Steve will provide further details on 2024 during his remarks. In summary, we believe that the distinction of our business model, the highly differentiated innovative technologies we are bringing to market and the strong customer pipeline, we continue to build positions SkyWater for several years of above industry growth and continued strong operating leverage. I’ll now turn to call over to Steve.
Steve Manko: Thank you, Tom. Before I begin my review of our third quarter results, I will direct you to a new financial supplement available on our IR website, which summarizes our quarterly financial results for the last three years. Starting in Q3, we have changed our policy regarding a couple of our non-GAAP financial metrics, namely tool revenues and margins are no longer excluded from our non-GAAP results, while the consulting fees incurred year-to-date are now excluded from our non-GAAP results. These helpful supplements on our IR website is where you can find the current non-GAAP treatment apply to prior periods. The reasons for the non-GAAP changes are as follows: First, tool sales, have historically been infrequent and viewed by management as secondary to ATS development revenue, which is why they previously were excluded from our non-GAAP results.
Recently, our ATS customers have stepped up their commitment to fund tool purchases and we expect this trend to continue going forward. As tool sales are expected to be a material and frequent component of our financials for the foreseeable future we are no longer excluding their impact in the calculation of our non-GAAP financial measures. That being said, the supplement on our IR website does provide the gross margin impact of tool sales every quarter and year since fiscal 2021 and we will continue to provide the detail regarding the impact of tool sales on our financial results. Next the second quarter of 2023, we have incurred project-based management consulting fees related to the long-term transformation activities focused on improvement in automation and operational efficiencies.
Similarly, we have also encouraged project-based specialist fees associated with our Chips Act applications. Neither of these types of fees are required to run our business and therefore are incremental to our ongoing operations and are not a normal operating expense. Beginning in Q32023, we began excluding these fees in the calculation of our non-GAAP earnings, non-GAAP earnings per share and adjusted EBITDA. The supplement on our website likewise shows the resulting retroactive non-GAAP earnings and adjusted EBITDA for prior quarters after excluding these fees. We hope you find the supplement a helpful guide as we compare results to future periods. Now turning to our Q3 results. Third quarter revenues reached another record for us, exceeding our expectations that totaled $71.6 million, which was up 3% through Q2 and up 37% from the third quarter of last year.
Record ATS revenue of $57.1 million was up 8% from Q2 and up 62% compared to Q3 of last year and included $3.2 million of tool sales. The sequential growth in ATS revenues exceeded our earlier expectations, especially considering the $3.6 million revenue pull-in recorded in Q2. Offsetting this strong sequential growth was a 14% decline in wafer services revenue, as a result of the softening demand environment in automotive and industrial markets. The decline in wafer services volumes, along with the increased tool sales resulted in a sequential decline in non-GAAP gross margin, which was 20.4% for the quarter. Tool gross profit was $0.4 million, which negatively impacted gross margins by 40 basis points. Non-GAAP operating expenses declined to $13.4 million, reflecting the normalized quarterly run rate of our ongoing business cost structure.
Management consulting fees were within the range of our earlier expectations at $3.5 million in Q3. Non-GAAP operating income was $1.2 million and adjusted EBITDA was $8.3 million. Interest expense was $2.5 million and with nominal tax, the GAAP net loss was $0.16 per share and the non-GAAP net loss was $0.05 per share. Now turning to the balance sheet. We ended the quarter with $17.3 million in cash and cash equivalents, a net increase of about $1 million from Q2. As a reminder, we have been generating positive cash flow from the P&L for the last four straight quarters and in Q3, this amount was about $4.5 million, essentially equal to adjusted EBITDA, less interest and CapEx. We added an additional $8 million in proceeds from our ATM early in the quarter at an average price of just under $10 a share.
We reduced total debt by nearly $4 million and the remaining use of cash was about $8 million of changes in working capital. Turning to our outlook for Q4 and our expectations for various financial metrics as we enter 2024, As Tom mentioned, with our current visibility, we expect Q4 revenue levels in the mid $70 million range, this reflects our assumption of a 15% to 20% sequential decline in wafer services revenue, a similar level of core ATS revenues, and a significant increase in tool sales, which could grow to as much as $10 million. Given the changes in the wafer services outlook and the expected revenue profile for Q4, we expect non-GAAP gross margin will decline sequentially to between 14% and 15%. With our outlook for wafer services revenue in the range of $10 million to $12 million for the next several quarters, we expect Q4 gross margin will be impacted by factory under absorption before returning to the 20% range in Q1.
