Expectations for future growth of our revenues. Unauthorized access to our customer data. Dependence on revenues from new customers. The rate of adoption of our SaaS model. Acceptance of our applications and services by customers. Loss of one or more key customers. Adverse changes in general economic or market conditions, particularly in the life sciences industry. Delays or reductions in information technology spend, in particular in the life sciences industry, including as a result of mergers in the life sciences industry. The development of the market for enterprise cloud services, particularly in the life sciences industry. Competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by our competitors.
Our ability to manage our growth effectively and changes in sales that may not be immediately reflected in our results due to the revenue recognition criteria under International Financial Reporting Standards. Further to these risks, these forward-looking statements do not include a full assessment or reflection of the unprecedented impact of the COVID-19 pandemic occurring in the first quarter of 2020 and the ongoing and developing situation resulting in direct global and regional economic impacts. This has resulted in significant economic uncertainty, and even though the company has to date experienced no significant impact to its operations, any future impact on our operations is difficult to understand or measure at this time. Further information on potential risks that could affect actual results will be included in other filings Kneat.com makes on www.sedar.com. The press release, the MD&A, and the consolidated financial statements are posted on our website.
If you wish to receive a copy of any of these documents, please do not hesitate to contact us. Finally, take note that we will take questions from sell-side financial analysts. Eddie will now start his comments. Eddie.
Thank you, Hugh. Welcome, everybody. I'm very pleased to report on the progress that our team has made during the quarter ended March 31, 2020. This is highlighted by our revenue growth, which is up 130%, and particularly our SaaS revenue, which is up 528% over Q1 2019, and our continuing success in winning new and scaling within our existing customer base. We are executing on our plans and continue to gather momentum in the market. It is very satisfying to be helping many of the largest global healthcare companies to digitize and become fully paperless with some of their critical business processes. As we progress, we are becoming trusted by more and more of the largest global healthcare companies. To date, we have signed a significant number of large global companies, including a significant number of the top 10 big pharma companies.
Within this current base, we have more than 400 sites into which our current software can be scaled. Customers who have gone live are expanding Kneat Gx to new work processes and new sites, and as reflected in our revenue and our recent announcements, an increasing number of customers are adopting our SaaS platform. Success is breeding success, and excellent customer references, coupled with a strong sales and marketing effort, is driving healthy sales pipeline. Leveraging intimate customer feedback, our R&D team continues to build out our platform, and we're very excited about what they are delivering. We continue to enhance our SaaS model, which is leading to its increasing adoption. During the first quarter of 2020, we continued to hire with a strong focus on development and professional services to support our increasing number of customers.
In December, we signed a lease agreement to expand our head office footprint within the National Technology Park in Limerick, Ireland. The additional office space will accommodate up to 100 Kneat.com employees, complementing the existing Kneat.com offices also located within the National Technology Park in Limerick. At the beginning of March this year, we closed a short form prospectus offering, including the full exercise of an over-allotment option, resulting in aggregate gross proceeds of CAD 12.65 million. In addition, we also completed a non-brokered private placement for gross proceeds of CAD 1.83 million. The company intends to use the net proceeds of the offering and the private placement for growth initiatives, working capital, and general corporate expenses. The long-term impact of COVID-19 is difficult to fully assess at this time.
Today, we are seeing a small proportion of companies deferring their purchasing decisions temporarily, while others are accelerating their decisions to go paperless because of the increased business continuity benefits that it can deliver. We have received messages from several customers highlighting the business continuity benefits of Kneat Gx during this pandemic. Kneat Gx is enabling their staff to continue many aspects of their validation activities remotely and allowing global contributors to collaborate in the process in real time. This has reinforced the many benefits of Kneat Gx over the manual paper-based systems that it has replaced for these customers. Our plan for the remainder of 2020 is to continue to add and deploy new customers, and to expand to new work processes and new sites within our existing customer base, with a particular focus on our SaaS platform. This ends my review and comments.
I will now hand you back to Hugh, and I will be back for the question and answer session and my closing statements later. Hugh.
Thanks, Eddie. For the financial review, please keep in mind that all numbers I will be discussing are in Canadian dollars. Revenue for the three months ended March 31, 2020, was CAD 0.95 million. This was an increase of 130% from the CAD 0.41 million in the same period in 2019. SaaS license fees, which are one of our recurring revenue streams, were CAD 0.41 million for the three months ended March 31, 2020. This is an increase of 528% compared with the first quarter in 2019. Gross margins for the three months ended 31 March 2020 was CAD 0.05 million. This was consistent with the same period in 2019, though underlying this gross margin versus Q1 2019, there's an increase in both revenue and cost of revenue.
Cost of revenue and professional services costs incurred during the first quarter were expensed during the period, including costs associated with additional professional services of CAD 0.7 million billed during the quarter, which will be recognized in future periods. The change to the cost of revenue reflects an increase in salaries and benefits related to additional headcount in the professional services team and increased hosting costs. Net loss for the first quarter of 2020 was CAD 0.47 million, as compared to a net loss of CAD 1.97 million in the same period in 2019. The decrease in the net loss reflects favorable foreign currency movements, resulting in foreign exchange gains of CAD 1.4 million in the first quarter of 2020. Annualized recurring revenue, which includes SaaS license fees and maintenance fees, was CAD 2.62 million at the 31st of March 2020.
This is an increase of 294% compared to the ARR at the 31st of March 2019. Breaking this down a little further, ARR from SaaS license fees increased by 502%, and ARR from maintenance fees increased by 110% from March 31, 2019. As a reminder, we have filed our financial statements and MD&A on SEDAR, and they are also available on our website. We are now ready to take questions from sell-side analysts. To ask a question, please use the hands-up feature available on the GoToWebinar webinar control panel. There should be a slide showing the image of the hands-up feature on your GoToWebinar webinar control panel now. Once you have selected the hands-up icon, I will introduce you, and you can ask your question using the microphone on your computer. Please note that only attendees with microphones will be able to ask questions during today's session.
Our first question comes from the line of Nick Cundari from Mackie. Good morning, Nick. You can go ahead with your question now. I've unmuted your line.
Good morning. Thank you. Can you hear me okay?
Yes, indeed.
Okay, perfect. Eddie, I wanted to go back to some of your comments and also your shareholder letter, in terms of some of your customers who are working on solutions and treatments for COVID-19, using your platform to streamline some of the processes. Do you have any examples or use cases that you might be able to share with us? As a corollary to that, once these customers' operations are somewhat back to normal, do you anticipate a rise in deployments for other processes with these customers?
Hi, Nick. Thanks for your question. I suppose we have a number of customers, and I think 90% of customers out there today are searching for a solution for COVID, and they all have initiatives afoot. We're working with quite a number of them, actually. Some of them are more advanced than others. Yes, we are working with them. What I say in my letter, really, that we're seeing it sort of more or less as business as usual. There are impacts on manufacturing and supply chain to some extent, but not huge. We do see some customers deferring their decisions because they're busy with a lower sort of employment base, and they're managing the risks from a business continuity perspective.
We are also seeing others, as I said, speeding up their decisions and speeding up their deployment requirements because they see the benefits of an automated paper solution. I would say yes, I do expect these decisions to ramp up again, the ones that are on the negative side. I also see the ones that are going forward to continue at a faster pace as well.
Got it. From a professional services point of view, in terms of onboarding new processes onto the platform towards more deployments, how should we think about that in the near term? Again, should we expect some kind of catch-up specifically in professional services, perhaps in the summer when things start to normalize, also, I guess, combined with the usual summer seasonality that some customers might have.
Yeah. Our professional services teams are busy and there is a lot of work going on, and we're also building out a structure to cater for the pipeline that we have and expect to increase. You're right in your assessment. We do expect professional services to get busier as we go into the later part of the year. There are also opportunities for partners to get involved in the professional services side of the business that we will look to cultivate a bit more in the future as well.
Great. Thank you. Just one last one before I pass the line. In terms of pricing, I think we spoke about this last quarter as well, I just wanted to check in again, make sure that, or rather ask, if you're seeing anything different from a pricing standpoint, and if we should sort of be thinking about any changes there or nothing to report.
I would say nothing to report at this time on that, Nick. There's variations. Some customers are a little more price-sensitive than others, and others are less so, and they appreciate quality and stuff like that. There's always, like any business, a mix of that, but nothing changed significantly.
Thank you.
Thanks, Nick.
Thanks, Nick. The next question comes from the line of Gavin Fairweather from Cormark. Just bear with me for while I unmute your line. Okay, Gavin, you're good to go.
Hey there, guys. Good afternoon.
Hi, Gavin. Good to talk to you.
Hi, Gavin.
Maybe just to start, I was hoping to clarify, I think last time we talked, you mentioned that all customers that you'd won were live except for the customer won in late March, correct me if I am wrong. I was hoping you could just give us an update on whether that customer is now live?
Just say that again, you're saying all customers that were signed in Q1 are live, Gavin, is that what you said?
Yeah. I think last time we talked, you mentioned that all customers were live except for the one right at the end of Q1, the Tier 1. I was just hoping for an update on whether that one is now live.
I think maybe I referenced quarter four, all customers from quarter four were live, Gavin. I think that's a clearer sort of assessment of it. There are some customers that are still in the process of going live in the coming months that would've been signed in quarter one.
Got it. On on-premise licenses, you guys had a really strong second half of 2019. Good number in Q1, kind of a little bit lower than those run rates. How should we be thinking about that kind of revenue stream over the course of 2020? Do you see kind of further new plant additions or expansions to new processes among your on-prem client base?
Yeah, we do. I would say that the key thing is where most of the customers that we are signing now are SaaS customers. There's less of the on-prem revenues with those customers, but obviously the SaaS grows considerably, and that's what we're beginning to see. It's not going to be like that all the time, Gavin. There will be some lumps in the quarters. By and large, yes, we do see all the customers that we have signed are scaling to one extent or another. Some a bit faster than others, and some are increasing their pace.
Got it. Just on that point, I mean, some of your earlier kind of on-prem clients, I think we've talked in the past about how you're starting to have conversations about switching to SaaS. Can you just give us a sense of kind of what that process looks like and whether you think those will start to happen later this year, or whether that's kind of a longer-term phenomenon?
I would say, first of all, it's a bit of a longer term. Some of them are big companies and the switch doesn't happen overnight for them. I would say within the next two years, I would be optimistic that we should have switched everybody. The question I would say there is that the process for them is that there is a commercial aspect to it because they have adopted one licensing model, and they're switching to another. There's security and all these other risk mitigation concerns that they would have. By and large, over the next two years or so, I'd say, Gavin, we should have switched most of them.
Is it an arduous process on their end to kind of migrate the data and then implement the new SaaS system? Does it require a lot of effort, or would you characterize it as being a little bit more frictionless?
I would say the actual doing of it is not very difficult to move into our SaaS environment. It's more the preparing themselves and de-risking whatever concerns they may have at their security audits and stuff like that. There'd be a bit of auditing and preparatory for it, the switching over is not very onerous, no.
Okay, great. I'll pass the line. Thank you.
Thanks, Gavin.
Thanks, Gavin. Nick, I think you've your hand up again there with another question. Nick Cundari from Mackie. I'll hand over to you, Nick.
Great. Thanks, guys. In terms of your product roadmap, given that we've been in this work-from-home situation for about two months now, how do you see that playing out in the near term? I think it was Google that said recently that these things are fine as long as you're working on stuff that's already in the funnel. If you're thinking about new products and features and whatnot, things might start to get a little challenging. Are you seeing that as well? How have you sort of adapted to this remote paradigm that we seem to be in?
I must say, Nick, that I'm very happy with the team and how it are functioning remotely. Every aspect of our business is working well remotely. Regarding new products and new features, ours is one key product and there's many backlog technology improvements, enhancements, and growing out the vision of it happening. Everybody's well joined up and aware of where they're going, and there's very rigid management of our development process. I'm very comfortable with that. We've been there since early March now. While we look forward to getting back into the office and having some face-to-face time, it wouldn't hurt us too much if we didn't get back in the short term. It's working well, just to summarize that.
Okay, great. Since we last spoke about a month ago, in terms of the second half of the year, has your overall thinking evolved in terms of what that trajectory might look like? Any major changes there, or is it still as per plan from a month ago?
As I said, there has been no significant change in a month. What I expect to see is that we're slowly transitioning to, not slowly, maybe faster than we think, but we're transitioning over to a SaaS-only environment. As per Gavin's question, it'll take a couple of years to complete customers that are already on-prem. That's the only change really, is it's SaaS first all the way now.
Great. Thank you.
Yeah. Thanks, Nick.
Thanks, Nick. Gavin, I see that you still have your hand up, so I'm not sure whether you have an additional question or whether it's just from the original question. I think you're self-muted there, by the way, Gavin.
Yeah. Okay. Can you hear me now?
Yes, indeed. Yeah.
Yeah. I've got a couple follow-ups. Can you just provide us with an update on your head count, maybe December versus end of March versus today, and run us through your plans on the hiring side?
Yeah. Gavin, the hiring is increasing as we go forward with a focus on professional services and developing out the platform technology towards the vision. It is steady growing. We will see more added on. When we look at that, we will see most of it's in professional services and product development, SaaS and product development.
Okay. You don't have head count numbers off the top of your head, do you?
Yeah. Well, we don't give out the numbers, but it's increased from the last time.
Okay. That's fair. Maybe one for Hugh. Your costs were pretty much what I was thinking, but I guess the allocation was a little bit different. There was more in COGS than your SG&A. Is that just an allocation between the two buckets?
Yeah, no, I think what you see in Q1 is reflective of the baseline for where we will be going forward. The increase in the COGS area is really reflective of the size of the professional services team.
Right.
There's been additional headcount, obviously, as Eddie talked about in the professional services team. I think what you see there is probably reflective of a baseline for the go forward.
Obviously, you'll get some kind of leverage on that as services activity ramps up.
Exactly, yeah. That would be correct, yeah.
I was hoping just lastly, that you could provide a bit of an update on the Kneat Academy. Have you been able to shift that to remote training model and maybe just an update on how the uptake of that is being among partners and customers?
Yeah. That's been very successful, Gavin, and it's fully remote. Up to recently it was three-quarters remote. On that whole, there's four different courses within that, and now it's 100% remote. Yes, there's an uptake on partners are engaging in that as our customers, and we're using it internally for our own internal certification as well. It's a certification program in that we don't just train them and say, "You're trained." We test them to make sure they understood what they learned. Yeah, very happy with that program, and we are pushing that program aggressively at the moment.
Okay. Thank you so much.
Yeah.
Thanks, Gavin. Thank you. This concludes today's question and answer session. I would like now to turn over to Eddie for his closing remarks. Eddie.
Thanks, Hugh. In summary, we are very pleased with the progress we have made in the first quarter of 2020, and we are very proud of the Kneat team as they continue to develop quality compliance software, continue to win top-tier customers, and continue to provide excellent end-to-end customer service. At Kneat, it gives us great pleasure to be trusted by some of the largest global healthcare companies to support them in their mission to bring their life-enhancing and life-saving therapies to their customers. We are very proud of the relationships we are building with these global companies. Before I finish, thanks to our shareholders, our partners, and our team for their ongoing support and belief in what we do. We look forward to the journey ahead and thank you all for your attention. Hugh.
Thank you. That concludes today's call.