Consider a “hat” with digital/coax out, or a Topping D10 or D10s that can inexpensively convert USB to coax or toslink. This way you would use the dacs in your avr along with Audyssey for room correction, sub/bass management, dynamic eq, etc. I believe the digital inputs on that avr are limited to 96/24, though.
If you use an external dac, you will either give up the Audyssey features above (by using direct mode) or the signal will go through double conversion, i.e. external dac to internal adc back to internal dac because all the internal processing is digital.