Abdullah Durmaz/iStock via Getty Images For a second quarter in a row now, e-commerce brand consolidator Aterian (NASDAQ:ATER) reported preliminary sales well ahead of consensus expectations as the company continues to focus on reducing inventory and maintaining its product rankings in order to protect or even gain market share in a difficult market environment: The Company expects fourth quarter net revenue in the range of $54.0 million to $55.0 million and full year 2022 net revenue in the range of $220.0 million to $221.0 million. “Our fourth quarter revenue was on the top end of our previous projection and we believe Aterian is set up well for a strong 2023,” commented Yaniv Sarig, CEO of Aterian. “We are executing on our plan to liquidate higher cost inventory and protect market share of our leading products in order to reach our target sustainable contribution margin. We continue to believe we are on the path to achieving Adjusted EBITDA profitability in the second half of 2023. Further, as a testament to my confidence that our trajectory is heading in the right direction, I have elected to receive almost all of my 2023 base salary in Aterian’s stock.” While this strategy is expected to better position the company for an improved 2023, the significant negative impact on key metrics like contribution margin and Adjusted EBITDA has already become visible in Aterian’s recent Q3 report: Company Press Releases and SEC Filings On the flip side, the company managed to bring down inventory by more than 20% quarter-over-quarter and generate positive cash flow from operations for the first time in two years. With Q4 likely to show a further, substantial decline in inventory, I would expect the company’s year-end cash position to be in range of $45 million to $50 million, essentially unchanged from the beginning of the quarter. With container freight rates down almost 85% from last year’s highs, Aterian should be able to replenish existing inventory at a much lower cost basis thus paving the way for strong margin improvement and positive Adjusted EBITDA in the second half of the year. That said, consumer spending patterns will be of particular importance for the company. On the Q3 conference call, management anticipated demand in 2023 to remain relatively flat but a combination of new product launches, M&A and international expansion should help Aterian to return to growth this year. Please note that Q1 is always the company’s weakest quarter of the year and with Aterian requiring more time to sell through its higher cost inventory, I wouldn’t expect any meaningful near-term progress on margins and profitability while Q2 should start to show some improvement followed by a much stronger second half. But with the company looking to resume M&A activities, investors will have to remain wary of additional equity offerings going forward. Bottom Line While liquidating higher-cost inventory apparently comes at the expense of margins, Aterian is paving the way for a much stronger second half including a likely return to positive Adjusted EBITDA and year-over-year sales growth. On the flip side, resumption of the company’s roll up strategy might result in further dilution for common shareholders. Given the positive outlook for the second half of the year and the recent return of risk appetite to the markets, I reiterate my “Speculative Buy” rating on the shares.