I am finding this in my AppleTV Log.
2019-01-15 09:06:09.039 [vd] v: Not trying to use hardware decoding: codec h264 is not on whitelist.
2019-01-15 09:06:09.041 [vd] v: Using software decoding.
I am using 2 EXTENDs so I would expect the transcoding to be done in hardware.
I have HARDWARE transcoding set on the the DVR server and am using a Mac mini 2011 Server (quad core i7).