HEOS on Denon / Marantz receivers

I have a HEOS - related question. Many recent Denon / Marantz receivers have HEOS in-built.

So, if I have such a receiver and use the the HEOS app on my phone (iOS or Android) or tablet to stream music from Tidal to the receiver, what does that mean? Choices:

1) The HEOS app on the phone tells the receiver what music to grab from the internet, or
2) The HEOS app on the phone sends the music from the phone to the receiver?

I hope the answer is #1. Otherwise, how high a resolution one can achieve might be more limited.
Ag insider logo xs@2xreg19