Over time, we expect the smart infrastructure vertical to drive a growing share of revenue given higher hardware ASPs and revenue accretive opportunities to deploy the Ouster Gemini software. And finally, all of this progress is backed by a strong operating model that builds on decisive actions we have taken since the merger. We have already achieved over $120 million in annualized cost savings one quarter ahead of schedule, and reduced our cost of capital by refinancing our term loan. To reach profitability, we have set a financial framework focused on averaging 30% to 50% annual revenue growth expanding gross margins to 35% to 40% and maintaining operating expenses at or below third quarter 2023 levels. We expect to achieve meaningful progress against these goals over the next 18 months.
I’ll turn the call over to our CFO, Mark Weinswig, to provide more context on our financial results for the third quarter, the business outlook and our operating framework.
Mark Weinswig: Thank you, Angus, and good afternoon, everyone. Starting off with our third quarter 2023 results, we recognized a record $22.2 million in revenue, a 15% increase over the second quarter. The automotive, industrial, robotics and smart infrastructure verticals each accounted for approximately one-quarter of our revenues. In the third quarter, we booked $38 million in business with new and existing customers. This represents a book-to-bill ratio of 1.7 in the third quarter. Over the last three quarters, our book-to-bill ratio has averaged 2.0. Similar to the first half of 2023, the third quarter saw continued commercial traction driven by strong demand and improved product mix. We shipped over 3,300 sensors in the third quarter and ASPs increased slightly on a sequential basis.
As anticipated, Ouster significantly improved its GAAP gross margins in the third quarter to 14%. Third quarter gross margins included certain expenses outside of our ordinary operations, including excess and obsolete costs and losses on firm purchase commitments of approximately $3 million primarily associated with the consolidation of product lines. Ouster’s non-GAAP gross margins were 33% in the third quarter of 2023, up significantly from the prior quarter to a near record level as a public company. The higher gross margins were driven by an increase in product and software revenue, higher ASPs and a reduction in manufacturing costs, which reflects the actions we have taken over the past nine months to reduce our cost structure. We expect further improvements in our GAAP and non-GAAP gross margins.
Given the transient nature of our integration-related activities, we will continue to break out merger integration, product transition and other expenses outside of our ordinary operations in an effort to provide a clear delineation between infrequent or unusual impacts and the fundamentals of the business to help baseline future operating performance. Operating expenses during the third quarter came in lower than expected, primarily due to the significant actions we have taken over the last couple of quarters to reduce our cost structure and the timing of certain R&D expenses. We expect our R&D expenses to fluctuate due to the timing of projects, including the tape-out of our next-generation Chronos chip. We have lowered the cost structure of our business while maintaining our ability to invest in our digital roadmap.
We believe Ouster is in a strong position as we enter the fourth quarter of 2023. We believe we have the most performant family of sensors on the market, one of the broadest customer bases in the industry and a strong balance sheet with $202 million in cash, cash equivalents, restricted cash and short-term investments as of September 30. We view our solid financial position as a differentiator, and we intend to continue to be prudent and proactive with regards to fortifying our balance sheet. As we announced in October, we refinanced our existing term loan by establishing a new credit facility that we expect to result in significantly lower interest expenses, along with increased financial and operational flexibility compared to our prior loan agreement.
