Kratos Defense & Security Solutions Inc. delivered the first production BQM-177A subsonic aerial target system to its U.S. Navy customer early this week, marking the occasion with a rollout ceremony July 11 near its Sacramento factory.

The drone is part of a previously announced low-rate initial production contract. The $37 million deal covers the first year.

Steve Fendley, president of Kratos’ Unmanned Systems Division, called the aircraft “arguably the highest performance unmanned aerial drone system in the world today.” He added that Kratos expects it “to be one of the largest programs in our company and a key element of our forecasted growth as we achieve full-rate production quantities.”

Shares of Kratos trade on the Nasdaq under the symbol KTOS.