Yesterday afternoon, Adrian Wojnarowski of ESPN reported that the Sixers and Joel Embiid had agreed to a five-year, $148 million contract extension, which could reach $178 million if certain considerations were met. The Athletic Philadelphia has confirmed that a contract extension has been reached, according to league sources (Update: The Sixers made the extension official Tuesday).

What does all of this mean? And how does it impact the 76ers going forward? We’ll break it down here.

A five-year contract extension

Typically, players entering the fourth year of their rookie scale contracts can receive a maximum four-year extension, which would begin following the conclusion of the final year of their rookie deals. However, a team can give out an extra, fifth year to a maximum of two players on its roster, referred to as the Designated Rookie extension.

There are no benchmarks a player needs to hit in order to qualify for the five-year extension. A team simply opts to award the player one of the two Designated Rookie slots it has available.

With Embiid receiving this fifth year, it means that the Sixers can only give out one such contract to Ben Simmons or Markelle Fultz when their times come. It also complicates trades — for example, if the Sixers trade for a player whose current contract is the result of being labeled a Designated Rookie, that will eat up their second Designated Rookie slot, meaning the Sixers would only be able to offer Fultz *and* Simmons four-year contract extensions when the time comes.

That’s probably not a huge deal, as no other team will be able to offer Fultz or Simmons more than four years if they ever reach restricted free agency, and the Sixers will have the right to match any offer each would receive.

Note: One of the benefits of offering a five-year extension is that it pushes out the date when a player can hit unrestricted free agency. While the Sixers only have one more five-year rookie extension they can offer (or acquire), they can still offer five-year contracts to both Fultz and Simmons when their rookie deals are up. The Sixers would just have to do so in restricted free agency rather than as an extension.

The Process to be continued…… I LOVE YOU PHILADELPHIA #5MoreYears pic.twitter.com/Xop96EhRPA — Joel Embiid (@JoelEmbiid) October 10, 2017

$148 million or $178 million?

ESPN reports that Embiid is receiving a $148 million contract, which could extend to $178 million if certain performance-based criteria are hit.

What are the criteria? Where do those two figures come from?

The maximum salary for players in the NBA is determined by how many years of experience a player has accrued, with players that have zero through six years of experience able to earn a salary up to 25 percent of the salary cap limit, players with seven through nine years of experience able to earn 30 percent and players with 10-plus years of experience able to earn 35 percent of the cap.

Embiid, who is about to enter his fourth season, falls into that first group. But the NBA has certain incentives that can allow players to jump into the next tier, frequently called the “Super Max”, meaning Embiid could qualify to earn up to 30 percent of the cap if he achieves certain performance-based goals this season.

How would Embiid qualify to receive 30 percent of the cap rather than the 25 percent he’s awarded based on his years of service? The possible criteria the NBA has established includes being voted Defensive Player of the Year or Most Valuable Player or be named to an All-NBA first, second or third team for the 2017-18 season. Exactly which of those predefined benchmarks will result in a jump in Embiid’s salary is then bargained between the player and team.

Based on a projected $101 million salary cap, 25 percent of the cap would be a first-year salary of $25.2 million, with 30 percent at $30.3 million. That also impacts the year-over-year raises, which are capped at 8 percent of the first year’s salary. At 25 percent of the cap, Embiid’s salary would escalate by $2.02 million per year. If he qualifies for the 30 percent max, that would instead climb by $2.424 million each season.

How the “Super Max” impacts Embiid’s contract.

Season 25% Amount 30% amount Annual Raises $2,020,000 $2,424,000 2018-19 $25,250,000 $30,300,000 2019-20 $27,270,000 $32,724,000 2020-21 $29,290,000 $35,148,000 2021-22 $31,310,000 $37,572,000 2022-23 $33,330,000 $39,996,000 Total: $146,450,000 $175,740,000

(*Note: There appears to be a bit of a discrepancy in the numbers, as a starting salary at $25.2 million with 8 percent raises comes out to a 5- year, $146.45 million contract. The $148 million appears to be based on a $102 million cap projection. The latest projection released to the public had the 2018-19 cap projected at $101 million).

If Embiid plays in 60-plus games this season, achieving some of these benchmarks could be a very realistic outcome. While winning DPOY or MVP would likely require Embiid to appear in more games than most anticipate, earning an All-NBA selection isn’t nearly as daunting, especially for a center. Last year, Anthony Davis, Rudy Gobert and DeAndre Jordan occupied the center spots in the All-NBA first, second and third teams, respectively.

This means that if the Sixers are making moves at February’s trade deadline to gear up for being able to offer a maximum salary contract in free agency next summer, they’ll have to potentially account for an extra $5 million of salary, depending on how Embiid is playing and the likelihood he earns an All-NBA nomination later that spring.

One final note: All of those numbers we listed above are estimates. The NBA will set the official salary cap number during the July moratorium next summer. Embiid didn’t agree to a $148 million contract yesterday; he agreed to an extension that will pay him, at minimum, a starting rate of 25 percent of the 2018-19 salary cap. Basically, these numbers could shift slightly if the current salary cap estimates are off.

How much of the contract is guaranteed?

Wojnarowski’s report includes a couple of additional pieces of information, stating that “The deal will include some salary-cap protection for the 76ers should Embiid suffer injury that causes him to miss significant playing time” but later editing the report to include that “Based on the details of what sources are describing as a complex contract structure, the 76ers would have to waive Embiid for him not to reach the full value of his $148 million extension.”

Bobby Marks of ESPN wrote an article earlier Monday detailing some of the potential paths the Sixers could take to limit the risk of such a deal, which included part of the salary becoming fully guaranteed based on the minutes played clause, based on Embiid not suffering a specific injury and other incentives and/or qualifiers.

At the time of this writing, the exact details of how much of Embiid’s contract is guaranteed and what events/thresholds are specified that would cause the rest of Embiid’s contract to become guaranteed, have not been reported. Both parts of that equation are important to fully judge the amount of risk the Sixers have taken on. While the exact details of how much is guaranteed have not yet been reported, a league source has described it to me as an unprecedented amount of non-guaranteed money for a max rookie-scale extension.

Why now?

Despite what looks like an oversized number at first glance, Embiid will be drastically underpaid if he remains healthy. The NBA’s salary structure, which ties earning potential to years of experience, virtually guarantees that for the league’s top players.

But that “if he’s healthy” bit is a huge question mark for somebody with the injury history Embiid has. Between the stress fracture in his foot (suffered prior to the 2014 draft, which required a second surgery in 2015), stress fracture in his back (prior to the 2014 draft) and torn meniscus (suffered last January), Embiid has played in just 31 of a possible 246 NBA games, and with the kind of foot, back and knee injuries which tend to be complicated for big men.

Still, Embiid’s bargaining position was elevated thanks to two very simple truths.

First, no matter how small of a chance you think Embiid has to stay healthy and be a factor in the playoffs, that’s a higher chance than the Sixers have of using his $25.2 million in cap space to attract a top-10 player in free agency.

Second, Embiid likely had to show little in order to command a maximum salary next summer, as 24-year-old players with his kind of impact almost never become available. Would 40 games played this season, without a career-threatening injury (i.e., a meniscus injury rather than fractured navicular bone) have still resulted in *somebody* offering Embiid a max contract? 50 games? 60 games? It’s hard to say, but the bar is probably not as high as you would think.

There are many risks to consider when talking about whether or not to give Embiid a contract extension. The risk that Embiid can’t stay healthy is the most obvious risk, but not the only one, and not even the biggest one.

Let’s say, for instance, that Embiid plays 60 games this season and is able to command a maximum salary contract next summer. Is that five-year contract now risk-free? Has he proven he can withstand the prolonged grind of an NBA career? Of course not. The concern would still be at the forefront of everybody’s minds next summer, even after a 60-game season.

But, thanks to Embiid having successfully navigated a season injury free, those substantial protections the Sixers were able to negotiate into this contract to protect against a career-threatening injury are likely off the table. So while the 2017-18 season might be riskier for the Sixers because they extended him earlier than they had to, the 2018-19 through 2022-23 seasons are now significantly less so.

Plus, by allowing the negotiations to play out through restricted free agency, there’s always the chance Embiid and his camp get frustrated at the negotiations, something Bryan Colangelo has acknowledged as a consideration in the past.

In short, if Embiid suffers a career-threatening injury this season, the decision to extend him now could backfire on the Sixers. If Embiid doesn’t suffer a career-threatening injury this year, extending him now actually mitigates the risk in the contract and will likely work out in the Sixers’ favor.

And the biggest risk of all? Letting Embiid walk. Sixers fans could go a decade or more without the team acquiring another player this talented. The cap space they’d gain, on a team that’s significantly less of a destination without Embiid’s presence, would provide the Sixers little chance of attracting a top-10 talent. That’s a terrifying future.

How does this impact the 76ers next summer?

If the Sixers and Embiid had not come to terms by next week’s October 16 deadline, Embiid still would have had an $18.3 million cap hold in free agency next summer.

However, with this extension in place, Embiid’s cap hit will now be either ~$25.2 million or ~$30.3 million, depending on whether he qualifies for the 30 percent max. That means the Sixers will have either $6.95 million or $12 million less in salary cap space to work with next July.

The absolute maximum salary a player can command in free agency next summer will be $35.35 million, or 35 percent of the salary cap. That’s the mark the Sixers will need to reach for maximum flexibility in free agency.

If Embiid only qualifies for the 25 percent max, the Sixers would have roughly $53.34 million in salary cap commitments next summer. That includes $25.2 million for Embiid, $8.339 million for Fultz, $8.575 million for Jerryd Bayless, $6.434 million for Simmons, $1.740 million for Furkan Korkmaz and a $1.5 million cap hold for Robert Covington, which they could theoretically relinquish if they were desperate for that remaining cap space, but which would then virtually close the door on bringing Covington back.

That would give the Sixers roughly $47.6 million in cap space, more than enough for a 35 percent max. But there are a couple of things which will eat into that.

First, the Sixers will have at least one, and possibly two, draft picks next June. The 2018 salary for these picks could be anywhere from $2 million to $10 million combined, depending on how things shake out. Sure, the Sixers could trade them, but that’s hardly optimal, especially considering the Lakers’ selection will either be No. 1 overall or likely between 6 and 14 in the lottery if it does convey next year. That’s a valuable draft pick to be shedding in order to save a tiny bit of salary cap space.

Second, the Sixers have a number of options on rookie-scale contracts they have to decide on by the end of this month. These options include a 2018-19 salary for Jahlil Okafor ($6.3 million), Dario Saric ($2.5 million) and Justin Anderson ($2.5 million). Saric’s option is a lock to be picked up later this month, and we’ll see what they do with Okafor and Anderson.

The team also has options on T.J. McConnell and Richaun Holmes for $1.6 million each. Since Holmes (second round) and McConnell (undrafted) were not first-round picks, these decisions don’t have to be made now. The deadline for both of those is June 29.

Finally, and perhaps most importantly, is what the team will do with Covington. If he does not receive an extension this fall (reminder: Covington’s contract can be renegotiated, and extended, on November 15), Covington will have a $3 million cap hold next summer. However, Covington has developed into Brett Brown’s best perimeter defender and a key part of the Sixers’ future, and odds are his deal will be renegotiated and extended when the team is legally allowed to do so. That’s going to eat into the Sixers’ available cap space next summer.

The exact calculations on that can be tricky, but for the sake of simplicity, let’s say that Covington’s 2018-19 salary is $12 million.

(Note: Embiid’s extension is not a renegotiation, meaning it does not impact the Sixers’ 2017-18 salary and thus does not impact what the Sixers can offer Covington in a renegotiation).

So add in Covington’s $12 million, the options for Saric ($2,526,840), Timothe Luwawu-Cabarrot ($1,544,951), McConnell ($1,600,520) and Holmes ($1,600,520), and $2.5 million for 2018 draft picks, and that brings the Sixers’ 2018-19 projected salary commitments to ~$72.1 million, which leaves the Sixers with ~$28.9 million in salary cap space next summer. Or just enough to offer a 25 percent max contract.

Player 2018-19 Salary Notes Joel Embiid $25,250,000 $30,300,000 if qualifiers reached Markelle Fultz $8,339,880 Jerryd Bayless $8,575,916 Ben Simmons $6,434,520 Dario Saric $2,526,840 If option picked up by Oct 31 2017 Robert Covington $12,000,000 If extended, otherwise $3m cap hold T.J. McConnell $1,600,520 If option picked up by June 29 2017 Richaun Holmes $1,600,520 If option picked up by June 29 2017 Timothe Luwawu-Cabarrot $1,544,951 If option picked up by Oct 31 2017 Furkan Korkmaz $1,740,000 2018 1st round pick(s) $2,500,000 Placeholder. Can realistically be from $2m to $10m Total: $72,113,147 Projected 2018-19 salary cap $101,000,000 Projected cap space $28,886,853

(Sixers’ 2018-19 salary cap projections. All data from basketballinsiders.com)

And, again, depending on draft picks and whether Embiid qualifies for the 30 percent max, the Sixers available cap space could drop all the way down to $16 million or so.

That’s a lot of cap space, but not exactly optimal.

If everything goes “right” — Embiid doesn’t qualify for the 30 percent max, the Lakers’ pick doesn’t convey — getting to the $35.35 million in cap space the Sixers would need for full flexibility next summer is doable, assuming they can find a taker for the final year of Bayless’ contract, a three-year, $27 million deal signed last summer, which is looking worse by the day.

If Embiid does qualify for the 30 percent max and the Lakers’ pick conveys? The Sixers may have to get creative if they want to extend Covington and still be able to offer a 35 percent max contract next summer.

Photo: Bill Streicher/USA TODAY Sports