Jingbo Wang: Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for the third quarter, and then I will discuss the outlook for the fourth quarter of 2023. Total revenues were $35 million in the third quarter of 2023, an increase of 2.9% quarter-over-quarter and a decrease of 14.6% year-over-year. Agora revenues were $15.3 million in the third quarter, flat compared to last quarter and decreased 8.9% year-over-year. The year-over-year decrease was primarily due to reduced usage and increased pricing sensitivity from customers in emerging markets due to challenging macroeconomic environment and tightening financing conditions, starting from the second half of last year. So on revenues, we’re RMB 141.2 million in the third quarter, an increase of 7.4% quarter-over-quarter and a decrease of 9.2% year-over-year, excluding revenues from the disposed CIC business.
The quarter-over-quarter increase was primarily due to an increase in revenues from digital transformation customers or large enterprises. This is an area where we have seen strong revenue growth in the past 2 years. Going forward, we believe digital transformation market will become an increasingly important revenue and profit contributor for the Shengwang business. The year-over-year decrease was primarily due to slowing general economic conditions and fast evolving regulations in certain downstream markets. Dollar-based net retention rate is 98% for Agora and 89% for Shengwang, excluding revenues from discontinued business. Moving on to cost and expenses. For my following comments, I will focus on non-GAAP adjusted financial measures, which excludes share-based compensation expenses, acquisition-related expenses, financing-related expenses, amortization expenses of acquired intangible assets, income tax related to acquired intangible assets, impairment of goodwill, depreciation of property and equipment and amortization of land use right.
Adjusted gross margin for the third quarter was 66.9%, 3.3% higher than Q3 2022, mainly due to the change in product mix and the implementation of technical and the infrastructure optimization. As mentioned in previous earnings calls, we’ve restructured and reduced our global workforce in Q4 last year, and we have continued to implement effective expense controls. As a result, adjusted R&D expenses were $15.7 million in Q3, decreased 36.4% year-over-year. Adjusted R&D expenses represented 44.8% of total revenues in the quarter compared to 60.2% in Q3 last year. Adjusted sales and marketing expenses were $6.6 million in Q3, decreased 48.8% year-over-year. Sales and marketing expenses represented 18.9% of total revenue in the quarter compared to 31.5% in Q3 last year.
Adjusted G&A expenses were $6.2 million in Q3, decreased 15.1% year-over-year. G&A expenses represented 17.6% of total revenues in the quarter compared to 17.7% in Q3 last year. Adjusted EBITDA was negative $4.4 million, translating to a 12.7% adjusted EBITDA loss margin in fourth quarter, significantly lower than the gross margin of 40% in Q3 last year. Investment loss was $13.4 million in Q3, mainly due to the fair value change in equity investment of $7 million and loss of investments in certain private companies of $6.3 million. Non-GAAP net loss, excluding investment loss was $2.2 million in Q3 translating to a 6.3% net loss margin for the quarter compared to a non-GAAP net loss margin of 42.9% in Q3 last year and 19.4% in Q2 this year.
Now turning to cash flow. Operating cash flow was negative $3 million in Q3 compared to negative $8.8 million last year. Free cash flow was negative $3.2 million compared to negative $9.9 million last year. Moving on to the balance sheet. We ended Q3 with $373.4 million in cash, cash equivalents, bank deposits and financial products issued by banks. Net cash outflow in the quarter was mainly due to free cash flow of negative $3.2 million and share repurchase of $12.5 million. Thanks to Board approved our share repurchase program in February 2022 and as of September 30, 2023, we have returned approximately 94.3 million to shareholders through share repurchase, demonstrating the Board’s commitment to safeguarding shareholder value and its confidence in the long-term prospects of the company.
As of September 30, 2023, the company had approximately 94.3 million ADS outstanding, reflecting a 16% reduction in total shares outstanding compared to January 31, 2022, before the share repurchase program started. So far, we have completed 47% of a $200 million share repurchase program, which will expire as in February 2024, and we intend to continue to undertake its meaningful capital return to our shareholders. Now turning to guidance. For the fourth quarter of 2023, we currently expect total revenues to be between $35.5 million and $37.5 million. This forecast reflects our current and preliminary view of the market and operational conditions, which are subject to change. In closing, we are very proud of our execution in this quarter, especially extensive improvement in profitability.
We’ll stick to our strategy and be laser focused on driving revenues and improving efficiency. For the long run, as Tony just mentioned, we are excited to see emerging AIGC use cases, and we are well prepared to help developers combine the power of generative AI and real-time engagement. Thank you to both Agora and Shengwang teams for their hard work and to our investors for your trust. Thank you, everyone, for attending the call today. Operator, let’s open it up for questions.
Operator: [Operator Instructions] First is from Tom Tang from Morgan Stanley.
Tom Tang: I have questions. This is Tom from Morgan Stanley. So I have 2 questions. So first 1 is regarding the 2024 outlook for — and would like to have a breakdown between Agora and Shengwang business? And the second question is regarding the competitive landscape in both China and overseas.
