you grow the Company several years, not just acquisition.

[Operator:]

I show our next question comes from Colin Sebastian from Baird.

[Colin Sebastian:]

I guess, on Merge Magic!, now that’s officially a forever franchise. I’m just wondering how that changes if at all, the way you manage game development or marketing support for the game? And maybe, just on your last points regarding organic growth and the 2021 commentary around double-digit bookings, I’m assuming then that does embed growth for the existing portfolio outside of peak and Rollic? Thank you.

[Gerard Griffin:]

into more detail on the call, back half of this year. But in general, we’re looking at growing business, we’re growing new business. Obviously, there So, from our perspective, it is a combination of those elements. And again, we’ll get into more detail in the second half of the year on what the components of that ‘21 guide is. In terms of the Merge Magic! question, now that they kind of got the game out and we’re starting to scale it, the transition to scalable bold beat and data driven as well as data driven decision making in terms of how the year unfolds with roadmaps is really where we’re transitioning towards with the team, much like what we did with Dragon. So, as we start to evaluate new features roadmaps, the team does take on a little bit of a different configuration, not dramatically different, but in the case of where we’re at in the development now that it’s out and scaling, we start to shift the focus towards some more segment level information and design and new features for the roadmaps.

[Operator:]

Our last question comes from the line of Drew Crum from Stifel. Please go ahead.

[Drew Crum:]

Guys, with Peak and now Rollic, would you say you need time to digest these transactions, or would you look to pull the trigger if something else comes along? Trying to gauge your appetite to do more deals over the near term? And then, Frank, Zynga Poker, as you referenced in the press release, had its best bookings quarter since 3Q of ‘18. Understanding it’s been somewhat of a struggle to get back to that threshold, based on what you observed in 2Q, how do you see the performance of that franchise going forward?

[Frank Gibeau:]

Thanks, Drew. In terms of appetite for M&A, we actually are -- we’re in integration mode right now. So, we’re focused on making sure that we deliver the second half of the year, so that we successfully continue to integrate Peak and they continue to make our Company and business better. And then, with Rollic coming in October, there’s a lot of work to be done there. So, we feel like we’ve got enough irons in the fire right now, in terms of where we’re at and how we’re positioned. I think, looking forward over the long-term, most of the commentary in the prior questions about M&A was more focused on the future, not necessarily right now. Because I think we’ve got a really great position right now. And it’s about executing and focusing on the deliverables.

[Ger Griffin:]

Yes. I’d just add to Frank’s comments, and he said this earlier, every day we wake up, we’re focused on our core live business, and Peak is part of that business now. It’s true for our forever franchises, it’s a team that’s integrated already into our weekly revenue calls and is working closely with the live services side of our business. But, as I think about it from a CFO perspective, operating the businesses is core. The other area that’s very much a focus for me is ongoing capital allocation. As we mentioned in the investor letter, we will continue to assess raising additional funds to make sure we do have the cash powder to go out and do additional acquisitions in the future. But right now, I would say, I’m focusing more on that and running the business. And, key is obviously, one of the factors that defined -- targeting of the close date for Rollic was to make sure we continue to focus on the core business, integrating Peak and then the team from Rollic can come join us in Q4. What I will tell you is we have the bandwidth to deal with that. We’ve said that in the past. These studios are pure in the sense that they’re a very tight configuration of creative teams. There’s not a lot of overhead and computation to integrate. And that’s why they fit very well with the overall configure Zynga. But, yes, we’re looking forward to printing very strong results for full fiscal, and obviously entering 2021 with both, Peak and Rollic as part of our live teams.

[Frank Gibeau:]

With regards to the question on Poker, it took a little bit longer than I would have liked, and many of us would like. But, the game has been rebounding, as you noted. We’re very impressed with a lot of the changes and additions that the game team has been making. And as we look forward in terms of Poker, we’re excited about the trend that we see there. But, yes, we’re still ironing out things, we’re still working through the process. Q2 was a nice quarter for us. And the key is to sustain that performance and the team is doing a pretty good job on it right now.

[Operator:]

Thank you. Ladies and gentlemen, I show no further questions in the Q&A. This concludes our Q&A session and today’s conference call. Thank you, ladies and gentlemen for attending today’s call and participating. You may now disconnect.