Thanks Yaniv and good afternoon everyone. I will begin by reviewing the details of our third quarter results.
For the third quarter of 2019, net revenue increased 64.6% to $40.6 million from $24.7 million in the year ago period. The increase was primarily attributable to increased direct sales volume of $15.6 million or 63.9%, from growth of existing products as well as new products launched in 2019 and late 2018. Gross margin for the third quarter improved 100 basis points from a year ago to 43.2% and were up 450 basis points on a sequential basis.
Our margins were impacted by a number of factors including a lower number of new product launches in the quarter as compared to Q2 2019, our decision to lower product prices on a number of our environmental appliances as we now benefit from the full effect of our direct fulfillment platform allowing us to reinvest the benefits in part in price competitiveness and keeping the remainder for improved contribution margin, accrual reversals and new accruals associated with our recall program that is materially complete, a governmental agency penalty associated with certain non-core products and a charge due to the liquidation of certain older products that we have discontinued which positively impacted third quarter 2019 gross margins by $800,000.
Excluding these one-time items, our gross margin for the quarter would have been 41.2% as compared to 38.7% in the second quarter of 2019.
Turning to expenses. It is important to note that a large driver of the increase in total operating expenses on a year-over-year basis was a $7.6 million increase in non-cash stock-based compensation expense related to restricted stock and options granted during December 2018 as well as in the first half of 2019.
Excluding non-cash stock-based compensation, operating expenses as a percentage of net revenue improved 1,150 basis points to 49.8% from 60.7% in the same period last year. The significant improvement in operating expense leverage highlights our ability to launch new products and grow revenue while keeping fixed costs essentially flat, thanks to the high degree of automation in our business model.
The remainder of my expense review excludes stock-based compensation expense.
For the third quarter, sales and distribution expenses as a percentage of net revenue decreased to 38.6% from 46.8% in the prior year period. The improvement is attributable to the higher percentage of sales fulfilled through our third-party logistics partners versus e-commerce platform service providers combined with a platform effect of growing sales while keeping fixed cost relatively flat. Contribution margin continued to improve for the third quarter of 2019 at $3.2 million compared to $0.3 million in the third quarter of 2018 and $1.7 million in the second quarter of 2019, reflecting both the increased revenue and improved unit economics.
With respect to other expenses, research and development expenses increased $0.5 million to $1.3 million due to an increase in the number of developers to support growth, while general and administrative expenses increased $0.7 million to $3.4 million due primarily to costs associated with being a publicly listed company.
Net loss for the third quarter of 2019 was negative $11.3 million compared to negative $5.1 million in the third quarter of 2018 and $7.6 million in second quarter of 2019.
Excluding non-cash stock-based compensation, third quarter 2019 net loss was $3.6 million.
Adjusted EBITDA for the third quarter of 2019 improved to a loss of $2.7 million from $3.7 million loss in the second quarter of 2019 and $5.6 million loss in the first quarter of 2019. This is the results of growing sales, lower variable costs resulting in improved unit economics and flat fixed costs in line with our model. Adjusting for the one-time items mentioned earlier in gross margin, adjusted EBITDA for the period would have been a loss of $3.5 million as compared to a loss of $4.3 million in the second quarter of 2019 and a loss of $6.3 million in the first quarter of 2019 while adjusting those earlier quarters for a full quarter's worth of costs for our public company D&O insurance for comparability purposes.
Turning to the balance sheet.
As of September 30, 2019, we had cash of $35.7 million compared with $39.5 million as of June 30, 2019.
During the third quarter, we acquired the assets of Aussie Health for $1.3 million. We used $1.1 million in cash and a $0.2 million promissory note to fund the purchase. On a trailing 12-month basis, as of September 30, 2019, Aussie Health revenue was $2.2 million, with operating income of $0.4 million.
As Yaniv noted, no headcount was added in connection with this acquisition.
Cash provided by operating activities for the third quarter was $3.1 million compared to cash used in operating activities of $4.4 million in the second quarter of 2019 and our overall cash burn improved to $2.4 million compared to $4.3 million in the prior quarter.
Our total debt at September 30, 2019 was $30.1 million consisting of borrowings under our revolving credit facility and our $15 million term loan. This compares to total debt of $35.4 million at the end of the second quarter 2019. The combination of total cash used of $3.8 million including the $1.1 million spent on acquisition and despite a lowering of the debt level while revenue growth is strong highlights the strong cash cycle structure implemented and allowing the company to grow quickly without burning cash at working capital level.
With respect to the remainder of 2019, we are on track to achieve our target of 20 new product launches during the second half of the year, subject to the ordinary course of reliability of importing goods from overseas. To ensure all of our new products meet our high quality standards, we made the decision to move the majority of our back half launches to late in the fourth quarter. Though delaying the revenue recognition by a quarter, we believe it will provide for high success ratio as quality is paramount. Providing best value at the best possible quality is at the core of our business model and value proposition and we will continue to prioritize great quality. Having bolstered our product sourcing and QA/QC competencies over the course of this year, we are confidence that we can continue to accelerate our new product launches in 2020 and believe that we can double our new product output in 2020 as compared with the 30-plus products launched in 2019.
On the SaaS front, considering the nascent nature that market segment, we do not plan on any significant increase of revenue yet.
With that I will turn it back to the operator to open the call for your questions.