To be clear Naim decode FLAC and LPCM WAV into a sample bit stream perfectly. However just like some prefer the RF loading effects of different Ethernet leads to shape the noise, some hear the processing noise profiles differently between FLAC and LPCM and prefer one or the other… usually WAV LPCM.
I use a DAC separate from my Naim second generation transport, and the differences between FLAC and LPCM WAV in terms of the resultant audio is minimal.