Breaking Down Justin Herbert's $262.5M Extension

Michael Ginnitti
Michael Ginnitti, Managing Editor & NFL/MLB ExpertJuly 26, 2023
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QB Justin Herbert & the Los Angeles Chargers agreed to his expected rookie extension Tuesday night, giving the 25-year-old 5 new years, $262.5M new money. In total, it’s a 7 year, $292M contract for Herbert through the 2029 season, when he’ll be 31.

From an average annual salary standpoint however, Herbert becomes the new top of the market at $52.5M. He’s the 3rd such QB this offseason to reset this number, with Jalen Hurts locking in at $51M per year in the beginning of April, & Lamar Jackson upping that to $52M later that month.

Herbert isn’t expected to hold that title belt for long though, as Joe Burrow’s pending extension in Cincinnati figures to shatter most of the top QB money numbers in the coming days, but for now we'll dive deep into the full 7 year contract structure.

The Triple Bonus Structure

With 7 total years to work with, the Chargers have built in three different bonuses to Justin Herbert's new contract: a $16.1M signing bonus, a $50.6M 2nd year option bonus, and a $45M 3rd year option bonus. Each will be allowed to prorate over the maximum 5 seasons, keeping cap hits relatively low for the first 4 years of this deal. All 3 of these bonuses (and their correspoding base salaries) are fully guaranteed at signing.

The Average Annual Salary

Herbert's $52.5M new money AAV is the most in NFL history, but it only tells a piece of this story. The 7 year total value AAV rings in it $42.3M. When comparing this to other recently signed rookie extensions, Josh Allen secured a $35.5M total value AAV, while Kyler Murray locked down a slightly better $37.9M in Arizona. Jalen Hurts' total value AAV calculates to $43.2M, however Philadelphia only had 1 year, $4.3M to carry over from his rookie contract - while the other players here had a significantly more expensive 5th year option to bring with them. In short, Herbert's 7 year payout holds up amongst the rest of the recently signed QB contracts. TOP AVERAGE PAID NFL PLAYERS

The Cash Flow

Despite reports about "$100M in Year 1", it appears that Herbert's new contract pays him a little over $17M in 2023, thanks to a minimum salary and a $16.1M signing bonus. Things escalate quickly thereafter, with a $56.6M payout in 2024, and another $60M set for 2025. In total, it's a $73.7M 2-year cash flow (7th), a $133.7M 3-year flow (4th), and a $193.7M 5-year payout (5th). CUMULATIVE CASH RANKINGS

The Cap Flow

As to be expected, the first two seasons of this contract carry relatively low cap figures. Herber'ts $8.4M cap hit for 2023 is nearly identical to the figure his rookie contract carried, keeping the Chargers' current cap financials neutral. In 2024, a $29.5M 5th-year option figure has been replaced by a $19.3M cap hit, representing more than $10M of savings for LAC next season. His number jumps to $37.3M for 2025, but with a league salary cap set to rise mightly over the next few seasons, this figure should represent less than 15% of the hard threshold by then. The same could very well be true in 2026, when his $46.3M cap hit could very well be tenable for the Chargers, who haven't been known for converting too many salaries into signing bonuses on an annual basis.

2027 likely becomes a discussion point for a few reasons. 1) The Practical Guarantees will be set to expire. 2) Herbert will be approaching age 30. 3) A $58.3M cap hit likely needs to be addressed in some way shape or form. Most teams aren't in the business of redoing contracts with 3 years remaining, but this should at least be the initial discussion point.

Justin Herbert's New Cap Hits
2023: $8.45M
2024: $19.34M
2025: $37.34M
2026: $46.34M
2027: $58.34M
2028: $71.12M
2029: $59.5M

The Guarantee Structure

The new deal contains $133.7M fully guaranteed at signing, 3rd most in NFL history. The upfront guarantee is comprised of every dollar built into the 2023-2025 seasons. By March of 2025, another $24M (his 2026 salary) will become fully guaranteed. Another $36M, his 2027 salary, will become fully guaranteed in March of 2026. Both of these salaries are guaranteed for injury right now, bringing his injury security over $193M. Another $25M of his 2028 salary will become fully guaranteed in March of 2027, putting the early vested guarantee number at a staggering $218.7M. Herbert becomes the only NFL player not named Deshaun Watson to secure a practical guarantee north of $200M. NFL GUARANTEE RANKINGS

The Practical Contract

While the early vesting guarantees make this a 6 year, $245M contract fairly comfortably, logical tells us that the deal probably gets ripped up after 5 years, $193.7M. The 6th (2028) season currently carries a cup hit north of $71M, and that's before any type of cap conversion in years prior. Herbert will be 30 years old after the 2027 season, with 2 years, $25M fully guaranteed remaining, so it's an ideal time to take on new years, with a truckloaf of new guarantees.

Additionally

On top of this all, Herbert has secured a full no trade clause throughout the entirety of this contract. He also gets the opportunity to add $2.5M annually to the deal: $1.25M for winning a Conference Championship, and another $1.25M for winning a Super Bowl.


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